Practical Articles

Interpretation of the Revision of the Company Law............................................................................................

2024.03.11

Introduction

The seventh meeting of the Standing Committee of the 14th National People's Congress of the People's Republic of China on December 29, 2023 deliberated and passed the the People's Republic of China Company Law [hereinafter referred to as the" Company Law "(revised in 2023)], which will come into force on July 1, 2024. This revision has made significant adjustments to the shareholder's capital contribution responsibility and corporate governance structure. This series of articles through the analysis and interpretation of the revision of the Company Law, with a view to the follow-up of the company's legal practice is beneficial.

in order to adapt to the new situation and new requirements of economic and social development and effectively safeguard the legitimate rights and interests of shareholders, the company law (revised in 2023) has made amendments to the shareholders' right to know, the right to request repurchase of dissenting shareholders, the optimization of equity transfer rules, the principle of equal proportion capital reduction and the double representative litigation system of new shareholders, as follows:

1. strengthening shareholders' right to know

1. Expand the scope of materials that shareholders have the right to inspect and copy

Shareholder's right to know is an inherent and legal right of shareholders. There are two views in the theoretical circle on the object scope of access to accounting books, which are broad and narrow. Broadly speaking, access to the original accounting documents is beneficial to help shareholders verify the authenticity of the accounting books, so the scope of the object of access to the accounting books should be expanded to the original documents. In a narrow sense, according to the meaning of the text, shareholders can only consult the accounting books, not the original vouchers ¹. The revision of the Company Law responds to the above controversy.

For limited liability companies, Article 57 of the Company Law (as amended in 2023) ² The materials that shareholders can consult and copy increase the register of shareholders, and the materials that shareholders can only request to consult increase the accounting documents.

for joint stock limited companies, article 110 of the company law (revised in 2023) ³ stipulates that in addition to inspection, shareholders may also copy the articles of association, the register of shareholders, the minutes of the meeting of the shareholders, the resolutions of the meeting of the board of directors, the resolutions of the meeting of the supervisory board, the financial and accounting reports and other materials. In addition, shareholders who individually or collectively hold more than 3% shares of the company for more than 180 consecutive days may request inspection of the company's accounting books and accounting vouchers. If the articles of association of the company have lower provisions on the shareholding ratio, the provisions shall be followed.

2. Entrusted intermediaries are allowed to access relevant materials

before the revision of the company law, the second paragraph of article 10 of the (IV) of the provisions of the supreme people's court on several issues concerning the application of the the People's Republic of China company law stipulates that" if a shareholder consults the company's documents and materials in accordance with the effective judgment of the people's court, it may be assisted by accountants, lawyers and other intermediary practitioners who have the obligation of confidentiality according to law or in accordance with the code of practice ". The Company Law (as amended in 2023) incorporates the provisions of the aforementioned judicial interpretation, which makes it clear at the legislative level that shareholders may entrust accounting firms, law firms and other intermediaries to consult relevant materials. According to the third paragraph of Article 57 of the Company Law (revised in 2023), the matters that shareholders can entrust shall be limited to "inspection" and not "copy".

As understood in the context, the scope of access to materials by intermediaries should be limited to accounting books and accounting vouchers. For joint stock limited companies, the second paragraph of Article 110 of the Company Law (revised in 2023) clarifies that the provisions of Article 57, paragraph 3, on entrusting intermediary agencies can only be applied when consulting accounting books and accounting vouchers; For limited liability companies, the "shareholders consult the materials specified in the preceding paragraph" referred to in the third paragraph of Article 57 of the Company Law (revised in 2023), combined with the context, it shall also be limited to the accounting books and accounting vouchers specified in the second paragraph of Article 57, excluding the articles of association and other materials specified in the first paragraph of Article 57.

