Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II) (Revised in 2020)
Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II) (Revised in 2020)
Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II) (Revised in 2020)
Fa Shi [2020] No.18
December 29, 2020
(Adopted at the 1447th meeting of the Judicial Committee of the Supreme People's Court on May 5, 2008; and amended for the first time in accordance with the Decision on Amending the Provisions on Several Issues concerning the Application of the Company Law of the People's Republic of China which was adopted at the 1607th meeting of the Judicial Committee of the Supreme People's Court on February 17, 2014; and amended for the second time in accordance with the Decision of the Supreme People's Court on Revising 29 Judicial Interpretations on Commercial Cases Including the Official Reply of the Supreme People's Court on Whether the Land Use Right of the Allotted State-Owned Land of a Bankrupt Enterprise Shall Be Listed as Insolvent Property adopted at the 1823rd meeting of the Judicial Committee of the Supreme People's Court on December 23, 2020)
In order to correctly apply the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law"), in light of judicial trial practices, issues concerning the application of the laws in the hearing of company dissolution and liquidation cases by the people's courts are hereby prescribed as follows:
Article 1 Where shareholder(s) individually or jointly holding 10% or more of the voting rights of all shareholders of a company initiates a company dissolution action for any of the following causes and the provisions of Article 182 of the Company Law are complied with, a people's court shall accept such action:
1. where the company has failed to call a meeting of shareholders or a general meeting of shareholders for two consecutive years or longer, and the operation and management of the company are in great difficulties;
2. where due to the fact that the statutory quorum or the quorum specified in the articles of association of the company cannot be present at the time of voting by shareholders, a meeting of shareholders or a general meeting of shareholders has not been able to adopt any valid resolution for two consecutive years or longer, and the operation and management of the company are in great difficulties;
3. where long-term disagreement between the directors of the company cannot be settled through meetings of shareholders or general meetings of shareholders, and the operation and management of the company are in great difficulties; or
4. where the operation and management of the company are in other great difficulties, and the continued existence of the company will cause great losses to the interests of shareholders.
Where any shareholder of a company initiates a company dissolution action on the grounds that his or its rights and interests, such as the right to know and the right to request profit distribution, have been harmed, or that the company suffers losses or its assets are inadequate to pay off all of its debts, or that the company has not gone through liquidation after its enterprise legal person business license has been revoked and so on, the relevant people's court shall not accept the action.
Article 2 Where any shareholder of a company initiates a company dissolution action in a people's court and at the same time submits an application to the people's court for liquidation of the company, the people's court shall not accept the liquidation application submitted by the shareholder. The people's court may advise the relevant plaintiff to liquidate the company himself or otherwise apply to the relevant people's court for liquidation of the company after the people's court renders a judgment of dissolution, subject to Article 70 of the Civil Code, Article 183 of the Company Law and Article 7 hereof.
Article 3 Where any shareholder of a company applies to a people's court for preserving property or evidence when initiating a company dissolution action, the people's court may preserve the property or evidence under the circumstances where the shareholder provides corresponding guarantee and the ordinary operation of the company is not affected.
Article 4 Any shareholder of a company who commences a company dissolution action shall list the company as the defendant.
Where the plaintiff in a company dissolution action lists any other shareholder of the company as a co-defendant, the relevant people's court shall advise the plaintiff to list such other shareholder as a third party; where the plaintiff refuses to make the corresponding change, the people's court shall dismiss the action against any such other shareholder initiated by the plaintiff.
The plaintiff in a company dissolution action shall inform other shareholders of such an action. Alternatively, the relevant people's court shall notify other shareholders to participate in the action. Where any other shareholder or any interested party applies to participate in the action as a co-plaintiff or a third party, the people's court shall approve the application accordingly.
