The Supreme People’s Court has issued the “Several Provisions of the Supreme People’s Court on the Application of the Temporal Effect of the Company Law”(hereinafter referred to as the “Provisions”) regarding the legal retroactive effect of the revised provisions after the implementation of the revised “Company Law” on July 1, 2024. The “Provisions” clarifies that in principle, the previous “Company Law” shall be applied to the previous legal behaviors, except 5 categories of exceptions, which are as follows.
- Applying the revised “Company Law” is more conducive to the realization of the legislation purpose of the “Company Law”.
The new regulations apply to the following 7 circumstances that occurred before the implementation of the revised “Company Law”.
| 1 |
Where the convening of a shareholders’ meeting of a company is improper, and the shareholders who have not been notified to attend the meeting filed a request for revocation of a resolution within one year after the resolution is made. |
| 2 |
Where a resolution of a shareholders’ meeting or a resolution of the board of directors is determined by a people’s court as not being established, a dispute over the validity of the legal relationship formed between the company and a bona fide counterparty in accordance with the resolution. |
| 3 |
A dispute over a shareholder’s capital contribution made by way of claims. |
| 4 |
A dispute over the equity transferred by a shareholder of a limited liability company to a party who is not a shareholder of the company. |
| 5 |
A dispute over the liability for damages for losses to a company which distributed profits or reduced its registered capital in violation of the laws and regulations. |
| 6 |
A dispute over the time limit for profit distribution under a resolution on profit distribution. |
| 7 |
A dispute over the corresponding reduction of capital contribution or number of shares by a shareholder of a company which reduced its registered capital. |
- The civil legal act relating to a company before the entry into force of the previous “Company Law” is deemed invalid according to the laws and judicial interpretations in force at that time, but is deemed valid according to the revised “Company Law”.
| 1 |
A dispute over the validity of an agreement that the company shall bear joint and several liability for the debts of the enterprise it invests in. |
| 2 |
A dispute over the validity of a corporate resolution made by the company to cover losses with capital reserves. |
| 3 |
A dispute over the validity of a resolution on merger between the company and another company in which the former holds more than 90% of the latter’s shares. |
- Any contract regarding a company overlaps the previous “Company Law” and the revised “Company Law”.
If the performance of those contract continues until after the entry into force of the revised “Company Law”, the revised “Company Law” shall be applied to the following 3 circumstances.
| 1 |
A contract for the holding of shares of a listed company on behalf of others. |
| 2 |
A contract for the acquisition of shares of a listed company by the controlling subsidiary of the listed company. |
| 3 |
A contract concerning the provision of gifts, loans, guarantees and other financial aids by a joint stock limited company for others to acquire shares of the company or the parent company. |
- There are no provisions regulate those circumstances in the previous “Company Law”.
| 1 |
Where a shareholder transfers its equity within the time limit for capital contribution and the transferee fails to make capital contribution in full amount on time, the determination of the liability of the transferor and the transferee for capital contribution. |
| 2 |
Where the controlling shareholder of a limited liability company abuses its shareholder’s right, seriously damaging the interests of the company or other shareholders, the request of other shareholders to purchase their equity at a reasonable price by the company. |
| 3 |
The request of a shareholder who votes against a resolution of the shareholders’ meeting of a joint stock limited company to purchase its equity at a reasonable price by the company. |
| 4 |
The determination of civil liability for the execution of the affairs of a company by the company’s controlling shareholder or de facto controller who is not a director of the company. |
| 5 |
The determination of civil liability of the controlling shareholder or de facto controller of a company who instructs a director or senior executive of the company to engage in activities that damage the interests of the company or shareholders. |
| 6 |
Other circumstances that do not obviously deviate from the reasonable expectations of the parties concerned. |
- The laws or judicial interpretations in force at that time have already provided for in principle, and the revised “Company Law” has provided for specifically.
| 1 |
A dispute over the provisions of the articles of association of a joint stock limited company imposing restrictions on the transfer of shares. |
| 2 |
The determination of compensation liability of a supervisor of a company who has committed prohibited acts such as misappropriation of the company’s funds, illegal related-party transactions, improper seeking of the company’s commercial opportunities, and operation of the same type of business with restrictions. |
| 3 |
The determination of compensation liability of a director or a senior manager of a company who improperly seeks the company’s commercial opportunities or operates the same type of business with restrictions. |
| 4 |
The determination of the scope of subjects with related-party relationship and the nature of related-party transactions. |
- Special rules regarding liquidation.
Where a legal fact requiring liquidation occurred before the entry into force of the “Company Law”, the provisions of the laws and judicial interpretations in force at that time shall apply to a dispute over the liability for liquidation. Where a legal fact requiring liquidation occurred before the entry into force of the “Company Law” but within 15 days as of the date when the “Company Law” enters into force, the provisions of Article 232 of the “Company Law” shall apply, and the time limit for the liquidation obligor to fulfill its liquidation obligation shall be counted anew from the date when the “Company Law” enters into force.