3. Introduce a penetrating exercise rule for shareholders' right to know

articles 33 and 110 of the company law (revised in 2023) respectively stipulate that shareholders of limited liability companies and joint stock limited companies may request to consult and copy relevant materials of wholly-owned subsidiaries of the company. In practice, larger companies tend to set up subsidiaries to specialize in a related area or business segment, and even to avoid risk, it is possible to set up a separate subsidiary for a specific business. In order to enable shareholders to truly understand the company's business situation, to protect the shareholders' right to know, the expansion of shareholders' right to know to wholly-owned subsidiaries is also in response to this practical demand, but also with the new dual shareholder representative litigation system to form a complement.

2. improve dissenting shareholders' repurchase claims

1. increase the abuse of shareholder rights by the controlling shareholder of a limited liability company to the detriment of the company or shareholders as a repurchase

Company Law (as amended in 2023) Article 89 ⁴ On the basis of the original three dissenting shareholders' repurchase situations, the controlling shareholder's abuse of shareholder rights to damage the interests of the company or other shareholders is added as a repurchase situation. Other shareholders have the right to request the company to purchase its equity at a reasonable price, and stipulate that it should be transferred or canceled within six months according to law.

before the revision of the company law, article 20, paragraph 2, of the company law (revised in 2018) ⁵ has stipulated that if the shareholders of the company abuse the rights of shareholders and cause losses to the company or other shareholders, they shall be liable for compensation. The new repurchase situation in Article 89 of the Company Law (as amended in 2023) provides a new remedy to protect the interests of small and medium-sized shareholders and resolve the company deadlock. For the specific circumstances of abuse of shareholders' rights, there is no type provision at the legislative level. At the judicial level, in the contract dispute case of China Construction Huaxia Construction Group Co., Ltd. and Jiangxi Xinnong Chuangfuchang Industrial Co., Ltd. [Case No.:(2021) Supreme Fa Min Shen No. 1080], the Supreme People's Court held: "Company shareholders abuse shareholders' rights, and common situations in practice include personality confusion, excessive dominance and control, and significant capital shortage, etc. Personality mixing is reflected in whether the property of the company and the property of shareholders are mixed and indistinguishable; excessive domination and control is manifested in the excessive domination and control of the company by the company's controlling shareholders, manipulating the company's decision-making process, making the company completely lose its independence and becoming a tool or body to control shareholders, which seriously damages the interests of the company's creditors; the significant lack of capital is in the process of operation after the establishment of the company, the amount of capital actually invested by shareholders in the company is clearly mismatched compared to the risks implied by the company's operations." Articles 10 to 12 of the Minutes of the National Court Conference on Civil and Commercial Trials describe in detail and summarize common situations in such areas as personality mixing, excessive domination and control, and significant undercapitalization, which can be applied by reference in practice.

2. Extend the right of dissenting shareholders to repurchase requests to unlisted companies limited by shares

article 161 of the company law (revised in 2023) ⁶ it is added that shareholders of a joint stock limited company who vote against the following resolutions of the shareholders' meeting may request the company to purchase its shares at a reasonable price:(1) the company has not distributed profits to shareholders for five consecutive years, and the company has made profits for the five consecutive years and meets the conditions for profit distribution stipulated in this law;(2) the company transfers its main property;(3) If the term of business as stipulated in the articles of association expires or other reasons for dissolution as stipulated in the articles of association arise, the shareholders' meeting shall adopt a resolution to amend the articles of association so that the company survives.

Compared with the three types of dissenting shareholder buybacks of limited liability companies stipulated in the first paragraph of Article 89 of the Company Law (revised in 2023), the first paragraph of Article 161 of the Company Law (revised in 2023) lacks the case of division and merger of companies. This is because the Company Law (revised in 2023) follows the style of the Company Law (revised in 2018). In addition, in the first paragraph of Article 162 ⁷ Item 4 stipulates that the company may acquire its shares at the request of the shareholders because the shareholders disagree with the resolution on the merger or division of the company made by the shareholders' meeting.

Although a company limited by shares has the characteristics of capitalization, but for non-listed companies limited by shares, its shareholding structure is relatively closed, there will still be violations of the interests of small and medium shareholders. Therefore, the Companies Act (as amended in 2023) extends the right of dissenting shareholders of limited liability companies to repurchase requests to unlisted limited companies, providing an exit mechanism for shareholders of unlisted limited companies.

