CHINA Law and Practice Contributed by: Kevin Wang, Global Law Office
• adopting resolutions on the issuance of cor - porate bonds; • deciding on the company’s purchasing its own shares to use shares for employee stock ownership plan or equity incentives; • deciding on the company’s purchasing its own shares to use shares for converting convertible corporate bonds issued by the company; and • deciding on the company’s purchasing its own shares because it is necessary for a listed company to protect the corporate value and the rights and interests of shareholders. The following resolutions shall be adopted by more than two-thirds of all the directors: • deciding on the issuance of new shares by not exceeding 50% of the issued shares with - in three years; but if non-monetary property is contributed as capital at an assessed value, such issuance shall be subject to the resolu - tion of the shareholders’ meeting; and • deciding on the company’s providing finan - cial assistance for another person to acquire shares of the company or its parent com - pany; however, the cumulative total of finan - cial assistance shall not exceed 10% of the issued capital stock. If the board of directors goes beyond the func - tion stipulated in the law or the articles of asso - ciation, and acts without any proper approvals by the shareholders’ meeting, it will constitute a violation with potential damage to the interests of the company in judicial practice. Decisions of the Shareholder Meeting In general, the new revision to Company Law narrows the scope of functions of the share - holders’ meeting, and creates more rooms for the board of directors, which was appraised by
many commentators as a sign of encouraging professionalism in corporate governance. The shareholder meeting is responsible for mak - ing decisions on fundamental issues, including but not limited to: • electing and replacing directors and supervi - sors, and determining their remuneration; • reviewing and approving plans for the compa - ny’s dividend distribution and loss recovery; • amending the articles of association of the company; • making resolutions on any increase or decrease of the company’s registered capital; and • making resolutions on merger, division, dis - solution or liquidation of the company, or change of the company form. Protection of Bona Fide Counterparts For the protection of the interests of bona fide counterparts and transaction stability, the Com - pany Law stipulates the following special meas - ures. • For legal representatives, any restriction on their functions imposed by the company’s by-laws or shareholders’ meeting cannot be used as an excuse to deny the validity of the company acting against the bona fide coun - terpart. • For directors, any restriction on functions of the board of directors in the articles of asso - ciation cannot be used as an excuse to deny the validity of the company acting against the bona fide counterpart. • If a people’s court declares invalid, revokes, or confirms the untenability of a resolution of a shareholders’ meeting or board of directors, a civil legal relation established between the
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