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…

Rights for minority shareholders under China Company Law

Being a minority shareholder in a China limited liability company can be a nightmare for investors, foreign or domestic. You get stuck there with no hope and find yourself no easy exit. I have witnessed many such sad stories happening to foreign clients who participated in Sino-foreign equity joint ventures.

So it will be meaningful for investors to know what…

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…

Answer to a question posed by a blog reader regarding legal representative of China company

Here is the question:

Dear Jason,

Today I was doing some research on the legal representative of WFOE’s. During my research I came across the following article:

Who the hell has the right to represent a company in China?

In your article you mention the following:

When this legal representative resigned by submitting his resignation letter to board of

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 …

Derivative Action/lawsuit in China: protection of (small) shareholders

[You can also download the PDF version for review here Derivative Action_140516]

Derivative actions are regarded worldwide as an effective enhancement of corporate governance in terms of protecting shareholders from the misbehaving management of their invested company, and protecting small shareholder from being repressed by controlling shareholders.…

What is a legal person under Chinese laws

You may frequently encounter the phrase “legal person” when perusing legal articles about Chinese laws, in particular, corporate and business laws. However, you may inadvertently take the “legal person” in China as the same in your home country when it is actually not. which may lead to unmindful loss.

What is a legal person under

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…

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,…

Legal issues regarding dormant investment by foreign investors in China

Just came across an article on the Internet, entitled “Protection for the Rights & Interests of Dormant Shareholders” discussing the protection of legal interests of dormant shareholders. While this article cast some lights on the issue, but some of its points do not apply to foreign investors being a “dormant shareholder”.…