3. optimization of equity transfer rules

1. Amend the rules for external transfer of shares of limited liability companies

Article 84 of the Company Law (as amended in 2023) ⁸ amends the relevant provisions on the external transfer of equity by limited liability companies. The Company Law (revised in 2023) has deleted the second paragraph of Article 71 of the Company Law (revised in 2018) ⁹ on" the transfer of shares by shareholders to persons other than shareholders shall be subject to the consent of more than half of the other shareholders "and the purchase requirements of dissenting shareholders, and it is clear that the transferring shareholders" shall notify the other shareholders in writing of the quantity, price, payment method and time limit of the transfer of shares ".

article 71 of the company law (revised in 2018) requires shareholders to transfer their shares to persons other than shareholders with the consent of other shareholders based on the consideration of protecting the personality of limited liability companies. other shareholders need to respond to the two matters of whether to agree to the external transfer and exercise the right of first refusal. On the one hand, regardless of whether the law stipulates that other shareholders are the subject of the right of consent to the transfer of equity, other shareholders can exercise the right of preemption under the same conditions. If other shareholders want to protect the company's personality, they will naturally exercise the right of preemption. There is no need to impose requirements at the legislative level, so this provision is no longer necessary. On the other hand, the free transfer of equity can further realize the circulation value of equity, which is conducive to corporate financing and stimulate market vitality. Although the provision that external transfers should be subject to the consent of a majority of other shareholders has been abolished in principle, article 84, paragraph 4, of the Company Law (as amended in 2023) retains the exceptions that may be provided for in the articles of association for the transfer of shares, leaving the relevant matters to the internal autonomy of the company.

article 84 of the company law (revised in 2023) also incorporates the provisions of article 18 of the (IV) of the supreme people's court on several issues concerning the application of the the People's Republic of China company law, emphasizing that other shareholders should be notified in writing of the quantity, price, payment method and time limit of equity transfer, so as to facilitate other shareholders to consider whether to exercise the right of first refusal.

2. Cancellation of the time limit for the transfer of shares by the promoters of a company limited by shares

article 160, paragraph 1, of the company law (revised in 2023) ¹⁰ has deleted Article 141 of the Company Law (as amended in 2018) that" the shares of the Company held by the promoters shall not be transferred within one year from the date of establishment of the Company. The original purpose of the aforementioned provisions is to ensure the sustainable and stable development of the company after its establishment and to prevent the promoter from harming the interests of the company and its creditors. Article 44 of the Company Law (revised in 2023) ¹¹ absorbed the relevant provisions of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law, and added the responsibility for the establishment of promoters at the legislative level, in combination with article 99 of the Company Law (revised in 2023) ¹² the promoter's joint and several liability provisions, can effectively protect the interests of the company and creditors. Therefore, in order to promote the free transfer of shares and strengthen the company's financing capacity, the amendment of the Company Law removes the restriction on the transfer of shares by the promoter.

4. clarify the principle of equal proportional capital reduction, allowing shareholders to agree on non-equal proportional capital reduction

Before this amendment, the Company Law only stipulated that a company's capital reduction should be approved by shareholders representing more than 2/3 voting rights. Although capital reduction requires a special resolution of the shareholders' meeting, in practice there are often situations in which the controlling shareholder uses the capital majority to reduce the capital of small and medium-sized shareholders, dilute their equity or directly expel them from the company to the detriment of the interests of small and medium-sized shareholders.

in this context, article 224, paragraph 3, of the company law (revised in 2023) ¹³ for the first time in the legal level to make it clear that the principle of equal proportion of capital reduction, the company's capital reduction should be in accordance with the proportion of shareholders' capital contribution or holding of shares to reduce the amount of capital or shares. At the same time, the law respects the autonomy of shareholders and provides for exceptions where the law provides otherwise, where all shareholders of a limited liability company agree otherwise, or where the articles of association of a limited liability company provide otherwise.

on the one hand, this regulation prevents major shareholders from using the capital majority to decide to damage the legitimate rights and interests of small and medium-sized shareholders in the capital reduction procedure; On the other hand, in practice, many investors will withdraw from the company through targeted capital reduction after achieving their investment objectives. Therefore, the Company Law (revised in 2023) ensures that the interests of shareholders and autonomy of will not be harmed, it is agreed that shareholders may agree on a non-equal proportion of capital reduction on their own, giving shareholders room to exercise their rights.

