Jurisprudential Study Of Shareholders’ Meetings

It has been a common understanding in academic circles that a company, as a civil subject, should be autonomous. For this point, the shareholders of a company should be autonomous first, and the shareholder autonomy is the core of company autonomy. Analyzing from the perspective of political philosophy, autonomy is just what is called "democracy", and the shareholder autonomy is just the "shareholder democracy". The basic connotation of shareholder democracy means that shareholders of a company should be entitled to participation in decision-making for the company’s affairs. The shareholders’participation in decision-making for the company’s affairs is a form of collective decision-making, which is a kind of institutional decision-making that only can be achieved through specific legal institutions. Through the democracy perspective, this paper studies basic theoretical issues of the core legal institutions ensuring the achievement of shareholder autonomy—the system of general meeting of shareholders.The shareholder democracy is adopted as the value concept of the general meeting of shareholders. Democracy is ideologically based on equality, because if there is no concept of equality, it will be impossible for people to demand democracy, i.e. autonomy. The essence of democracy is a form of social management system, and a collective decision-making mechanism. The realization of democracy must be relied on certain material, intellectual, and legal conditions. Democracies have three forms, namely, the direct democracy, the indirect (representative) democracy and the participatory democracy.Compared with the prototype theory of democracy theory—political democracy, the shareholder democracy has a certain degree of particularity:First, the shareholder equity, as the ideological basis of shareholder democratic, refers to that the shareholders of a company have "equal" rather than "average" right to participate in decision-making of the company’s affairs. Second, the shareholder democracy is a form of integrated democracy based on the direct democracy with the characteristics of the indirect democracy and the participatory democracy. Third, the homogeneity of the shareholder democracy is stronger than the political democracy, it is because that the complexity of corporate affairs is at a level below the complexity of state affairs.Although the shareholder democracy has a certain degree of particularity, as it adopts the majority voting as the rule for resolution, the "majority tyranny", namely minority shareholders are oppressed by controlling shareholders, still exists. In majority voting of the political democracy, "majority" is generally variable, while the status of "majority" in the shareholder democracy, namely the controlling shareholders has a constancy nature, which determines that the problem of "majority tyranny", namely minority shareholders are oppressed by controlling shareholders, is more difficult to overcome. In the theory of political philosophy, the most effective way to overcome the "majority tyranny" is to limit the scope of the affairs under the democratic resolution and establish strict rules of procedure for all aspects of the democratic resolution. It is the same in resolving the problem of "majority tyranny", namely minority shareholders are oppressed by controlling shareholders, and that is to say, the company law must limit the scope of affairs to be resolved at the general meeting of shareholders and establish strict rules of procedure for the general meeting of shareholders.As the institutional form of shareholder democracy, the general meeting of shareholders has a very important role in corporate governance, and is called the highest authority of a company. However, as it is not always ready to carry out decision-making for the affairs of the company, it has to elect a certain number of representatives to form a governing body for the company’s day to day affairs, namely, the board of directors, so that it can carry out make decisions for the company’s affairs at any appropriate time. Once the board of directors comes into existence as the company’s daily operation and management body, the relationship between the general meeting of shareholders and the board of directors, namely, the roles of them in corporate governance should be considered.The differentiation of modern corporate administrative organs is inevitable with profound political, economic, technological and other reasons. Under such circumstance, the role of the general meeting of shareholders, as the company’s highest authority, is not reflected by the company’s decision-making on all affairs of the company, but by the right of final decision on the appointment and removal of the members of the company’s board of directors (the management) and major issues of the company. Therefore, with regard to the understanding of roles of the general meeting of shareholders and the board of directors in corporate governance, we must establish such a concept:as long as the right to appoint and remove of directors (the management) is really on the grasp of shareholders, the legal status of the general meeting of shareholders as the company’s highest authority will be wavered in no respect, and the general meeting of shareholders will play a major role in corporate governance. The purpose of shareholders in attending the general meeting of shareholders is to exercise their rights of shareholders.The general meeting of shareholders, as the place for the shareholders to exercise their rights and an institutional tool for ensuring the realization of the shareholder autonomy, not only plays the role in reconciling divergent views of shareholders, transmitting information about the company, and educating the shareholders, but also has important functions in monitoring the company’s directors (the management) and making decisions on the company’s affairs. The performing of the roles and functions of the general meeting of shareholders tends to be affected by the structure of stock right, the financial system, and other factors. As the shareholders assume no legal responsibilities in voting for making resolution for the company’s affairs at the general meeting of shareholders, it is not the company’s administrative organ in its real meaning, but a decision-making mechanism similar to the "referendum" in political democracy, which has essential difference with the legislature (parliament) in political democracy. In addition, the general meeting of shareholders is not the administrative organ of a company means that the function of the general meeting of shareholders should be discussed from the perspective of institution rather than administrative organ.Determining the affairs to be resolved at the general meeting of shareholders scientifically is the key to perform the functions of the general meeting of shareholders in an effective manner. To determine the affairs to be resolved at the general meeting of shareholders, we must consider a variety of factors:First, the relationship between the shareholders and other interest-relating parties should be taken into account. Shareholders are the investors of the company, and the most important but not the sole interest-relating party of the company. As the general meeting of shareholders is only composed of shareholders, it can only make decisions for affairs of their own