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9 Tenda Co Ltd was incorporated by five natural persons (Mr A, Mr B, Mr C, Mr D and Ms E). Mr A was the majority shareholder and elected to be the chairman of the board of directors and the legal representative of the company.
In the business operations, Mr A, in the name of Tenda Co Ltd, sold a large shipment of goods at a low price to an enterprise invested by Mr A and other investors, which caused a huge loss to Tenda Co Ltd. Having discovered this, Ms E submitted a formal request to the board of supervisors to file a lawsuit against Mr A for his wrong-doing. However, she did not receive any response from the board of supervisors.
Required:
Answer the following questions in accordance with the Company Law of China, and give your reasons for your answers:
(a) state whether Ms E was entitled to bring a lawsuit against Mr A, due to Mr A’s transaction causing a huge loss to Tenda Co Ltd;
(b) state the pre-conditions to be satisfied for Ms E to bring a lawsuit in her own name against Mr A;
(c) explain which party should be the beneficiary of a legal action against Mr A, assuming Ms E obtained a favourable judgement from the court.
答案:
9 This question requires candidates to deal with the legal issues relating to derivative litigation under the Company Law of China.
(a) Ms E was entitled to bring a lawsuit against Mr A. The legal basis for this conclusion is Articles 21, 150 and 152 of the Company Law. The controlling shareholders, actual controllers or directors of a company shall not, by taking advantage of
their affiliate relationship, damage the interests of the company. Where any of the above-mentioned persons violates laws or articles of association of a company and causes damages to a company, such person shall be liable for the damages. If such a situation occurs, any shareholder may directly bring a lawsuit against the director, subject to the conditions as prescribed by the Company Law.
(b) In accordance with Article 152 of the Company Law, the following conditions shall be satisfied:
(i) Ms E requests the supervisory board in writing to bring a lawsuit against the director who causes the damage;
(ii) the supervisory board, upon its receipt of Ms E’s request, fails to file a lawsuit within 30 days upon the receipt of such
request;
(iii) Ms E brings a lawsuit against the Mr A for the interests of the company, in her own name.
(c) Assuming Ms E was granted a favourable judgement by the court, the beneficiary should be Tenda Co Ltd. Although Ms E brought the lawsuit in her own name, the legal action was for the interests of the company. Therefore, the result of such a legal action should be attributed to the company.
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