5. improve the provisions on the right of shareholders of a joint stock limited company to propose interim proposals and request the convening of interim shareholders' meetings

1. The individual or total shareholding ratio of the shareholders who put forward the interim proposal is reduced to 1%

article 115 of the company law (revised in 2023) ¹⁴ reduces the shareholding ratio of shareholders entitled to submit interim proposals from more than 3% of the Company's shares individually or collectively before the amendment to more than 1%, and also stipulates that the Company may not increase the shareholding ratio of shareholders entitled to submit interim proposals. Improving the system of temporary proposal rights can prevent small and medium-sized shareholders from falling into a situation where they can only vote passively, strengthen the participation of small and medium-sized shareholders in the democratic governance of the company, and promote the long-term sustainable development of the company.

The Corporations Act (as amended in 2023) gives the Board the duty to review provisional proposals. The board of directors shall notify other shareholders within two days after receiving the proposal, and submit the temporary proposal to the shareholders' meeting for deliberation, except that the temporary proposal violates the provisions of laws, administrative regulations or the articles of association, or does not fall within the scope of the shareholders' meeting. On the one hand, the review of interim proposals by the board of directors can improve the efficiency of deliberation and ensure the quality of proposals. On the other hand, the board of directors of individual companies may use the review process to screen the proposals they want to exclude, thus violating the original intention of the legislation ¹⁵. Follow-up to observe the effect of the implementation of the new law.

2. add a decision on whether to convene an interim shareholders' meeting within ten days from the date of receipt of the shareholders' request and reply to the shareholders in writing

Article 100 of the Company Law (revised in 2018) stipulates that an interim general meeting of shareholders shall be held within two months at the request of shareholders who individually or collectively hold more than 10% of the shares of the company. The third paragraph of Article 114 of the Company Law (as amended in 2023) adds that the board of directors and the board of supervisors shall make a decision on whether to convene an interim shareholders' meeting within 10 days from the date of receipt of the shareholders' request, and reply to the shareholders in writing.

6. adds dual shareholder representative litigation system

article 189 of the company law (revised in 2023) ¹⁶ The fourth paragraph adds that when directors, supervisors, and senior managers perform their duties in violation of laws, administrative regulations, or the provisions of the company's articles of association and cause losses to the company, they shall be liable for compensation. The shareholders of the parent company have the right to sue directors, supervisors, and senior managers on behalf of the parent company, the shareholders of the parent company have the right to request the board of supervisors and the board of directors of the wholly-owned subsidiary to sue or sue the directors, supervisors and senior managers of the wholly-owned subsidiary on behalf of the wholly-owned subsidiary.

Multi-layer equity structure is conducive to the company's financing operations and effective risk isolation, in recent years, the company group in the market has become the norm. In the context of the vigorous development of group companies, the single-layer litigation system cannot meet the dispute resolution of the dual structure of parent-subsidiary companies. The double representative litigation system is the perfection of the single-layer representative litigation system, strengthens the supervision right of the shareholders of the parent company, and provides a benign channel for the interests of all parties within the company. The new rules for the penetration and exercise of shareholders' right to know in the Company Law (as amended in 2023) and the dual representative litigation system complement each other, effectively protecting the legitimate rights and interests of shareholders.

there are two points to note about double representation litigation:

Penetration of (I) Shareholder Representative Litigation

there are two ways to define parent-subsidiary companies in a broad sense and a narrow sense. the control relationship between parent-subsidiary companies in a broad sense includes equity control and non-equity control. equity control is subdivided into wholly-owned control, absolute control and relative control. non-equity control such as investment relationship, agreement, personnel arrangement, etc. In a narrow sense, parent-subsidiary companies rely purely on equity control ¹⁷.

