CHINA Law and Practice Contributed by: Kevin Wang, Global Law Office
Shareholder Direct Lawsuits Shareholders can file shareholder direct lawsuits against the company itself based on civil liability for torts. • If the company refuses to provide sharehold - ers access to inspecting or copying legal documents or materials of the company without justifiable reasons, the sharehold - ers may file a lawsuit to the people’s court; specifically, the legal documents or materials include: the articles of association, the regis - ter of shareholders, the minutes of sharehold- ers’ meetings, the resolutions of the board of directors, the resolutions of the board of supervisors, financial accounting reports, accounting books, accounting records, and related materials of wholly-owned subsidiar- ies; and according to the new revision of the Company Law, shareholders are allowed to entrust intermediaries to act on their behalf. • In cases where a shareholder requests confir - mation that a resolution of the shareholders’ meeting or board meeting is not established, invalid or revoked, the company shall be listed as the defendant. • In a case where a shareholder requests a company to distribute profits, the company shall be listed as the defendant; if the share- holder fails to submit a resolution of the shareholders’ meeting specifying a specific distribution plan, the people’s court shall reject their claim, except when the company does not distribute profits in violation of the law and causes losses to other shareholders. 5.5 Disclosure by Shareholders in Publicly Traded Companies In some situations, a shareholder or actual con - trol person of a publicly traded company shall inform the board of directors and co-operate
with the company in performing information dis - closure obligations: • of a relatively significant change in the control of the company, or the shareholding of share - holders who hold more than 5% of the com - pany’s shares, or the actual control person; • of a relatively significant change in the situ - ation of engagement in business identical or similar to the company that is taken by the company’s actual control person and other enterprises controlled by the actual control person; • if the controlling shareholder was prohibited from transferring their shares by a court ruling or judgment; • if more than 5% of the company’s shares held by any shareholder are pledged, fro - zen, judicially auctioned, kept in custody or established in trust, or their voting rights are restricted, or there is a risk of being forced to transfer ownership; and • of a plan to significantly restructure assets or business of the publicly traded company. The CSRC also requires that, where any share - holder of the company applying for an IPO has a shareholding structure consisting of two or more layers and is a company or a limited partnership with no actual business activities, the ultimate beneficial owner of such shareholder should be disclosed, in the case that the buy-in price of such shareholder is apparently abnormal. 6. Corporate Reporting and Other Disclosures 6.1 Financial Reporting Publicly traded companies are subject to peri - odic financial reporting (annual, midterm and
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