Copyright 2012 by Stanford University

LI Jianjun

v.

Shanghai Jiapower Environment Protection Science and Technology Co., Ltd.,

A Corporate Resolution Revocation Dispute

Guiding Case No. 10

(Discussed and Passed by the Adjudication Committee of the Supreme People’s Court

Released on September 18, 2012)

CHINA GUIDING CASES PROJECT

English Guiding Case (EGC10)

November 9, 2012 Edition*

* The citation of this translation of the Guiding Case is: 《李建军诉上海佳动力环保科技有限公司公司

决议撤销纠纷案》(LI Jianjun v. Shanghai Jiapower Environment Protection Science and Technology Co., Ltd.,

A Corporate Resolution Revocation Dispute), CHINA GUIDING CASES PROJECT, English Guiding Case (EGC10),

Nov. 9, 2012 Edition, available at http://cgc.law.stanford.edu/guiding-cases/guiding-case-10.

This document was primarily prepared by CHEN Qian, JIANG Runzhou, David Kong, Oma Lee,

Christine Qingyu Liu, Thomas Rimmer, Sylvia Tsai, Randy Wu, and ZHU Muran. The document was

finalized by Dimitri Phillips and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a

few words included in square brackets, and boldfacing the headings to correspond with those boldfaced in the

original Chinese version, was done to make the piece more comprehensible to readers. The following text,

otherwise, is a direct translation of the original text and reflects formatting of the Chinese document released by

the Supreme People’s Court.

The following Guiding Case was discussed and passed by the Adjudication Committee of the Supreme

People’s Court of the People’s Republic of China and was released on September 18, 2012 available at

http://www.chinacourt.org/law/detail/2012/09/id/145946.shtml. See also 《最高人民法院关于发布第三批指

导性案例的通知》 (The Supreme People’s Court’s Notice Concerning the Release of the Third Batch of Guiding

Cases), Sept. 18, 2015, available at http://www.chinacourt.org/law/detail/2012/09/id/145946.shtml.

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Copyright 2012 by Stanford University

2

Keywords

Civil Corporate Resolution Revocation Scope of Judicial Review

Main Points of the Adjudication

A people’s court, when handling a corporate resolution revocation dispute, should

review: Whether or not the procedure for convening meetings and the method of voting

violate laws, administrative regulations, or the articles of association, as well as whether or

not the content of the resolution violates the articles of association. On the premise that the

aforementioned provisions have not been violated, whether the facts on which the resolution

dismissing the general manager is based are verified and whether the reasons can stand are

not within the scope of judicial review.

Related Legal Rule(s)

Article 22, Paragraph 2 of the Company Law of the People’s Republic of China

Basic Facts of the Case

Plaintiff LI Jianjun (李建军) claimed: The resolution that defendant Shanghai

Jiapower Environment Protection Science and Technology Co., Ltd. (上海佳动力环保科技

有限公司) (hereinafter referred to as “Jiapower Company”) used to dismiss LI from his post

as general manager was based on facts and reasons that could not stand, and the board of

directors’ procedure for convening, its method of voting, as well as the contents of its

resolution all violated the provisions of the Company Law. He requested that the court

revoke the board of directors’ resolution in accordance with law.

Defendant Jiapower Company defended its position, claiming: The board of

directors’ procedure for convening, its method of voting, and the contents of its resolution all

conform to the provisions of law and the articles of association, and therefore the board of

directors’ resolution was valid.

The court heard the case and ascertained: Plaintiff LI Jianjun was a shareholder of

defendant Jiapower Company and served as general manager. Jiapower Company’s

shareholding structure was: 40% of shares held by GE Yongle, 46% by LI Jianjun, and 14%

by WANG Taisheng. The three shareholders together constituted the board of directors; GE

Yongle served as the chairperson of the board of directors, and the other two were directors.

The articles of association stipulated:

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3

The board of directors exercises authorities including appointment and

dismissal of the company’s manager, etc.; board meetings shall be valid only

when two-thirds or more of the directors are in attendance; decisions made at

the board meeting on the matters discussed should be valid only when

directors who constitute more than two-thirds1 of all shareholders approve by

voting.

On July 18, 2009, GE Yongle, Chairperson of the Board of Directors, Jiapower

Company, convened and presided over a board meeting, and the three directors were all in

attendance. A resolution was made during the meeting, the contents of which stated in part:

“In view of the fact that General Manager LI Jianjun, without the board of directors’ consent,

privately used company funds for stock speculation in the secondary market, resulting in a

heavy loss, [the board] hereby dismisses him from the position of general manager, effective

as of today.” The resolution was signed by GE Yongle, WANG Taisheng, and the

supervisor, while LI Jianjun did not sign.