article 189 of the company law (revised in 2023) adopts the concept of parent-subsidiary company in a narrow sense, making it clear that shareholder representative litigation only penetrates into wholly-owned subsidiaries, excluding holding subsidiaries, shareholding companies and other types of shareholders in companies, nor does it include wholly-owned subsidiary companies and other related entities such as wholly-owned subsidiary companies. In practice, the parent company damages the holding subsidiary from time to time. After the implementation of the Companies Act (as amended in 2023), in order to circumvent the law, some group companies may set up wholly-owned subsidiary companies below the wholly-owned subsidiary. Whether the subsequent penetration of shareholder representative litigation into other interested parties requires further observation of the effectiveness and practical testing of Article 189 of the Company Law (as amended in 2023).

Performance and exemption of pre-(II) procedures

Article 189 of the Company Law (as amended in 2023) sets up a pre-procedure for shareholder representative litigation, stipulating that shareholders shall request in writing the Supervisory Board or the Board of Directors to file a lawsuit in court before filing a lawsuit on their own. The board of supervisors or the board of directors refuses to file a lawsuit or fails to file a lawsuit within 30 days from the date of receipt of the request, and the shareholders can file a lawsuit in their own name. The same applies to dual shareholder representative actions.

Shareholder representative litigation is indirect litigation, so shareholders can only exercise the right of action on their behalf if the company refuses or neglects to exercise the right. As a principle requirement of shareholder representative litigation, there are two exceptions:

1. The situation is urgent and it will cause irreparable damage to the company's interests if the lawsuit is not filed immediately

the second paragraph of article 189 of the company law (revised in 2023) stipulates that if the situation is urgent and the company's interests will be irreparable damage if the company does not bring a lawsuit immediately, shareholders can skip the pre procedure and directly bring a lawsuit to the people's court in their own name.

2. There is no possibility of litigation by the relevant authorities of the company

article 25 of the minutes of the national court civil and commercial trial work conference ¹⁸ stipulates that the pre-procedure for shareholder representative litigation is aimed at the general situation of corporate governance, that is, when the shareholders make a written application to the relevant organs of the company, there is the possibility of the relevant organs of the company to bring a lawsuit. In practice, there are mainly the following specific situations in which the relevant organs of the company do not have the possibility of filing a lawsuit:(1) the relevant organs of the company do not exist or the company is in a deadlock, and the shareholders cannot file a request;(2) the board of directors and the board of supervisors of the company are controlled by the same shareholder or actual controller;(3) the director or supervisor who should file a lawsuit request with him is the defendant;(4) most members of the board of directors or the board of supervisors have an interest in acts that harm the interests of the company ¹⁹. If there is a pre-procedural exemption, the burden of proof should be borne by the shareholders. If the facts ascertained indicate that there is no possibility of submitting a written application to the relevant company authority, the court shall not dismiss the lawsuit on the grounds that the plaintiff has not performed the pre-procedure.

The Company Law (as amended in 2023) establishes and improves the mechanism for protecting shareholders' rights from various aspects such as shareholders' right to know, while respecting the autonomy of shareholders' will, which is conducive to improving the corporate governance mechanism and promoting the high-quality development of the socialist market economy.

& nbsp; Author Profile

THE LAWYERS

lawyer bu bin

[Introduction to Practice] Master of Civil and Commercial Law, Chinese University of Hong Kong. He is currently a lawyer of Shengdian Law Firm, senior corporate compliance engineer, deputy director of Shengdian Foreign Affairs Legal Professional Committee, director of Shenzhen University Law School Alumni Association, director of Shenzhen Legal Culture Research Association, selected into the Guangdong Foreign Lawyer Talent Pool, Shenzhen Foreign Lawyer Talent Pool, with securities qualifications, rich practical experience in dispute resolution, and has handled a large number of civil and commercial disputes, focus on corporate litigation, foreign-related litigation, commercial contracts, financial disputes, corporate compliance and other fields, good at handling difficult and complex cases, has provided legal services for dozens of domestic banks, securities firms, trusts, listed companies and large enterprises, etc., and is good at helping customers effectively achieve their business goals through litigation.

