The Dilemma of Minority Shareholder in a China Limited Liability Company

Facts: a limited liability company (“LLC”) incorporated in 2013 in China has two shareholders with the majority shareholder having 60% of equity interests (there is no share in a China LLC, and equity is expressed in percentages), and the minority shareholder having 40%. The Company has a three-member board of directors with the majority shareholder…

Fire the General Manager of a China Company

A foreign client approached me for advice to fire the general manager of its WFOE subsidiary in Shanghai.

Indeed,  firing a general manager can be a real headache in China.

Following the high-profile case in Shanghai, in which a fired general manager of a listed company wrestled with his employer and won (not really in a strict sense) the fight by having the…

Corporate deadlock – a reason to dissolve your China company

It is not rare to see a Sino-foreign joint venture company (indeed any type of company) to run into a stalemate where the operation comes to halt or the minority shareholder(s) is marginalized with no rescue. For the victims in such deadlock, there should be a way out of it. After all, justice should be upheld.

I. The Law and Judicial Interpretation

As a remedy to…

Agency between Shareholders and Companies

This is more an academic thought than a practical tip.

I am reading the book “Agency, Partnership and the LLC” (2nd ed, West Nutshell Series)  by J. Dennis Hynes in particular to find support for my personal understanding of the agency relationship between shareholders/members and the companies/corporations they invest.

In China, law scholars seldom…

When does buyer become shareholder in a Chinese company when buying its shares?

To many, it may seem a simple and even stupid question. But it is not.

I   In the Case of Domestic Company

In a country with the tradition of statute laws, when a statute law fails to offer a clear answer to a certain legal issue, it can be a problem in practice.

With respect to the captioned question, China Company Law does not provide clearly for when a buyer of the …

stretched understanding of shareholder’s pre-emptive right to purchase equity interests under China Company Law

It is a landmark court decision in China corporate law practice in the judicial system, having far-reaching impact for anyone that holds equity interests in China limited liability companies.

The decision was made not long ago by a Shanghai People’s First Intermediary Court in the high profile dispute between Fosun and Soho in regard of the equity interest…

Manage your manager

A client came to my office telling a story that was shocking to an outsider. The client is a foreigner who has set up a WFOE in Shanghai two years ago producing cleaning products. As a foreigner unable to read any Chinese, she had to hire a Chinese manager as her right hand. In the WFOE, the manager is below one person only, the client, and above all other …

Single member company and the lifting of corporate veil in China corporate law practice

Most foreign investors have come to choose to go alone when investing in China. As a result, more and more WFOE companies (limited liability companies) have appeared in market. Among those WFOEs, there is a considerable portion being single or one member companies that, namely, have only one shareholder, either a natural person or a legal person.

Recently,…

employee self-dealing, an embezzlement crime?

A corporate client approached us recently for advice on a tricky situation as follows:

The company A has been purchasing serveral accessary parts for their machinery. These articles are purchased at inflated prices (say RMB 20) from their original manufacturer. The  procurement department manager (not the general manager of the Company A) found…

The Concept of Legal Representative in China Corporate Laws

When advising foreign investor clients (esp, those from common law jurisdictions) on corporate governance structure of the company they invest, the concept of legal representative often causes great confusion and puzzle. There have been also frequent inquiries from people on what it means to them to be a legal representative of a company in China, as such…

Entities you can set up under China Company Law

Though in a foreign investment context, we often use the foreign invested enterprise to refer to the entities foreign investors may set up in China, nowadays most entities established by foreign investors are companies under the company law of China rather than an enterprise. In the Chinese legal jargon, a company is for sure regarded as an enterprise but an…

Enterprise Bankruptcy Law of the People’s Republic of China

Enterprise Bankruptcy Law of the People’s Republic of China

  (Adopted at the 23rd Meeting of the Standing Committee of the Tenth National People’s Congress on August 27, 2006)

  

Chapter I  General Provisions

  Article 1 This Law is enacted with a view to regulating…