Taihe Research | Typical Case in the Corporate Governance Stage: Dispute over the Annulment of a Corporate Resolution
Release Date:
2026-08-26
Case Summary
Mr. Li is a shareholder of a certain environmental‑technology company in Shanghai (hereinafter referred to as the “Environmental Company”), holding a 46% stake and serving as the company’s general manager. The company’s shareholding structure is as follows: Mr. Ge holds 40%, Mr. Li holds 46%, and Mr. Wang holds 14%. The three shareholders jointly constitute the board of directors, with Mr. Ge serving as chairman. The company’s articles of association provide that the board of directors exercises powers including the appointment or dismissal of the company’s manager; that the board may validly convene only when at least two-thirds of its members are present; and that any decision on matters under consideration shall be valid only if approved by a vote of at least two-thirds of all directors.
On July 18, 2009, Chairman Ge convened and presided over a board meeting, which was attended by all three directors. The meeting adopted a resolution stating, among other things, that “in view of General Manager Li’s unauthorized use of company funds to trade stocks on the secondary market without the board’s approval, resulting in substantial losses, he is hereby removed from his position as general manager, effective immediately.” The resolution was signed by Ge, Wang, and the supervisor; Li did not sign it. Li contends that the facts and grounds underlying the resolution are unfounded and that the board’s convening procedures, voting method, and the content of the resolution all violate the provisions of the Company Law. Accordingly, Li brought suit before the court, seeking to have the board resolution annulled. The environmental protection company argues that the board’s convening procedures, voting method, and the resolution’s content all comply with applicable laws and the company’s articles of association, and therefore the resolution should be deemed valid.
Judgment Result
The court of first instance ruled to annul the board resolution adopted by the environmental protection company. Following the judgment, the environmental protection company, dissatisfied with the decision, filed an appeal.
The second-instance court ruled as follows: 1. Revoke the first-instance civil judgment; 2. Dismiss Li’s claim.
Reasons for the Judgment
The court’s final judgment holds that, pursuant to Article 22, Paragraph 2 of the Company Law of the People’s Republic of China, grounds for challenging a board resolution include: (1) violation of laws, administrative regulations, or the company’s articles of association in the convening procedure; (2) violation of laws, administrative regulations, or the company’s articles of association in the voting process; and (3) content of the resolution that contravenes the company’s articles of association.
From the perspective of the convening procedure, the board meeting convened by the environmental protection company on July 18, 2009, was called by Chairman Ge; all three directors attended, and the convening procedure for that meeting did not violate any provisions of laws, administrative regulations, or the company’s articles of association.
From the perspective of the voting procedure, in accordance with the provisions of the Environmental Protection Company’s Articles of Association, any resolution on the matters under consideration shall be valid only if approved by a majority of at least two-thirds of all directors. The aforementioned board resolution was adopted by two out of the three shareholders who also serve as directors; therefore, the voting procedure did not violate any applicable laws, administrative regulations, or the company’s Articles of Association.
Based on the content of the resolution, the company’s articles of association stipulate that the board of directors has the authority to remove the company’s general manager. The statement in the board’s resolution—that “General Manager Li, without the board’s consent, unilaterally diverted company funds to trade stocks in the secondary market, resulting in substantial losses”—serves merely as the rationale for the board’s decision to dismiss Mr. Li from his position as general manager; moreover, the resolution itself does not contravene the company’s articles of association.
If the reasons stated in the board resolution for dismissing Mr. Li from his position as general manager do not exist, such a finding does not render the board resolution void. First, corporate law respects corporate autonomy; in principle, internal legal relationships within a company are governed by its self‑governance mechanisms, and judicial authorities generally do not intervene in the company’s internal affairs. Second, the articles of association of the environmental protection company impose no restrictions on the board of directors’ authority to remove the company’s manager, nor do they require that such removal be based on specific grounds. Accordingly, this provision does not contravene the mandatory provisions of the Company Law and should be deemed valid. Accordingly, the court should respect corporate autonomy and need not examine whether the reasons advanced by the board of directors of the environmental protection company for dismissing the company’s manager are valid; in other words, it is not required to assess whether the facts upon which the resolution is based are true or whether the stated grounds are well-founded.
Legal advice
1. This case has established the boundaries of judicial review in actions to rescind corporate resolutions. When hearing disputes over the annulment of corporate resolutions, the people’s courts need only examine three statutory grounds: whether the procedures for convening the meeting violated laws, administrative regulations, or the company’s articles of association; whether the voting method violated laws, administrative regulations, or the company’s articles of association; and whether the content of the resolution violates the company’s articles of association. Whether the facts upon which the resolution is based are true and whether the grounds for it are well-founded fall within the scope of corporate autonomy and are not subject to judicial review. If a shareholder merely contends that the facts upon which the resolution is based are untrue or that its rationale is insufficient, without presenting evidence to establish any of the statutory defects mentioned above, the shareholder’s action for annulment is unlikely to succeed. This principle reflects the fundamental tenet of corporate law that respects corporate autonomy and, in principle, refrains from judicial intervention in internal corporate matters.
