MACAU SAR, CHINA Law and Practice Contributed by: João Nuno Riquito, Bruno Almeida, Belmiro Leong and Kimberley Cheong, Riquito Advogados
11. Shareholder Activism 11.1 Legal and Regulatory Provisions Please refer to 2.8 Shareholder Approval in respect of shareholders’ competence in matters of management. Shareholders of limited liability companies by quotas retain the right to resolve on management matters and directors must respect such decisions; therefore, a shareholder or group of shareholders with the required voting rights (in particular, where the law or the arti- cles of association may require qualified majorities to resolve) may to a great extent direct the management of the company as they deem convenient. Shareholders of limited liability companies by shares are generally prevented from passing resolutions on matters of management and may only do so, aside from the specific matters set forth in the law, when requested by the directors. Therefore, their activism usually takes place indirectly, by means of: • the exercise of voting rights (eg, in respect of the appointment and removal of directors); • access to the company’s business information; • the request for a judicial examination of the com- pany’s activities; or • the commencement of judicial proceedings to enforce liability against directors. The exercise of the rights mentioned in 2.4 Informa- tion and Documents Relating to the Meeting and 2.6 Quorum, Voting Requirements and Proposal of Resolutions – such as the right to participate in, and vote at, general meetings or the right to request infor- mation from the management in respect of the com- pany’s business – is (or may be) limited to a minimum shareholding position. Similarly, only unlimited liability shareholders or share- holders holding 10% or more of the capital may file an action to seek liability against directors (Section 248). 11.2 Aims of Shareholder Activism The rights and mechanisms described in 11.1 Legal and Regulatory Provisions are set forth in the law and/or in companies’ articles of association, so they are enforceable. It is common to have court actions for
Regarding the termination or dismissal of directors, as a general rule all directors can be removed by simple majority at any time, even without any justified rea- son, unless the director is a shareholder with a spe- cial right to management. In this exceptional case, the dismissal is only possible with cause (Section 389, paragraphs 1 and 3 and Section 463). In general partnerships, if the directorship is under- taken by the shareholders, directors are only subject to dismissal with cause; otherwise, the dismissal can occur at any time without any reason (Section 345, paragraphs 3 and 5). In limited partnerships, the dis- missal of directors who are unlimited liability share- holders can only occur with cause and according to the quorum rules set forth in 6.1 Rights to Appoint and Remove Directors , or by a court. Compensation claims against directors to cover loss- es resulting from the breach of legal or statutory duties may be started upon a resolution of the shareholders in a general meeting, by simple majority, and within three months from the date of resolution. A sharehold- ers’ resolution such as this implies the dismissal of the targeted directors (Section 247, paragraphs 1 and 2). While the company does not resolve to, and/or does not, start such action, shareholders with 10% or more of the capital may do so. Shareholders are further entitled to initiate a claim against company directors seeking compensation for the damages caused directly to them, and not as a mere reflection of their shareholding position in the company (ie, the loss of profits). Direct actions against directors are available to minority sharehold- ers as well. 10.3 Derivative Actions As a general rule, an action to seek a director’s liability shall be brought before a court by the company upon resolution of the shareholders. While the company does not act in such a manner, shareholders holding 10% or more may start an action in which the com- pany shall be summoned as a party. Please see 11.1 Legal and Regulatory Provisions and 10.2 Remedies Against the Directors for more detail.
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