Working languages are Mandarin, Cantonese, English and Hakka.

Contact

mailbox: bubin@shengdian.com.cn

Notes:

1. Guo Shunqiang and Liu Huibin," The Object of a Limited Company's Shareholders' Right to Know ", in People's Justice, No. 2, 2022.

2. Article 57 of the the People's Republic of China Company Law (as amended in 2023):" Shareholders shall have the right to consult and copy the articles of association, the register of shareholders, the minutes of the shareholders' meeting, the resolutions of the meetings of the board of directors, the resolutions of the meetings of the board of supervisors and the financial and accounting reports.

Shareholders may request access to the Company's accounting books and accounting vouchers. If a shareholder requests to consult the company's accounting books and accounting vouchers, he shall submit a written request to the company stating the purpose. If the company has reasonable grounds to believe that the shareholders' inspection of accounting books and accounting vouchers has an improper purpose, which may harm the legitimate interests of the company, it may refuse to provide inspection, and shall reply to the shareholders in writing and explain the reasons within 15 days from the date of the shareholders' written request. If the company refuses to provide inspection, the shareholder may file a lawsuit in the people's court.

Shareholders may entrust accounting firms, law firms and other intermediaries to consult the materials specified in the preceding paragraph."

3. Article 110 of the the People's Republic of China Company Law (as amended in 2023):" Shareholders shall have the right to consult and copy the articles of association, the register of shareholders, the minutes of the shareholders' meeting, the resolutions of the meetings of the board of directors, the resolutions of the meetings of the board of supervisors, and the financial and accounting reports, and to make suggestions or inquiries about the operation of the company.

If shareholders who individually or collectively hold more than 3% shares of the company for more than 180 consecutive days request to consult the company's accounting books and accounting vouchers, the second, third and fourth paragraphs of Article 57 of this Law shall apply. Where the articles of association of the company have lower provisions on the shareholding ratio, such provisions shall be followed.

Where a shareholder requests to consult or copy the relevant materials of the company's wholly-owned subsidiary, the provisions of the preceding two paragraphs shall apply.

Shareholders of listed companies who consult and copy relevant materials shall abide by the provisions of the the People's Republic of China Securities Law and other laws and administrative regulations."

4. Article 89 of the the People's Republic of China Company Law (2023 Revision):" Under any of the following circumstances, a shareholder who votes against the resolution of the shareholders' meeting may request the company to purchase its equity at a reasonable price: (1) The company has not distributed profits to shareholders for five consecutive years, and the company has made profits for the five consecutive years and meets the profit distribution conditions stipulated in this law; (II) the merger, division and transfer of major property of the company; (III) the business term stipulated in the articles of association expires or other reasons for dissolution stipulated in the articles of association occur, the shareholders' meeting shall adopt a resolution to amend the articles of association to keep the company alive.

If the shareholder and the company cannot reach an equity acquisition agreement within 60 days from the date of the resolution of the shareholders' meeting, the shareholder may file a lawsuit in the people's court within 90 days from the date of the resolution of the shareholders' meeting.

If the controlling shareholder of the company abuses the rights of shareholders and seriously harms the interests of the company or other shareholders, the other shareholders have the right to request the company to purchase its equity at a reasonable price.

The company's equity acquired by the company due to the circumstances specified in the first and third paragraphs of this article shall be transferred or canceled within six months in accordance with the law."

5. Article 20, paragraph 2, of the the People's Republic of China Company Law (as amended in 2018):" If a shareholder of a company abuses his rights as a shareholder and causes losses to the company or other shareholders, he shall be liable for compensation in accordance with the law."

6. Article 161 of the the People's Republic of China Company Law (revised in 2023):" under any of the following circumstances, shareholders who vote against the resolution of the shareholders' meeting may request the company to purchase its shares at a reasonable price, except for companies that issue shares publicly: (1) the company has not distributed profits to shareholders for five consecutive years, and the company has made profits for the five consecutive years, And meet the conditions for profit distribution stipulated in this law; the (II) company transfers its main property; (III) the term of business as stipulated in the articles of association expires or other reasons for dissolution as stipulated in the articles of association occur, the shareholders' meeting passes a resolution to amend the articles of association to keep the company alive.

