The setting and exercise of the "one-vote veto" of the government in PPP project companies.

In some international organizations, in order to highlight and emphasize the status of certain or certain subjects, some subjects are given a veto power. For example, in the United Nations, the five permanent members enjoy the veto power of the Security Council; in the Asian Infrastructure Investment Bank, China is on major decisions. Have a veto.

In the field of domestic private equity investment, the "one vote veto" system is more common. In order to control investment risk, the investor, the provider of funds, usually sets a number of protective clauses in the investment and financing agreement, one of which is to require a "one-vote veto" on the decision-making of certain matters ".

As for what is a "one-vote veto", there is no clear definition of our law at present. In practice, it is generally believed that "one-vote veto" means that in a voting or voting, as long as there is a negative vote, the candidate or the content of the vote will be denied. Specific to the field of the company, it means that when the shareholders' meeting, the board of directors or the board of supervisors votes on certain specific matters, as long as the subject with "one vote veto" votes against it, the resolution will not be passed, regardless of the opposition or approval of other subjects. In other words, only when the subject holding the "one-vote veto" votes in favor, and the proportion of votes in favor reaches the effective approval ratio stipulated in the company's articles of association, the relevant resolutions can be effectively passed.

In the legal practice of the company, the application of "one-vote veto" needs to distinguish between limited liability companies and limited liability companies, because the PPP project in practice mainly adopts the form of limited liability companies, this paper mainly discusses the "one-vote veto" in the form of limited liability companies ". In addition, the "one-vote veto" is an important part of the corporate governance structure, which is set by the articles of association and is mainly reflected in the process of forming resolutions in the company's organizational structure, so the following is mainly discussed at the level of the shareholders' meeting, the board of directors and the board of supervisors.

The "one-vote veto" in PPP project company is essentially a kind of control and influence on the project company's business decision-making based on equity, mainly through the PPP project company shareholder agreement, articles of association and other contractual forms to provide for the distribution of the company's management rights, that is, in the PPP project company governance structure.

(I) a veto in the shareholders' meeting of the PPP project company.

In practice, the shareholder structure of PPP project companies can be divided into three categories according to the proportion of capital contribution: first, the wholly-owned holding of social capital. In order to obtain a veto and the right to know, the government contributes a small proportion of symbolic contributions, generally less than 10%; third, the government contributes to the substantive participation of representatives, generally more than 10%, but not more than 50%. In reality, the first type is less wholly owned by social capital, and most projects use the latter two types.

In project companies with government shares, the voting mechanism of the shareholders' meeting is divided into two levels: general matters are approved by shareholders representing more than 1/2 voting rights; Special matters (such as resolutions to amend the articles of association, increase or decrease the registered capital, merger, division, dissolution, liquidation or change the form of the company, extension of the operating period, formulation and modification of the articles of association of the project company, external guarantee and equity pledge, the same below) needs to be adopted by shareholders representing more than 2/3 voting rights. There are also three levels: general matters are approved by shareholders representing more than 1/2 of the voting rights; special matters need to be approved by shareholders representing more than 2/3 of the voting rights; and particularly significant matters (involving people's livelihood security, social stability and affecting public interest, public safety, changes in the shareholding of the project company, etc.) are unanimously approved by all shareholders.

Regardless of the level of voting mechanism, government-funded representatives should have a veto on particularly important matters (involving people's livelihood protection, social stability and affecting public interests, public safety, etc.). In some projects, government investors even hold only "1 yuan gold shares", but have a "one vote veto" over major decisions such as financing, mortgage, pledge and restructuring of the project company ".

A veto in the board of directors of the (II) PPP project company.

In view of the fact that the management of the project company is mainly the responsibility of the board of directors, the government should pay more attention to the veto power of the board of directors in practice. The principle of the composition of the board of directors in the PPP project is basically based on the proportion of shareholders to allocate the directors appointed by the parties, but in the case of government funding on behalf of administrative participation or substantial participation, the government side in order to avoid social capital to fully control the board of directors, in the number of appointed directors does not fully follow the proportion of equity.

The resolution mechanism of the board of directors is one person, one vote, regardless of whether the number of directors is allocated according to the proportion of equity, and regardless of the rules of procedure adopted by the board of directors, whether the two-level or three-level voting method is adopted as the above-mentioned shareholders' meeting, the directors appointed by the government-funded representatives have one-vote veto power on matters affecting the public interest or public security in the operation of the project company. It should be noted here that the one-vote veto power enjoyed by the directors appointed by the government-funded representative shall correspond to the one-vote veto power enjoyed by the shareholders at the shareholders' meeting.

One-vote veto of the supervisory board of the (III) PPP project company

The board of supervisors is the supervisory body of the project company, which exercises its supervisory power in accordance with the law to ensure that the project company operates in accordance with the law and safeguard the interests of shareholders. Under normal circumstances, the board of supervisors has no particularly important matters that require the supervisor appointed by the government to exercise the "one-vote veto". In PPP projects where the author provides legal services, social capital generally does not pay too much attention to the seats on the supervisory board. Therefore, in order to maintain the control of the government over the board of supervisors and better supervise the operation and management of the project company in accordance with the law, it is also possible to set up no board of supervisors and appoint only one supervisor by the government, which can fully realize the purpose of the government controlling the board of supervisors.

