JC Master Case | When a shareholders’ meeting of a limited liability company votes on matters that were not included on the agenda, the resolution in question may be annulled on the grounds that the convening procedure was unlawful.

A certain asset management company in Nanjing (hereinafter referred to as: Company A has four corporate shareholders—A, B, C, and D. Shareholder A holds 20% of Company A’s equity, shareholder B holds 15%, shareholder C holds 30%, and shareholder D holds 35%. As Company A has long ceased to engage in business operations, on January 8, 2025, the company’s chairman, Mr. Hou, together with another director, Mr. Sun, pursuant to the provisions of Company A’s Articles of Association, proposed convening an extraordinary general meeting on January 23, 2025. On that same day, notices titled “Notice of Convening an Extraordinary General Meeting” were served upon shareholders A, B, C, and D, stating: “To all shareholders: At the proposal of Directors Hou and Sun, an extraordinary general meeting is hereby scheduled for 10:00 a.m. on January 23, 2025, in the Company’s conference room. Convener: Mr. Hou; Chairperson: Mr. Hou; Mode of convening: on-site voting. Agenda: To deliberate and resolve on the dissolution of the company.” On January 23, 2025, the extraordinary general meeting of Company A was duly held, with authorized representatives of all four shareholders in attendance. The meeting ultimately adopted three resolutions: First, Company A shall be dissolved effective January 23, 2025, and shall cease all business operations from the date of such dissolution decision. Second, within fifteen days from the date of dissolution, Company A shall establish a liquidation committee in accordance with the Company Law of the People’s Republic of China and the provisions of its Articles of Association, and shall carry out self‑liquidation. Third, the liquidation committee shall consist of the three directors of Company A, with Chairman Hou serving as its head. With respect to these three resolutions, shareholder A opposed all of them, while shareholders B, C, and D expressed their approval. Since more than two-thirds of the voting rights of the shareholders present voted in favor of the aforementioned three resolutions, following the adoption of the resolutions by the shareholders’ meeting, Company A proceeded to organize its own liquidation. During the liquidation process, shareholder A filed a lawsuit with the Qixia District People’s Court of Nanjing, seeking to annul the resolutions of the extraordinary general meeting held on January 23, 2025, on the grounds that the meeting’s procedural rules were unlawful. The primary argument advanced was that the notice issued on January 8, 2025, did not include any deliberation regarding the establishment of a liquidation committee or the composition of its members. Consequently, the meeting purportedly resolved matters not specified in the notice, thereby infringing upon the lawful rights of the shareholders. This conduct was deemed a serious violation of the convocation procedures prescribed in Article 26 of the Company Law. Accordingly, shareholder A requested the court to rescind the three resolutions adopted by the shareholders’ meeting on January 23, 2025. 
 

Article 26 of China’s Company Law provides that if the procedures for convening a shareholders’ meeting or a board of directors’ meeting, or the voting methods, violate laws, administrative regulations, or the company’s articles of association, or if the content of the resolution contravenes the articles of association, shareholders may, within sixty days from the date the resolution is adopted, petition the people’s court to rescind it. However, this does not apply where the procedural defects in convening the meeting or the voting methods are minor and have not had a substantial impact on the resolution. In the present case, the notice issued by Company A on January 8, 2025, for an extraordinary shareholders’ meeting listed only one item for consideration—“the dissolution of the company”—while the second item, “establishment of a liquidation committee,” and the third item, “determination of the members of the liquidation committee,” were not specified in the notice. On January 23, 2025, at the shareholders’ meeting, did the simultaneous vote on the second and third items—neither of which had been included in the agenda—constitute a “violation of the convening procedure” as contemplated in Article 26 of the Company Law? Should all three resolutions adopted at this shareholders’ meeting be annulled, or only some of them? Sales ？ 
 

Although China’s Company Law does not explicitly specify the types and scope of matters that must be set forth in the notice of a shareholders’ meeting of a limited liability company, to fully safeguard shareholders’ right to information and ensure the proper exercise of their voting rights, such notices should generally state the time and place of the meeting, as well as the agenda items. The agenda items must be specific and clearly defined; otherwise, shareholders are entitled to refuse to vote on any matters beyond the scope of the notice. While the dissolution of Company A is related to its liquidation, the two remain distinct matters. In particular, the composition of the liquidation committee is closely linked to the smooth conduct of the liquidation process and the protection of shareholders’ rights. In the absence of prior notice, and despite Shareholder A’s objection to including the establishment of the liquidation committee and the appointment of its members on the agenda of the shareholders’ meeting, the meeting nonetheless adopted a resolution on these matters. This improperly restricted Shareholder A’s right to make adequate preparations to exercise his voting rights correctly, constituting a serious procedural violation. Accordingly, Shareholder A is entitled to rescind the resolutions contained in the “Resolution of the Extraordinary Shareholders’ Meeting” regarding the establishment of the liquidation committee and the confirmation of its members. With respect to the first resolution—“to approve the dissolution of Company A and to cease its operations effective from the date of dissolution”—the convening procedures, voting procedures, and voting results all comply with applicable laws and the company’s articles of association, and the content does not contravene any mandatory provisions of laws or administrative regulations; therefore, it is lawful and valid.

When a limited liability company convenes a shareholders’ meeting, it shall notify each shareholder of the time, place, and matters to be considered at least fifteen days prior to the meeting. If the shareholders’ meeting votes on any matter that was not duly notified, such vote may be invalidated on the ground that the convening procedure was unlawful.

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