If a shareholder and the company fail to reach a share acquisition agreement within 60 days from the date of the resolution of the shareholders' meeting, the shareholder may file a lawsuit in the people's court within 90 days from the date of the resolution of the shareholders' meeting.

The shares of the Company acquired by the Company as a result of the circumstances specified in the first paragraph of this Article shall be transferred or canceled in accordance with the law within six months."

7. Article 162 of the the People's Republic of China Company Law (2023 Revision) A company shall not purchase shares of the company. However, except for one of the following circumstances: (1) reducing the registered capital of the company; (II) merging with other companies holding shares of the company; (III) using the shares for employee stock ownership plan or equity incentive; (IV) shareholders require the company to acquire its shares due to dissent from the resolution on merger and division made by the shareholders' meeting; (V) use the shares to convert the corporate bonds issued by the company that can be converted into stocks; (VI) listed companies is necessary to safeguard the value of the company and shareholders' rights and interests.

8. Article 84 of the the People's Republic of China Company Law (as amended in 2023):" Shareholders of a limited liability company may transfer all or part of their shares to each other.

Where a shareholder transfers its equity to a person other than a shareholder, it shall notify the other shareholders in writing of the quantity, price, payment method and time limit of the equity transfer, and the other shareholders shall have the right of first refusal under the same conditions. If a shareholder fails to reply within 30 days from the date of receiving the written notice, it shall be deemed to have waived the preemptive right. If two or more shareholders exercise the right of first refusal, they shall negotiate to determine their respective purchase ratios; if they fail to negotiate, they shall exercise the right of first refusal in accordance with their respective proportions of capital contribution at the time of transfer.

if the articles of association provide otherwise for the transfer of equity, from its provisions."

9. Article 71, paragraph 2, of the the People's Republic of China Company Law (as amended in 2018):" The transfer of equity by a shareholder to a person other than a shareholder shall be subject to the consent of a majority of the other shareholders. Shareholders shall notify other shareholders in writing of their equity transfer to seek consent. If other shareholders fail to reply within 30 days from the date of receiving the written notice, they shall be deemed to have agreed to the transfer. If more than half of the other shareholders do not agree to the transfer, the shareholders who do not agree shall purchase the transferred shares; if they do not, they shall be deemed to have agreed to the transfer."

10. The first paragraph of Article 160 of the the People's Republic of China Company Law (2023 Revision):" The shares issued before the company's public offering of shares shall not be transferred within one year from the date of listing and trading of the company's shares on the stock exchange. If there are other provisions in laws, administrative regulations or the securities regulatory authority under the State Council on the transfer of the shares of the company held by the shareholders or actual controllers of the listed company, such provisions shall prevail."

11. Article 44 of the the People's Republic of China Company Law (as amended in 2023):" The legal consequences of the civil activities of the shareholders of a limited liability company for the establishment of the company shall be borne by the company.

the shareholders at the time of establishment have the right to choose to request the company or the shareholders at the time of establishment of the company to bear the civil liability arising from civil activities in their own name.

If a shareholder at the time of establishment causes damage to another person by performing his duties as a company, the company or the shareholder without fault may recover from the shareholder at fault after assuming liability."

12. Article 99 of the the People's Republic of China Company Law (2023 Revision):" If the promoter does not pay the shares in accordance with the shares it subscribes for, or the actual value of the non-monetary property as capital contribution is significantly lower than the subscribed shares, the other promoters and the promoter shall be jointly and severally liable to the extent that the capital contribution is insufficient."

13. Paragraph 3 of Article 224 of the the People's Republic of China Company Law (revised in 2023):" When a company reduces its registered capital, it shall reduce its capital contribution or shares in accordance with the proportion of shareholders' capital contribution or shares, unless otherwise provided by law, otherwise agreed by all shareholders of a limited liability company, or otherwise provided by the articles of association of a joint stock limited company."

