Taihe Research | Typical Case in the Corporate Governance Stage: Dispute over the Confirmation of the Validity of a Corporate Resolution
Release Date:
2026-09-15
Case Summary
Mr. Huang serves as the supervisor of a certain advertising company in Beijing (hereinafter referred to as “the Advertising Company”). The Advertising Company is a foreign-invested enterprise, with shareholders including a Japanese corporation and an individual, Mr. Xiao, among others. Its board of directors comprises Mr. Rang (Chairman), Mr. Xiao (Vice Chairman and General Manager), Mr. Shan (Director), and others; notably, the directors appointed by the Japanese corporation hold a majority of seats on the board. The Advertising Company has invested in establishing a wholly owned subsidiary, a cultural communication company in Beijing (hereinafter referred to as “the Cultural Company”), which engages in cultural communication services.
On January 6, 2019, a certain advertising company convened a board of directors meeting and adopted six resolutions, including the dissolution of its wholly owned subsidiary, a certain cultural company, and the assumption by the advertising company of the subsidiary’s related liabilities. Mr. Huang contends that these resolutions shift the debts of the cultural company onto the advertising company, thereby harming the company’s interests, and that procedural irregularities occurred during the resolution‑making process, in violation of Articles 20 and 21 of the Company Law of the People’s Republic of China. Accordingly, acting in his capacity as a supervisor, he brought suit before the court, seeking a declaration that the six board resolutions are invalid. The advertising company counters that the content of the board resolutions at issue pertains solely to matters of corporate management, does not contravene any mandatory provisions of laws or administrative regulations, and thus should be deemed valid.
Judgment Result
The court of first instance ruled: The court dismissed Mr. Huang’s claim. Following the judgment, Mr. Huang, dissatisfied with the ruling, filed an appeal.
The second-instance court ruled: The appeal is dismissed, and the original judgment is upheld. Huang, still dissatisfied, filed a petition for retrial with the Supreme People’s Court on the ground that the lower court erred in the application of the law.
The Supreme People’s Court, upon review, holds that: The application for retrial filed by Huang does not fall within any of the circumstances set forth in Article 207 of the Civil Procedure Law of the People’s Republic of China; accordingly, the court rules to reject his application for retrial.
Reasons for the Judgment
The court’s final judgment holds that: In accordance with Article 22, Paragraph 1 of the Company Law of the People’s Republic of China, any resolution of the shareholders’ meeting or general meeting of shareholders, or of the board of directors, that contravenes laws or administrative regulations shall be void. The statutory ground for declaring a corporate resolution invalid is that its content violates the mandatory provisions of laws or administrative regulations.
Based on the content of the resolution, the matters addressed in the board resolution at issue all pertain to the operational affairs of a certain advertising company, including the dissolution of its wholly owned subsidiary, a certain cultural company, and the assumption of related liabilities. Such matters constitute commercial judgments and decisions made by the company’s governing body regarding its business operations, and no circumstances have been found that violate mandatory provisions of laws or administrative regulations.
The issue raised by Mr. Huang—that a certain Japanese corporation, leveraging its majority seats on the board of directors of a certain advertising company, passed a resolution to dissolve the board of directors of a certain cultural company, thereby harming the interests of the advertising company—concerns the commercial reasonableness of the resolution’s content and is unrelated to its legality. Whether the resolution’s content is appropriate or conducive to the company’s interests falls within the scope of corporate autonomy, and, in principle, the people’s courts do not review such matters.
The existing evidence submitted by Mr. Huang fails to establish that the board resolution at issue violates any mandatory provisions of laws or administrative regulations, thereby rendering it invalid. Accordingly, the original judgment did not uphold Mr. Huang’s claim seeking a declaration of the invalidity of the said board resolution, and the application of law was proper.
Legal advice
1. This case has established the boundaries of judicial review in actions challenging the validity of corporate resolutions. When adjudicating disputes over the validity of corporate resolutions, the people’s courts recognize a resolution as invalid only on the statutory ground that its content violates mandatory provisions of laws or administrative regulations. Whether the resolution’s content is commercially reasonable or serves the company’s interests falls within the scope of corporate self‑governance and, in principle, is not subject to judicial review. If shareholders or supervisors merely contend that a resolution harms the company’s interests without providing evidence that its content contravenes mandatory legal or administrative provisions, their claims seeking to have the resolution declared invalid are unlikely to be upheld. This rule embodies the fundamental principle of corporate law: respect for corporate autonomy and prudent judicial intervention in internal corporate matters.
