Research On The Definition Of The Power Of The Board Of Directors And Shareholders’ Meeting

During the time of the change of the companies’ governance structure, there have been lots of cases relating to power struggle between the board of directors and Shareholders’ meeting, and there have been statute laws and case laws in different period of historical development in each legal system regulated such problems or cases mentioned above. Meanwhile, kinds of companies allocated and defined the power of the board of directors and Shareholders’ meeting via its articles of association or article documents. Despite all this, kinds of problems rising from the power struggle between the board of directors and Shareholders’ meeting couldn’t be solved by relevant legislation and articles of association in the time of transition of company. Taking following case as example: Company A(“the Company”) grants the Board of Directors the power of election and appointment of independent directors in its Articles of Association, then the Board of Directors made the following resolution of the Board of Directors to introduce overseas high-quality capital into the Company: the capital manager-institution investor is entitle to appoint two(2) representative as independent director into the Board of Directors. After releasing the resolution, Shareholders’ meeting convened an interim meeting of shareholders and made a resolution “rejecting the resolution relating to adopt new independent directors and remove all current directors” made by simple majority in accordance with the rules “Shareholders’ meeting is the company’s governing body”, “the Board of Directors of a company shall be accountable to Shareholders’ meeting” of in Company Law and required the Board of Directors to execute its resolution. The Board of Directors insisted that the power of election and appointment of independent directors has been granted by the Articles of Association and refused to execute.Based on the above example, we can raise the following questions: Question A: In event that the Board of Directors made a resolution within the limitation of authorization of the Articles of Association, whether Shareholders’ meeting is entitle to reject the resolution made by the Board of Directors in according to the rules that the Board of Directors of a company shall be accountable to Shareholders’ meeting in Company Law?Question B: Whether the rule that the Board of Directors of a company shall be accountable to Shareholders’ meeting will undoubtedly mean that Shareholders’ meeting is the highest governing body of the Company?Question C: How to reasonably divide the power between the Board of Directors and Shareholders’ meeting in the Articles of Association and article documents?Centering on the three questions mentioned above, author will adopt three ways of research, which are the comparative research method, historical analysis method and normative methods to analysis and research the legitimacy and rationality from the perspective of the legislation shortcomings of current company law and regulations.The power of the Board of Directors granted by articles of association or article documents shall be divided into the following three aspects which is discretion power of the Board of Directors, decision-making power of company business and power of supervision of company business. If we want to seek the boundary between the Board of Directors and Shareholders’ meeting among current company law and company regulations, we must understand the legal meaning of the sentence “the Board of Directors of a company shall be accountable to Shareholders’ meeting” at first, and the most important part of that sentence is to interpret the world “be accountable to”. If we believe that the Board of Directors shall take legal responsibility of consequence of exercising its own power, such cause-and-effect relationship is inconformity to the definition of the legal status of company bodies, for this reason, “be accountable to’ can’t be interpreted as “taking legal responsibility”. If we believe that the sentence “the Board of Directors of a company shall be accountable to Shareholders’ meeting” emphasizes the obligations and responsibilities shouldered by members of the board of directors to shareholders, such meaning on the one side is relatively farfetched and far away from the literary meaning, on the other side is inconformity to the requirements of structure of China’s company law. Because China Company Law has stipulated in detail for obligations and responsibilities of directors to shareholders, so there is no need to emphasize that in obscure languages. In this case, we can only interpret the sentence “the Board of Directors of a company shall be accountable to Shareholders’ meeting” as declaratory regulation : the main meaning of above declaratory is emphasizing the Board of Directors shall implement the resolution of Shareholders’ meeting or the decision of shareholder and report to Shareholders’ meeting in accordance with the legislation purpose of China Company Law, the Board of Directors is entitle to make decisions and execute daily routine of company unless the resolution of Shareholder’s meeting decides to dismiss directors and elect a new director, Shareholders’ meeting can’t constraint the decision and execution of the Board of Directors. The sentence “the Board of Directors of a company shall be accountable to Shareholders’ meeting” shall be excluded as the barrier to define the boundary between the Board of Directors and Shareholders’ meeting according to such interpretation.