Perspective | Can the powers of the shareholders’ meeting be delegated to the board of directors? — An Analysis of Power Boundaries and Dynamic Balance in Corporate Governance
Published:
2025-12-24
At the heart of corporate governance lies the scientific allocation and effective checks and balances of power. Among these, the relationship between the shareholders’ meeting—the company’s governing body—and the board of directors—the company’s executive body—forms the cornerstone of the corporate governance structure. Can the powers of the shareholders’ meeting be delegated to the board of directors for exercise? The answer to this question is neither a simple “yes” nor a “no”; rather, it hinges on the dynamic balance among legally mandated provisions, the scope of corporate autonomy, and the interplay between governance efficiency and risk control.
At the heart of corporate governance lies the scientific allocation and effective checks and balances of power. Among these, the relationship between the shareholders’ meeting—the company’s governing body—and the board of directors—the executive body—is the cornerstone of the corporate governance structure. Can the powers of the shareholders’ meeting be delegated to the board of directors for exercise? The answer to this question is neither simply “yes” nor “no”; rather, it hinges on a delicate balance among legal mandatory provisions, the scope of corporate autonomy, and the trade-offs between governance efficiency and risk control. Dynamic equilibrium 。
I. Establishment of the Shareholders’ Meeting’s Core Status and Legalization of its Authorization Mechanism
The current Company Law first reinforces the status of the shareholders’ meeting as the company’s highest authority. Article 59, paragraph 1, explicitly lists nine powers of the shareholders’ meeting in limited liability companies, including, but not limited to, electing and replacing directors and supervisors, reviewing and approving reports submitted by the board of directors and the supervisory board, deciding on profit distribution, increasing or reducing capital, merging, splitting, dissolving the company, and amending the articles of association. Article 112 clearly stipulates that this provision also applies to the shareholders’ meetings of joint-stock companies. These powers are critical to the company’s very survival and directly affect the core interests of shareholders, making them of paramount importance and unshakable in nature.
However, the traditional “ Shareholder-centricism This could lead to long decision-making chains and low efficiency, making it difficult to respond effectively to the rapidly changing market environment. To enhance the company’s decision-making efficiency, the Company Law explicitly introduces an authorization mechanism in its general provisions. Article 59, paragraph 2, stipulates: “The shareholders’ meeting may authorize the board of directors to make resolutions on the issuance of corporate bonds.” This clearly demonstrates that the legislature recognizes the shareholders’ meeting’s right to delegate certain powers to the board of directors through a legally prescribed procedure.
II. The Limitation of the Scope of Authorization and Core Permissions That Cannot Be Delegated
Although the Company Law has opened the door to delegation, this door is not entirely open-ended. The scope of delegation is clearly limited, and there are well-defined boundaries beyond which certain core powers cannot be delegated.
(1) Clearly authorized matters: Issuing corporate bonds
As mentioned above, Article 59, paragraph 2, provides the explicit legal basis for the authorization mechanism. Companies may either directly stipulate this in their articles of association or delegate this authorization to the board of directors through a resolution passed by the shareholders’ meeting, thereby delegating the specific decision-making authority for issuing corporate bonds and enhancing financing efficiency.
(2) Implicit Delegable Authority: Operational Decision-Making Power
In addition to explicit authorization, the current Company Law also leaves room for implied authorization. Article 67 lists ten powers vested in the board of directors; many of these matters—such as “deciding on the company’s business plans and investment proposals,” “formulating the company’s profit distribution plan and loss-compensation plan,” and “drafting plans for increasing or reducing the company’s registered capital and issuing corporate bonds”—are inherently of a “executive” or “plan-drafting” nature. As the authority body, the shareholders’ meeting is responsible for “reviewing and approving” or “adopting resolutions” on the plans formulated by the board of directors. In practice, the shareholders’ meeting may, through its articles of association or resolutions, clearly define the amount and scope of “business plans” and “investment proposals,” thereby granting the board of directors discretionary power over routine operational decisions within a specified amount or scope, while reserving for itself the responsibility of making strategic and fundamental decisions. Paragraph 2 of Article 67 of the Company Law stipulates: “Restrictions on the powers of the board of directors set forth in the company’s articles of association shall not be enforceable against bona fide third parties.” This provision indirectly strengthens the protection of transactional security and implicitly suggests the broad scope of the board of directors’ powers within the limits prescribed by the articles of association, thus providing institutional safeguards for the shareholders’ meeting to delegate authority downward.
