CHINA Trends and Developments Contributed by: Jiang Guoliang, Huang Jie, Xie Tingting and Lang Tao, T&C Law Firm
ledgers, journals, and auxiliary ledgers – for on-site review within three business days. Persistent refusal may result in fines or consumption restrictions on the company’s legal representative. In practice, where the parties have a dispute over matters of enforce- ment – such as the timing or scope of execution – the enforcement court has the authority to resolve the disagreement by organising both parties to inspect the relevant company documents at a fixed time and place. Improved rights to submit proposals and convene meetings The New Company Law refines both the shareholder proposal right and the right to convene shareholders’ meetings. First, it lowers the shareholding threshold required to submit a proposal. For public companies, the minimum shareholding for shareholders to put for- ward an interim proposal has been reduced from 3% to 1%. This significantly lowers the barrier for minority shareholders to exercise their proposal rights, ena- bling greater participation in corporate governance. The change is particularly meaningful in listed com- panies, where shareholding is often widely dispersed, making it easier for minority shareholders to initiate proposals. Second, the new law clarifies the procedures and time limits for convening a meeting. Under Paragraph 3 of Article 114, shareholders holding 10% or more of the company’s shares – whether individually or in aggregate – may request that an interim shareholders’ meeting be convened. The board of directors or the board of supervisors shall, within ten days of receiv- ing such a request, decide whether to convene the meeting and provide a written reply to the requesting shareholders. This provision outlines explicit proce- dural and timing requirements, thereby reducing the risk of delays by the board or supervisory board. Following the introduction of these provisions, there have already been cases of shareholders holding less than 3% of the shares submitting interim pro- posals. For example, on 12 May 2025, the board of KLT received an interim proposal from a shareholder holding 2.14% of the company’s shares, proposing to terminate a restricted stock incentive plan. After verifying compliance with statutory requirements and
the articles of association, the board placed the pro- posal on the agenda of the annual general meeting – demonstrating the tangible impact of the reduced threshold. In practice, shareholders should take note of several key points. First, any shareholder holding at least 1% of the company’s shares, individually or in aggregate, may submit an interim proposal. “Aggregate holding” can arise where multiple shareholders act jointly or where one shareholder publicly solicits proposal rights from others. Second, proposals must comply with the timing requirement: eligible shareholders may submit an interim proposal in writing to the board of directors no later than ten days before the scheduled date of the shareholders’ meeting. There are different calcula- tion methods used in practice for determining this ten- day deadline, and the law does not prescribe a spe- cific approach. Companies should adopt the method best suited to their circumstances, record it in their internal governance rules, and apply it consistently in future operations. Shareholders, in turn, should ensure their proposals are submitted in accordance with the adopted calculation method to avoid procedural chal- lenges. Facilitating meetings via electronic communication Article 24 of the New Company Law expressly pro- vides that a company may convene shareholders’ meetings, board meetings, and supervisory board meetings, and conduct voting through electronic com- munication. The introduction of this mechanism facili- tates shareholder participation in decision-making, reduces participation costs, and broadens the scope of shareholder involvement. Shareholders should be aware that the term “elec- tronic communication” should be interpreted to mean real-time, interactive methods that replicate the imme- diacy of in-person meetings. At least two participants must be able to exchange text or image messages and engage in simultaneous voice or video interaction via the internet or mobile technology. Fax and email – which do not provide real-time interaction – are not suitable, as they risk conflating electronic meetings with written resolutions made without a meeting.
15 CHAMBERS.COM
Powered by FlippingBook