Research On The Nature And The Determination Of Validity Of Resolution Of Shareholders’Meeting

Resolution of shareholders’ meeting is a manifestation form of a corporation’s will.The level of completeness of internal decision-making rules within a corporation reflects its corporate governance level.Currently,commercial transactions are booming in China,and numerous corporations have been registered here.However,the level of internal governance varies between different corporations,and corporate meetings have sometimes become battlefields for the proxy contest of controlling shareholders or management boards.Under such circumstances,disputes regarding the validity determination of resolution of shareholders’ meeting occur frequently,from misrepresentation,fraudulent concealment,improper intervention in voting process,to malicious hampering shareholders’ attendance at the meeting on time,temporary addition of shareholder’s qualification requirements,and shortening shareholders’ inquiry time at will,which have revealed many issues of corporate governance.Therefore,it is urgent to improve the rules of corporate resolutions.The first part of this paper introduces the current legislative choice on the corporate resolution’s nature and the issues arising from this choice in corporate resolution field.Paragraph 2 of Article 134 of the Civil Code of the People’s Republic of China provides the establishment elements of resolution act,implying the nature of resolution of shareholders’ meeting has been determined as juridical act.Additionally,the system of invalid corporate resolution determined in the Paragraph 5 of Provisions of the Supreme People’s Court on Several Issues Relating to Application of the Company Law of the People’s Republic of China is considered to be the best proof that the Company Law has acknowledged that the corporate resolution falls within the scope of the system of juridical act.The determination of nature of shareholders’meeting resolution leads to a series of issues such as which standards should be applied and which rules should be governed when determining the validity of corporate resolutions.Currently,Article 22 of the Company Law still leaves many legal loopholes.Incorporating the corporate resolution into the system of juridical act provides an opportunity as well as legal support for the supplementary application of general rules of juridical acts to the Company Law,causing a negative impact on the original system under the Company Law when determining the validity of corporate resolutions.As a result,rules of validity determination of shareholders’ meeting resolution have been scattered in several legal documents such as the Civil Code and the Company Law,leading to a lack of complete regulation system and deviation from original standards.The second part discusses the nature of resolution of shareholders’ meeting,which is the prerequisite of validity determination of corporate resolution.While the current legislative practice has already made a clear choice on the nature of resolution act,it seems that such determination in the Civil Code fails to settle the disputes in academic community.There are still different viewpoints with regard to the nature of resolution act.Two principal theories are the theory of juridical act and the theory of non-juridical act.In essence,resolution of shareholders’ meeting is an extension of organization decision in commerce.Given the essential distinctions between juridical act and corporate resolution such as the procedural appearance and organizational characteristic,resolution of shareholders’ meeting is a formation system of organization’s will,and a process in which the personal wills of majority shareholders are transferred into a single will of corporation through resolution procedures and the majority rule,and hence needs special regulation.The third part analyzes the determination path of validity of shareholders’meeting resolution.By comparison with the determination standards under the current Company Law system,this part emphasizes on the changes as well as deviation from original regulation effect when determining the validity of shareholders’ meeting resolution after the Civil Code considered the resolution act as juridical act.In theory,the majority holds that the general rules of juridical act,which take the genuineness of manifestation of intention as the core,are unlikely to be effectively applied into the determination of validity of corporate resolution,no matter what nature it is.However,some researchers believe the manifestation of intention rules of juridical act should be applied to determine the single voting act of shareholders,and further influence the validity of resolutions indirectly.Additionally,the unconscionability rule under civil law could also supplement the reasons for defective resolution.In fact,some courts have long been using the traditional civil rules as the ground of their decisions to determine whether the corporate resolutions are void or voidable to guarantee justice when Article 22 of the Company Law is insufficient to regulate the corporate resolution.Such practice leads to the inconsistent application of laws in judicial field,and diverse reasonings and holdings in similar cases.The typical example is that there are both civil law and corporate law judicial grounds for the determination of validity of shareholders’ meeting resolution when involving the forgery signature of shareholders.In essence,the determination standards of validity of resolution of shareholders’ meeting should be procedure defects and content defects.Randomly applying the traditional general rules of juridical act to fill the legal loopholes of the Company Law will easily lead to the over-protection of individual right,the ignorance of procedural justice value to corporate resolution,and the inefficiency of commercial transactions when determining the validity of resolution of shareholders’ meeting.The fourth part aims at providing significant suggestions on improvement of current corporate resolution rules on the occasion of amendment of the Company Law shortly afterwards.In general,it should be clear that the resolution of shareholders’meeting needs to be specially regulated under the Company Law,and the legal loopholes of the Company Law should be filled by means of legal interpretation in accordance with original legislative purposes.In view of the current Company Law,the validity rules are not comprehensive,and the scopes of three validity type are not clear.Thus,it is necessary to clarify the boundary of three types of resolution validity,to return the function of unestablished resolution system back as one type of validity defects,and to incorporate unfair procedural defects into regulations.Further,determining the duty of disclosure and its standards during the conferences,restricting and classifying the reasons for void resolutions from the perspective of legislative purposes of the Company Law are beneficial to balance corporate self-governance and judicial intervention.