The Research On The Rule Of Abstention From Voting

The rule of abstention from voting includes abstention from voting rights of shareholders and abstention from voting rights of directors,which means when shareholder(s)or director(s)has/have interests in the meeting agenda,shareholder(s)or director(s)shall not participate in voting on the matter.As the name suggests,the rule of abstention from voting is a mechanism for regulating the voting rights of shareholders or directors.Introducing and operating this rule,plays an critical role to facilitate company to make substantive fair decision,improve the corporate governance structure,protect the company's interests,promote the efficiency of the company's operations and even promote the rational operation of our capital market.The first regulation about the rule of abstention from voting was the Article 72 of Guidelines on the Bylaws of Listed Companies(now revised in Article 70 in 2016),which said “When matters concerning affiliated transactions are deliberated at a shareholders' meeting,affiliated shareholders shall not vote,and the number of voting shares represented by them shall not be counted in the total number of valid votes.” Then,similar regulations can be found in many departmental regulations and industry regulations about listed company.While the relevant regulations appeared in the Company Law is in 2005 revision,the Article 16 said “If a company intends to provide guaranty to a shareholder or actual controller of the company,it shall make a resolution through the shareholder's meeting or shareholders' assembly.The shareholder as mentioned in the preceding paragraph or the shareholder dominated by the actual controller as mentioned in the preceding paragraph shall not participate in voting on the matter as mentioned in the preceding paragraph.” So far,the rule has received attention and has become the hot discussion point in the academy and judicial practice.However,the application of this rule is still an unclear problem,especially in the case of dispute over the effectiveness of company dissolution with violating this rule.In addition,subject to Article 5 of Provisions of the Supreme People's Court on Several Issues concerning the Application of the Company Law of the People's Republic of China(IV),there is a new type of defect resolution,namely the resolution has never been formed.So,the dispute over the effectiveness of such resolutions will be more complicated.The most famous case in recent years is the directors' resolution dispute of Wanke's independent director abstention from voting.This case has introduced the rule of abstention from voting and its operation mechanism to the scholars,especially focusing on the legality of this directors' meeting resolution,that is,how to count the number of voting rights.The special value basis of the rule of abstention from voting is the substantive fairness of the resolutions.Specifically,the value is for avoiding abusing the Majority Rule for shareholder and directors' loyalty obligations for directors.Recognition of the value base is a fundamental condition for the establishment of a rule.After clarifying the value basis,there is no uniform title for this rule,either "voting rights exclusion system" or "voting rights restriction system".But I think abstention from voting is just a rule about voting rights,not the system,and the word “abstention” can explain the feature of this rule that the voting rights are temporarily not exercised.With the explicit title,the meaning of this rule has not been determined,for this,we should clarify the meaning of “special interest relationship”.In this paper,I think the meaning of “special interest relationship” is the shareholder(s)or director(s)has/have more interests in the meeting agenda than other shareholder(s)or director(s).As a rule,it should have its own application procedures,including application of abstention,recognition of application and the adoption of the resolutions.The detailed provisions of the procedure help the rules to be better applied.Even we have related laws and regulations about the rule of abstention from voting,including the Company Law and departmental regulations and industry regulations of the listed company,there are many characteristics and problems showed,such as the low effectiveness of these regulations,the narrow scope of application,the lack of procedure design and unclear validity of resolution with violating this rule.When we look at the relevant provisions on the rule of abstention from voting in foreign countries,we can find there is also the dispute of the necessity of this rule and the differences between abstention form voting of shareholders and directors.I select the legislations of German,Japan,America,Hong Kong and Taiwan for comparatively study to provide the suggestions for the rule in China.In addition to the theories of the foreign countries,the rule of abstention from voting has already infiltrated into the legislation.This paper studies the rule of abstention from voting including the relevant legislation of the disputed application,the method of counting votes and the validity of the resolution.It is worthwhile to analyze the foreign countries legislation to find out what should to learn and refer to,and what is not applicable to China's legislation by comparison.Finally,this paper combines the above analyst and provides suggestions on the legislations and application practice to establish the complete regulations for this rule to reduce disputes over the validity of resolutions caused by violating the rule of abstention from voting.For legislation,we should respect the concept of corporate autonomy and encourage companies to set their own rules of abstention of voting rights through articles of association or internal rules of procedure;on the basis of affiliated guarantee and affiliated transaction,the application scope of voting right abstention rule should be broadened;establish rule of abstention from voting for non-listed companies.In the application procedure of the rules,the interested shareholders and directors should voluntarily apply for the abstention of the voting rights,other participants can exercise their supervision.When the interested shareholders or directors do not evade voting,there may be two kinds of defects in the validity of resolution,which can be remedied without affecting the interests of the third party.