14. Article 115 of the the People's Republic of China Company Law (2023 Revision):" To convene a meeting of shareholders, the time, place and matters to be considered shall be notified to all shareholders 20 days before the meeting; The extraordinary shareholders' meeting shall be notified to all shareholders 15 days before the meeting.

Shareholders who individually or collectively hold more than 1% shares of the company may submit an interim proposal and submit it in writing to the board of directors ten days before the meeting of the shareholders. Provisional proposals should have clear topics and specific resolutions. The board of directors shall notify the other shareholders within two days after receiving the proposal, and submit the temporary proposal to the shareholders' meeting for deliberation, except that the temporary proposal violates the provisions of laws, administrative regulations or the articles of association of the company, or does not fall within the scope of the shareholders' meeting. The company shall not increase the shareholding ratio of the shareholders who put forward the temporary proposal.

A company that publicly issues shares shall make the notices specified in the preceding two paragraphs by way of public announcement.

The shareholders' meeting shall not make resolutions on matters not listed in the notice."

15. Zhang Jizhi, Li Weiting:" Company Law Amendment Series of Practical Articles (II) the Controversy over Control of Companies & mdash;& mdash; The System of Shareholders' Right to Promise Provisional Proposal ", in the public number of" Haotian Law Review.

16. Article 189 of the the People's Republic of China Company Law (revised in 2023):" if a director or senior manager has the circumstances specified in the preceding article, the shareholders of a limited liability company or a joint stock limited company who individually or collectively hold more than 1% shares of the company for more than 180 consecutive days may request the board of supervisors in writing to bring a lawsuit to the people's court; if the supervisor has the circumstances specified in the preceding article, the aforementioned shareholders may request the board of directors in writing to file a lawsuit in the people's court.

The board of supervisors or the board of directors refuses to file a lawsuit after receiving the written request of the shareholders specified in the preceding paragraph, or fails to file a lawsuit within 30 days from the date of receipt of the request, or the situation is urgent, and failure to file a lawsuit immediately will cause the company's interests to suffer If there is irreparable damage, the shareholders specified in the preceding paragraph have the right to directly file a lawsuit in the people's court in their own name for the company's interests.

If another person infringes upon the legitimate rights and interests of the company and causes losses to the company, the shareholders specified in the first paragraph of this article may file a lawsuit in the people's court in accordance with the provisions of the preceding two paragraphs.

If the directors, supervisors, and senior managers of the company's wholly-owned subsidiary have the circumstances specified in the preceding article, or others infringe on the legitimate rights and interests of the company's wholly-owned subsidiary and cause losses, the shareholders of the limited liability company, the company limited by shares For more than 80 days, shareholders who individually or collectively hold more than 1% shares of the company, you may, in accordance with the provisions of the preceding three paragraphs, request in writing the board of supervisors and the board of directors of a wholly-owned subsidiary to file a lawsuit in the people's court or directly file a lawsuit in the people's court in your own name."

17. Li Jianwei," The System Composition and Normative Expression of Double Derivative Litigation by Shareholders ", Social Science Research, No. 2, 2023.

18." Minutes of the National Court Civil and Commercial Trial Work Conference "25. [Correct Application of Pre-procedure] According to Article 151 of the Company Law, one of the pre-procedures for shareholders to bring a representative lawsuit is that shareholders must first request in writing the relevant organs of the company to bring a lawsuit to the people's court. In general, if the shareholder fails to perform the pre-procedure, the lawsuit shall be dismissed. However, the pre-procedure is aimed at the general situation of corporate governance, that is, when the shareholders submit a written application to the relevant organs of the company, there is the possibility of litigation by the relevant organs of the company. If the relevant facts ascertained show that there is no such possibility at all, the people's court shall not dismiss the prosecution on the grounds that the plaintiff has not performed the pre-procedure.

19. The Second Civil Trial Division of the Supreme People's Court:" & lt; Minutes of the National Court Civil and Commercial Trial Work Conference & gt; Understanding and Application ", People's Court Press, December 2019, first edition, p. 213.