2. For the company’s supervisors (shareholders and supervisory board members), when they believe that a corporate resolution harms the company’s interests, they should appropriately choose the appropriate remedy:
(1) Accurately distinguish among the types of defects in resolutions. If the content of a resolution violates mandatory provisions of laws or administrative regulations, it constitutes grounds for invalidity; if the convening procedure or voting method contravenes laws, administrative regulations, or the company’s articles of association, or if the resolution’s content breaches the articles of association, it constitutes grounds for annulment; and if no meeting was held, no vote was taken, the quorum or voting rights were insufficient, or the voting result failed to meet the required approval threshold, such circumstances constitute grounds for the resolution’s non‑establishment. Parties should select the appropriate type of litigation based on the facts of the case to avoid improperly invoking an action for invalidity.
(2) Evidence shall be adduced centering on the “illegality of the content.” In an action for a declaration of invalidity of a resolution, the party concerned must prove that the resolution’s content directly contravenes the mandatory provisions of laws or administrative regulations having binding force, rather than merely arguing that the resolution is commercially unreasonable or prejudicial to its own interests. Challenges to the appropriateness of the business judgments and decisions upon which the resolution is based fall outside the scope of review in such a declaratory action.
(3) Make effective use of other remedies. Where controlling shareholders abuse their shareholder rights, or where directors, supervisors, and senior management exploit related-party relationships to harm the company’s interests, shareholders who meet the statutory requirements may bring a derivative action pursuant to Article 189 of the Company Law (as amended in 2023), or, under Articles 21 and 22 of the Company Law, seek compensation from the relevant liable parties; such remedies often yield more direct results.
3. For the company (including its controlling shareholder), to mitigate risks such as the invalidation of resolutions, it is essential to ensure both the legality of the resolution’s content and compliance with procedural requirements.
(1) Ensure that the content of resolutions is lawful. Resolutions concerning external guarantees, assumption of liabilities, related-party transactions, and significant asset disposals shall comply with applicable laws and administrative regulations, and shall be subject to the deliberation procedures of the shareholders’ meeting or the board of directors in accordance with the law and the company’s articles of association. Where related-party transactions are involved, the relevant provisions requiring recusal of related directors and related shareholders from voting must be strictly observed.
(2) Standardize resolution procedures and maintain traceable records. Although issues related to the convening process and voting methods do not constitute grounds for invalidating a resolution, they may nonetheless give rise to actions seeking to rescind or declare the resolution void. Companies should standardize procedural steps such as issuing meeting notices, verifying quorum, tallying votes, and signing minutes, and ensure that all relevant documentation is meticulously preserved.
(3) Respect the statutory rights of minority shareholders and supervisory bodies. Controlling shareholders, when exercising their voting rights, must comply with the provisions of the Company Law governing the exercise of shareholder rights and may not abuse their controlling position to harm the interests of the company or other shareholders; otherwise, even if the validity of the resolution remains unaffected, they may still be held liable for damages and other legal consequences.
4. The legal consequences of a resolution being declared invalid 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 confirmed as non‑existent by a people’s court, the company shall apply to the company registration authority for the cancellation of 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 (as amended in 2020), civil legal relationships established by the company with bona fide third parties pursuant to a resolution that has been confirmed as invalid shall remain unaffected. Accordingly, when making significant business decisions, companies should ensure that the content of such resolutions is lawful and compliant and that the relevant procedures are fully in place, so as to avoid litigation arising from disputes over the validity of resolutions and to mitigate associated legal risks.
Article link
The Company Law of the People’s Republic of China (as amended in 2018; the version applicable to this case is the 2018 amendment)
Article 22: Any resolution of the shareholders’ meeting or general meeting of shareholders, or of the board of directors, that contravenes laws or administrative regulations shall be void.
If the procedures for convening a shareholders’ meeting or a general meeting of shareholders, or the voting methods thereof, violate laws, administrative regulations, or the company’s articles of association, or if the content of a resolution violates the company’s 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, upon the people’s court declaring such resolution invalid or revoking 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 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 1: Where shareholders, directors, supervisors, or other interested parties of a company seek to have a resolution of the shareholders’ meeting or general meeting of shareholders, or of the board of directors, declared invalid or non-existent, the people’s court shall accept the case in accordance with the law.
Article 3: In cases where the plaintiff seeks a court determination that a resolution of the shareholders’ meeting or general meeting, or of the board of directors, is invalid, void, or subject to revocation, the company shall be named as the defendant. Other interested parties affected by the resolution may, in accordance with the law, be joined as third parties. Prior to the conclusion of the first-instance court debate, any other person who meets the requirements for standing and submits an application to join the proceedings on the same grounds as set forth in the preceding paragraph may be designated as a co‑plaintiff.
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. With 16 years of legal practice, he currently serves as… Deputy Director of the M&A and Restructuring Committee of Taihe Law Firm, Secretary of the Party Branch of Taihe (Suzhou), 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 Party 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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