Results of the Adjudication

On February 5, 2010, the Huangpu District People’s Court of Shanghai Municipality

rendered the (2009) Huang Min Er (Shang) Chu Zi No. 4569 Civil Judgment: Revoke the

board of directors’ resolution made on July 18, 2009 by defendant Jiapower Company.

After the judgment was pronounced, Jiapower Company appealed. On June 4, 2010, the No.

2 Intermediate People’s Court of Shanghai Municipality rendered the (2010) Hu Er Zhong

Min Si (Shang) Zhong Zi No. 436 Civil Judgment: (1) Repeal the (2009) Huang Min Er

(Shang) Chu Zi No. 4569 Civil Judgment of the Huangpu District People’s Court of Shanghai

Municipality; (2) reject LI Jianjun’s litigation claims.

Reasons for the Adjudication

In the effective judgment, the court opined:2 In accordance with Article 22,

Paragraph 2 of the Company Law of the People’s Republic of China, reasons for which a

1 Translators’ note: “三分之二以上” should be literally translated as “more than two-thirds”. But this

term should include “two-thirds” because (1) of the context (in the Reasons for the Adjudication, it mentions

“[t]he aforementioned resolution of the board of directors meeting was approved by the votes of two of the three

shareholders (and directors); therefore the voting method did not violate the provisions of laws, administrative

regulations, or the articles of association.”), and (2) the articles of association at issue likely follows the

prevailing practice in China’s Company Law. According to Article 155 of the General Principles of the Civil

Law of the People’s Republic of China (the “GPCL”) (《中华人民共和国民法通则》), adopted on Apr. 12, 1986

and effective on Jan. 1, 1987, the term “以上” (“more than”) includes “本数” (“the number”). Since company

law falls within the scope of civil law, Article 155 of the GPCL also applies to company law. Therefore,

companies likely follow this practice when they prepare their articles of association. 2 Translators’ note: The Chinese text does not specify which court opined. Given the context, this

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4

board of directors’ resolution can be revoked include: (1) The procedure for convening

violates laws, administrative regulations, or the articles of association; (2) the voting method

violates laws, administrative regulations, or the articles of association; (3) the content of

resolutions violates the articles of association. From the view of the procedure for

convening, one could see that the board of directors meeting held by Jiapower Company on

July 18, 2009 was convened by Chairperson GE Yongle, and all three directors were in

attendance. The procedure of convening that board meeting did not violate the provisions of

laws, administrative regulations, or the articles of association. From the view of the voting

method, one could see that, according to the provisions of Jiapower Company’s articles of

association, decisions on the matters discussed should be valid only when directors who

constitute more than two-thirds3 of all shareholders approve by voting. The aforementioned

resolution of the board of directors meeting was approved by the votes of two of the three

shareholders (and directors); therefore the voting method did not violate the provisions of

laws, administrative regulations, or the articles of association. From the view of the

contents of the resolution, one could see that Jiapower Company’s articles of association

provide that the board of directors has the right to dismiss the company’s general manager.

The contents of the board of directors’ resolution stating that “General Manager LI Jianjun,

without the board of directors’ consent, privately used company funds for stock speculation

in the secondary market, resulting in a heavy loss” were merely the reason for the board’s

dismissal of General Manager LI Jianjun, whereas the contents of the resolution

themselves—that General Manager LI Jianjun be dismissed—did not violate the articles of

association.

Even if the reasons for the dismissal of General Manager LI Jianjun as stated in the

board of directors’ resolution did not exist, this would not result in the revocation of the

board of directors’ resolution. First, the Company Law respects corporate autonomy.

Legal relations within companies, in principle, should be adjusted by corporate autonomy

mechanisms and judicial organs, in principle, do not intervene in internal corporate affairs.

Second, Jiapower Company’s articles of association did not restrict the board of directors’

authority to dismiss the company’s manager, and did not provide that the dismissal of the

manager by the board must be based on particular reasons. The contents of the articles of

association did not violate any compulsory provisions of the Company Law and should be

regarded as valid; hence, Jiapower Company’s board of directors could exercise the authority

conferred by the articles of association to make the decision of dismissing the company’s

manager. Therefore, the court should respect corporate autonomy, and did not need to

review whether or not there were reasons for which Jiapower Company’s board of directors

dismissed its general manager; this means that there was no need to review whether or not the

facts on which the resolution was based were verified, and whether or not the reasons could

stand. In summary, plaintiff LI Jianjun’s litigation claims requesting revocation of the

board of directors’ resolution could not stand and were rejected in accordance with law.

should be the No. 2 Intermediate People’s Court of Shanghai Municipality. 3 See supra note 1.