2. For shareholders (plaintiffs), when bringing an action to rescind a corporate resolution, the following procedural key points should be observed:
(1) Strict adherence to the statutory limitation period. Under Article 22 of the Company Law (as amended in 2005), shareholders must, within sixty days from the date the resolution is adopted, petition the people’s court for its annulment. Article 26 of the Company Law of the People’s Republic of China (as amended in 2023) further provides that a shareholder who was not notified to attend the shareholders’ meeting may, within sixty days from the date he or she knew or ought to have known of the adoption of the resolution, seek its annulment; however, if the right to seek annulment is not exercised within one year from the date the resolution was adopted, such right shall lapse. If a lawsuit is filed after the expiration of this period, the people’s court shall either refuse to accept it or dismiss it in accordance with the law.
(2) Organize the presentation of evidence around statutory grounds. Shareholders should focus on three aspects: the convening procedure, the voting method, and the content of the resolution. For example, they should examine whether the notice of convocation was served to all shareholders or directors in accordance with the time limits and methods prescribed in the articles of association; whether the number of attendees and the voting rights held met the statutory or charter‑stipulated thresholds; whether the voting process and results were accurately recorded; and whether the resolution’s content conflicts with the company’s articles of association. Challenges to the facts and reasons underlying the resolution do not fall within the scope of statutory review and should not be relied upon as the primary basis for filing a lawsuit.
(3) Pay attention to the “minor defects” rule. Article 4 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (IV), as amended in 2020, provides that if the procedures for convening a meeting or the method of voting involve only minor defects that do not have a substantial impact on the resolution, the people’s court will not support a request to rescind the resolution. Prior to filing a lawsuit, it is advisable to assess the severity of any defects to avoid the risk of losing the case on the ground that the defect is deemed minor.
3. For the company (the defendant), mitigating the risk of its resolutions being rescinded hinges on procedural compliance and meticulous record-keeping:
(1) Improve the procedures for convening meetings. Issue meeting notices to all shareholders or directors in strict accordance with the notification methods and timeframes stipulated in the company’s articles of association, and retain proof of delivery; meetings must be held in person and voting must be conducted on a genuine basis, avoiding the use of alternative methods such as “circulation for signature” or “approval by memo” in lieu of formal meetings.
(2) Standardize voting and record-keeping. The number of attendees and the total number of voting rights must meet the statutory or charter‑specified quorum; the voting results shall be accurately recorded in the minutes and signed by the shareholders or directors present at the meeting. The text of each resolution must be properly executed and securely filed, ensuring that the decision‑making process is fully documented and traceable.
(3) Distinguish among the levels of defects in corporate resolutions. Depending on their severity, defects in corporate resolutions may be categorized into three types: invalidity (where the resolution’s content violates laws or administrative regulations), revocability (where the convening procedure or voting method is unlawful or contravenes the articles of association, or where the resolution’s content breaches the articles of association), and non‑establishment (where no meeting was held, no vote was taken, the quorum or voting rights were insufficient, or the required approval threshold was not met). Each category entails distinct legal consequences. Companies should accurately identify the type of resolution defect and adopt appropriate corrective or remedial measures; for instance, a revocable resolution should be promptly reconsidered at a new meeting, with a fresh resolution adopted to replace it.
4. The legal consequences of the revocation of a resolution should be given due consideration. Pursuant to Article 28 of the Company Law of the People’s Republic of China (as amended in 2023), if a resolution of the shareholders’ meeting or the board of directors is declared invalid, revoked, or deemed non‑existent by a people’s court, the company shall apply to the company registration authority to cancel any registration that has been effected on the basis of such resolution. Meanwhile, in accordance with Article 6 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (IV), civil legal relationships established by the company with bona fide third parties pursuant to a revoked resolution shall remain unaffected. Accordingly, when making significant business decisions, companies should ensure that the decision‑making procedures are lawful and compliant and that the content of the resolutions does not contravene applicable laws, regulations, or the company’s articles of association, so as to avoid litigation arising from defects in the resolutions and the ensuing cascading risks, including registration amendments and liability.
Article link
The Company Law of the People’s Republic of China (as amended in 2018; in this case, the version revised in 2005 applies, and the provisions at issue remain unchanged)
Article 22: Resolutions of the company’s shareholders’ meeting or general meeting of shareholders, or of the board of directors, shall be invalid if their content violates laws or administrative regulations.
If the procedures for convening a shareholders’ meeting or a general meeting of shareholders, or the voting methods, violate laws, administrative regulations, or the company’s articles of association, or if the content of a resolution violates the articles of association, shareholders may, within sixty days from the date the resolution was adopted, petition the people’s court to rescind it.