(3) Core Permissions That Cannot Be Delegated: Powers that pertain to the company’s fundamental interests and the basic interests of its shareholders.
Certain powers of the shareholders’ meeting are non-delegable because they involve fundamental changes to the company and the ultimate interests of the shareholders. These powers must be exercised directly by the shareholders’ meeting itself and may not be delegated to the board of directors. They primarily include:
1. Amend the company’s articles of association: The company’s articles of association are the company’s “constitution,” and any amendments thereto must be approved by the shareholders’ meeting (Article 59, Paragraph 1, Item 8; Article 66).
2. Increase or decrease the registered capital: The registered capital is the cornerstone of a company’s liability, and any changes to it directly affect the company’s creditworthiness and the interests of its creditors. Such changes must be approved by shareholders representing more than two-thirds of the voting rights (Article 66).
3. Merger, division, dissolution, or change of the company’s corporate form: These matters directly determine the company’s survival and legal form, and represent the shareholders’ most fundamental rights; therefore, they must be resolved by a shareholders’ meeting (Article 66).
4. Electing and replacing directors and supervisors, and deciding their remuneration: The board of directors and the supervisory board are established by the shareholders’ meeting and are accountable to it. The power to appoint, remove, and incentivize management is the core mechanism through which the shareholders’ meeting exercises control over management and is non-transferable (Article 59, Paragraph 1, Item 1).
III. Methods of Exercising the Authorization Mechanism and Procedural Safeguards
The granting of power must follow statutory procedures; otherwise, it may render the authorization invalid or give rise to disputes.
(1) Authorized by the company’s articles of association: The company’s articles of association serve as the fundamental guidelines for the company’s organization and conduct, and are binding on both the company and all shareholders. At the time of the company’s establishment or through subsequent amendments to the articles, the company may explicitly specify the scope, conditions, and limitations of the shareholders’ authority over the board of directors. This is the most stable and foundational method of granting authorization.
(2) Authorization by Shareholders’ Meeting Resolution: For specific, one-time, or temporary authorizations, the shareholders’ meeting may adopt a special resolution. For example, the shareholders’ meeting may resolve to authorize the board of directors to decide on investment projects not exceeding a certain percentage of the company’s net assets within the coming year.
(3) Procedural Legality and Remedies for Defects in Resolutions: Regardless of the method used to grant authorization, it is essential to ensure that the procedures for convening the shareholders’ meeting and the voting methods comply with both statutory requirements and the company’s articles of association. Articles 24 through 28 of the Company Law clearly specify the circumstances under which resolutions passed by the shareholders’ meeting or the board of directors are invalid, voidable, or unenforceable. If the authorization resolution itself contains procedural or substantive defects, shareholders may, in accordance with the law, request the court to revoke the resolution or declare it invalid, thereby negating the legality of the authorization. This provides small and medium-sized shareholders with an important avenue for redress, helping to prevent controlling shareholders from harming the interests of the company and other shareholders through improper authorization.
IV. Conclusion
To sum up, first, statutory exclusive powers involving fundamental changes to the company—such as amending the articles of association, increasing or decreasing capital, merging, splitting, or dissolving the company—must never be delegated. This is the bottom line for protecting shareholders’ rights and interests. Second, beyond these red lines, there is room for flexible delegation. With regard to non-core operational and planning-related powers, in accordance with the principles of corporate autonomy and operational efficiency, the shareholders’ meeting may, through the company’s articles of association or a valid resolution, explicitly and specifically authorize the board of directors to exercise such powers. Ultimately, a sound corporate governance structure, while strictly adhering to legal boundaries, requires a carefully designed articles of association that strikes a dynamic and efficient balance between the ultimate control vested in the shareholders’ meeting and the operational autonomy of the board of directors.
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