interests other than those involved with rights and interests of other interest-relating parties, such as affairs concerning the interests of creditors of the company. Secondly, the "majority tyranny", namely minority shareholders are oppressed by controlling shareholders, which exists in the general meeting of shareholders as the institutional form of shareholder democracy, should be taken into account. To protect the interests of minority shareholders, it is necessary to limit the scope of affairs to be resolved at the general meeting of shareholders, that is to say, the shareholders may not adopt any resolution which is detrimental to the vested interests of the shareholders. Finally, the limitation of conditions for the general meeting of shareholders as the institutional form of shareholder democracy should also be considered. The realization of democracy is conditional, and the realization of shareholder democracy is no exception.The shareholders are different from businessmen and have no business skills. Therefore, considering from the view of scientific decision-making, shareholders can not make decisions on affairs to be resolved upon business skills at the general meeting of shareholders. Combining these three factors, the author considers that four of the company’s affairs should be rendered for the decision-making of the shareholders, namely, the appointment and removal of directors, the amendment of the company’s articles of association, the change of the company’s form and the matters concerning the distribution of the company’s profits. Other affairs of the company can be decided by the general meeting of shareholders or the board of directors; any matter included in the scope of shareholders autonomy should be regulated by the company’s articles of association. For the division of affairs to be resolved by the general meeting of shareholders or the board of directors, from a logical perspective, the clear definition of affairs for one of them is enough. As a corporate, the company’s decision-making has a certain degree of randomness, and it is impossible to clearly prescribe it in advance in the company law or the articles of association by enumerating. Therefore, after it is clearly prescribed that affairs to be resolved at the general meeting of shareholders should be enumerated, affairs not subject to the resolution of the general meeting of shareholders should be interpreted as subject to the resolution of the board of directors.When the shareholders make decisions on the company’s affairs at the General meeting of shareholders, the rules of procedure prescribed by the company law and the company’s articles of association must be complied with in a strict manner. To abide by the rules of procedure strictly is not only a necessity for the scientific decision-making of shareholders, but also a condition to ensure that the rights and interests of minority shareholders will not be infracted by majority shareholders due to the adoption of the rule of majority voting for the general meeting of shareholders. For designing the rules of procedure for the general meeting of shareholders, the principle of interest balance between the values of efficiency and justice should be followed. From the point of view on the efficiency of decision-making, the rules of procedure for the general meeting of shareholders should be simple rather than complicate. From the perspective of justice, the rules of procedure for the general meeting of shareholders should be as detailed as possible so as to ensure that the minority interests will not be infracted by controlling shareholders and minimize the problem of "majority tyranny", namely, the oppression of minority shareholders by controlling shareholders.The rules of procedure for the general meeting of shareholders can be divided into two components, namely, rules to be complied with by the participants, i.e. the shareholders, and the rules to be complied with by the convener (the host). For the participants of the general meeting of shareholders, namely, the shareholders, they must exercise their rights (mainly the right to vote and propose) according to the rules. There are different ways to exercise voting rights of shareholders. The rules to be complied with by the shareholders are different based on different ways to exercise their rights. For the convener, to comply with the rules of procedure for the general meeting of shareholders means that the convener (the host) must notify the participants for the convening of meeting, submit proposals to the meeting and preside over the meeting as prescribed. In normal circumstances, the general meeting of shareholders should be convened by the board of directors and the topics of the meeting should be drafted out by the board of directors. The shareholders can only vote on affairs submitted to the general meeting of shareholders, which features the general meeting of shareholders by obvious "passivism". To increase the enthusiasm of shareholders in participating in the general meeting of shareholders and give full play to the shareholders’role as "masters", it is necessary to give the right to make proposals to the shareholders.Compared with bilateral (unilateral) juristic acts, the resolution of the general meeting of shareholders has a greater degree of particularity:first, the content of a bilateral (unilateral) juristic act is uncertain before it comes into existence, while the content of the resolution of the general meeting of shareholders, namely the content of the proposals of the general meeting of shareholders, is determined prior to the resolution of the general meeting of shareholders. Second, the legal effect of a bilateral (unilateral) juristic act is mainly reflected by the legally binding force on the representor, while the legal effect of the general meeting of shareholders is mainly reflected by the legally binding force on the third party, namely the board of directors (the management) of the company other than the representor. Third, the relief measures for defects in validity of bilateral (unilateral) juristic acts are not always practical for defects in any resolution of the general meeting of shareholders. Fourth, the theory on defects of expressions in bilateral (unilateral) juristic acts is structured based on the prototype of natural persons, and it has great limitations on the expressions in the formation of the resolutions of the general meeting of shareholders.The particularity of resolution of the general meeting of shareholders as a juristic act decides that, in theory, it should be regarded as an independent juristic act that is different from a bilateral (unilateral) juristic act, that is, resolution (act). The board of directors has the obligation to implement the resolutions of the general meeting of shareholders. Where the board of directors fails to implement any resolution of the general meeting of shareholders and cause damage to interests of the company or shareholders, the board members should bear relevant liabilities for compensation. From the view of point of improving the implementation efficiency, the system of personal responsibility should be adopted for implementing resolutions of the general meeting shareholders, that is to say, the chairman of the board or the legal representative of the company should be the first person responsible for implementing resolutions of the general meeting shareholders.