Where a shareholder brings an action in accordance with the preceding paragraph, the people’s court may, upon the company’s request, require the shareholder to provide appropriate security.
Where a company has, pursuant to a resolution of the shareholders’ meeting or general meeting of shareholders, or of the board of directors, completed registration of changes, and the people’s court subsequently declares such resolution invalid or revokes it, the company shall apply to the company registration authority for cancellation of the change registration.
Company Law of the People’s Republic of China (Revised in 2023)
Article 25: Resolutions of the company’s shareholders’ meeting or board of directors that contravene laws or administrative regulations shall be null and void.
Article 26: If the procedures for convening meetings or the voting methods of the shareholders’ meeting or the board of directors of a company violate laws, administrative regulations, or the company’s articles of association, or if the content of a resolution violates the articles of association, any shareholder may, within sixty days from the date the resolution is adopted, petition the people’s court to rescind it. However, this shall not apply where the procedural defects in the convening of the meeting or the voting method are minor and have not had a substantial impact on the resolution. A shareholder who was not notified of the shareholders’ meeting may, within sixty days from the date he or she knew or ought to have known of the adoption of the resolution, petition the people’s court to rescind it; if the right to rescind is not exercised within one year from the date the resolution was adopted, such right shall lapse.
Article 27: Resolutions of the shareholders’ meeting or the board of directors shall be invalid if any of the following circumstances exists: (1) No shareholders’ meeting or board of directors meeting was convened to adopt the resolution; (2) The shareholders’ meeting or board of directors did not conduct a vote on the matter at issue; (3) The number of attendees or the number of voting rights held fails to meet the quorum required by this Law or the company’s articles of association; (4) The number of votes in favor or the number of voting rights held fails to meet the quorum required by this Law or the company’s articles of association.
Article 28: If a resolution of the shareholders’ meeting or the board of directors of the company is declared invalid, revoked, or confirmed as non‑existent by the people’s court, the company shall apply to the company registration authority for the cancellation of any registration that has been effected pursuant to such resolution.
Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (IV) (Fa Shi [2020] No. 18)
Article 4: Where a shareholder requests the annulment of a resolution of the shareholders’ meeting or the general meeting of shareholders, or of the board of directors, and such request complies with Article 85 of the Civil Code, Article, Company Law Article 22 Where the circumstances set forth in paragraph 2 apply, the people’s court shall grant support; however, with respect to the procedure for convening the meeting… Alternatively, if the voting procedure contains only minor defects that have not had a substantial impact on the resolution, the people’s court shall not uphold such defects.
Article 5: Where a resolution of the shareholders’ meeting or general meeting of shareholders, or of the board of directors, falls under any of the following circumstances, and a party contends that the resolution is invalid, the people’s court shall uphold such claim:
(1) If the company has not convened a meeting, But according to Company Law Article 37 The Unless otherwise provided in the articles of association or by the company’s bylaws, decisions may be made directly without convening a shareholders’ meeting or general meeting of shareholders, provided that all shareholders sign and affix their seals to the relevant decision document;
(2) The meeting did not vote on the matters subject to resolution;
(3) The number of attendees at the meeting or the voting rights held by shareholders does not… Compliant with Company Law Or as otherwise provided in the company’s articles of association;
(4) Meeting The outcome of the vote did not reach Company Law Or public Those that meet the approval threshold stipulated in the company’s articles of association;
(5) Other circumstances that render the resolution invalid.
Article 6: Where a resolution of the shareholders’ meeting or general meeting of shareholders, or of the board of directors, is declared invalid or revoked by a people’s court, any civil legal relationships established by the company with bona fide third parties on the basis of such resolution shall remain unaffected.
Attorney Zhao Liwei
Taihe (Suzhou) Law Firm
Attorney Zhao Liwei graduated from the Wang Jian School of Law at Soochow University and is a member of the Communist Party of China. He has practiced law for 16 years and currently serves as… Deputy Director of the M&A and Restructuring Committee of Taihe Law Firm, Secretary of the Taihe (Suzhou) Party Branch, examiner for the internship assessment of the Suzhou Lawyers Association, Deputy Director of the Rule-of-Law Construction Committee of the Suzhou Industrial Park Free Trade Zone, member of the Social Governance Committee, and supervisor as well as Deputy Director of the Legal Affairs Committee of the Suzhou–Wuxi Chamber of Commerce. Previously served as a delegate to the CPC Congress of Gusu District and was recognized as an Outstanding Communist Party Member by Gusu District, Xiangcheng District, and the Suzhou Industrial Park. Holds certifications in securities practice, tax planning, and psychological counseling.
Practice Areas: Equity‑based investment and financing, and criminal–civil cross‑border matters (specifically including equity structure design and optimization, resolution of equity disputes, equity‑related investment and financing, mergers and acquisitions and corporate restructuring, criminal risk prevention and legal analysis for directors, supervisors, and senior management, as well as the resolution of criminal–civil cross‑border disputes).
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