(I) the specific circumstances of "public interest" according to the specific circumstances of the project.

Article 7 of my country's "Contract Law" stipulates: "When the parties conclude and perform a contract, they shall abide by laws and administrative regulations, respect social ethics, and shall not disrupt the social and economic order or harm the public interest." The PPP Project Contract Guide of the Ministry of Finance stipulates on "Contract Performance during Dispute Period": "In view of the fact that PPP projects usually involve public safety and public interests, in order to ensure the continuous and stable operation of the project, it is usually clearly stipulated in the dispute resolution clause that during the dispute period, all parties shall continue to perform the undisputed part of the contract. Unless otherwise stipulated by law or otherwise agreed, neither party shall use the dispute as an excuse, stop project operations." Article 74 of the National Development and Reform Commission's "General Contract Guidelines for Government and Social Capital Cooperation Projects" also stipulates: "During litigation or arbitration, the parties to the project shall continue to perform the undisputed part of the contract; unless otherwise stipulated by law or otherwise agreed, neither party shall stop project operation services, stop project operation support services or take other measures that affect the public interest on the grounds of disputes." Article 42 of the 2017 Regulations on Government and Social Capital Cooperation in the Field of Infrastructure and Public Services (Draft for Comment) stipulates: "During the settlement of disputes on cooperation projects, both parties to the agreement shall continue to perform their obligations under the cooperation project agreement and shall not interrupt public services without authorization."

However, what is the "public interest" in PPP projects is not clearly defined in the above provisions. Public interest has long been the core concept of political and legal debate, and is often widely invoked because it reflects the source of power legitimacy, the basis of behavior value judgment, and the goal of legal protection. This also results in the negotiation of PPP projects, the social capital side can accept the "one-vote veto" of the government, but cannot accept the simple abstraction of the object of the veto as "public interest". Therefore, it is necessary to determine the specific direction of the "public interest" involved in the project in consultation with social capital in combination with the specific type, scale, potential audience and other factors of the project, so as to prevent the abuse of the "one vote veto" and provide clear guidance for the specific exercise of the right.

(II) Avoiding the Abuse of "One-vote Veto"

The management right of PPP project company focuses on the social capital side, if the government is too involved in the management of the project company, it will greatly reduce the operational efficiency of the enterprise, which is not in line with the principle of resource allocation under the condition of market economy. Therefore, "although the government enjoys the" one-vote veto power ", it should aim at maintaining the public service attribute of the project and promoting the implementation of the project in an orderly manner, and should not abuse this right to hinder or restrict the normal operation and management of the project company by social capital, or even infringe upon the legitimate rights and interests of social capital, which will lead to the imbalance of the rights and obligations of both parties and ultimately affect the smooth implementation of the project. It is difficult to achieve win-win-win-win situation.

The (III) clearly stipulates "one vote veto" in the articles of association of the project company"

"One-vote veto" is a kind of "agreed" right, which belongs to the category of meaning autonomy, so it needs to be clearly agreed in the relevant documents of PPP project. The exercise of "one-vote veto power" not only affects the rights and obligations between the government and social capital, but also involves the public interest, the interests of the public and third parties, and affects the transaction order between the project company and bona fide third parties. Therefore, except for the setting and agreement made in the project implementation plan, project contract and shareholder agreement, in the articles of association of the project company, the specific circumstances and exercise of the "one-vote veto" should be clearly and clearly stipulated and fixed, so as to realize the publicity of the "one-vote veto" through the publicity of the articles of association.

(IV) the correct use of the "one-vote veto" expression

Regarding the expression of "one-vote veto power", there are two common expressions in practice. Take the shareholder's "one-vote veto power" as an example. One expression is: "The decision made by the shareholders' meeting on the matter under discussion shall be determined by the number of voting rights. The voting of the following matters can only be passed with the written consent of a certain shareholder"; one expression is: "The following matters shall be valid only if unanimously approved by all shareholders". These two expressions can actually achieve the effect of "one vote veto", but there is a big difference. The first formulation grants a "one-vote veto" to a particular shareholder on a particular matter, while the second formulation creates a one-vote veto for all shareholders on a particular matter. Therefore, in the specific setting, attention should be paid to the difference between the above expressions.

Due to the particularity of the two parties involved in the PPP project, the PPP project company is different from the general company, the shareholder side is the representative of the public power of the government, so the distribution of control of the general company can not be fully applied to the PPP project company. In order to safeguard the public interest, maintain the public service and public welfare attributes of PPP projects, and overcome the profit-seeking nature of social capital, it is necessary to give the government a corresponding "one-vote veto" from the different organizations of the project company, and set specific circumstances. However, the government should exercise this right on the premise of maintaining the public service attributes of the project and promoting the implementation of the project in an orderly manner, and try to avoid interfering with the normal operation and management of the project company in the form of "one-vote veto" to ensure the smooth operation of the PPP model.