Article 5 In hearing a company dissolution action, a people's court shall attach importance to mediation. Where the parties concerned agree to the continued existence of the company in question through the acquisition of relevant shares of the company by the company itself or any other shareholder thereof, or by way of capital reduction or otherwise, which are not in violation of the mandatory provisions of laws and administrative regulations, the people's court shall support the mediation between the parties. Where the parties concerned fail to reach an agreement after negotiation as to the continued existence of the company in question, the people's court shall promptly render a judgment.
Where, upon mediation by the people's court, the company in question acquires the shares of the plaintiff in the action, the company shall transfer or deregister the relevant shares within six months of the effective date of the mediation agreement. Prior to the transfer or deregistration of the shares in question, the plaintiff shall not claim against any creditor of the company on the grounds that the company has acquired the shares of the plaintiff.
Article 6 A judgment rendered by a people's court with respect to the dissolution of a company shall be binding on all shareholders of the company.
After a people's court has delivered a judgment that a request for dissolving a company filed by any shareholder of the company shall be dismissed, a company dissolution action initiated by the same shareholder or any other shareholder based on the same facts and causes shall not be accepted by the people's court.
Article 7 A company shall, in accordance with the provisions of Article 70 of the Civil Code and Article 183 of the Company Law, establish a liquidation group within fifteen days of the occurrence of any cause for dissolution and commence liquidation itself.
Where, under any of the following circumstances, any creditor, shareholder or other interested parties of the company applies to a people's court for designation of a liquidation team, the people's court shall accept the application:
1. where, upon the dissolution of the company, no liquidation group is established to carry out the relevant liquidation work;
2. where a liquidation group has been established, but the liquidation group willfully delays carrying out the relevant liquidation work; or
3. where any illegal act in the liquidation of the company severely threatens the interests of creditors or shareholders of the company.
Article 8 After the acceptance of a company dissolution case, a people's court shall promptly establish a liquidation group by appointing relevant persons.
Members of a liquidation group may be selected from the following individuals or institutions:
1. shareholders, directors, supervisors and officers of the company in question;
2. legally established intermediaries such as law firms, accounting firms, and bankruptcy and liquidation firms; and
3. staff members with relevant professional knowledge and holding the relevant practicing qualification of legally established intermediaries such as law firms, accounting firms, and bankruptcy liquidation firms.
Article 9 Under any of the following circumstances, a people's court may, on the basis of an application by any creditor, shareholder, director or other interested parties of the relevant company or in accordance with its power, change any member of a liquidation group it designates:
1. where the member acts in violation of laws or administrative regulations;
2. where the member loses the relevant practicing competency or civil capacity; or
3. where the member acts in any way which severely harms the interests of the company or its creditors.
Article 10 Before the cancellation of a company subsequent to the completion of the liquidation carried out in accordance with the law, any civil action with respect to the company shall proceed in the name of the company.
Where a liquidation group has been established by the company, the liquidation group shall be responsible for representing the company in participating in the action. Where a liquidation group has not been established by the company, the original legal representative of the company shall represent the company in participating in the action.
Article 11 In carrying out the liquidation of a company, a liquidation group for the company shall notify in writing all known creditors thereof of matters relating to the dissolution and liquidation of the company in accordance with the provisions of Article 185 of the Company Law and shall, in light of the scale of the company and areas covered by its business, make a corresponding public announcement in a national newspaper or a provincial newspaper of the place in which the company is registered.
Where failure to perform the notification and public announcement obligations in accordance with the provisions of the preceding paragraph by a liquidation group for a company results in failure to promptly declare debt claims by any creditor of the company and to get the debt liquidated and any such creditor asserts that members of the liquidation group shall be responsible for indemnifying the creditor against any loss arising therefrom, the people's court shall support the claim in accordance with the law.
Article 12 In the course of the liquidation of a company, any creditor of the company that raises objections to debt claims ascertained by a liquidation group may request the liquidation group to ascertain debt claims once again. Where the liquidation group refuses to do so or any such creditor continues to raise objections to debt claims ascertained anew and the creditor brings an action against the company for a determination of the debt claims in a people's court, the people's court shall accept the action.
Article 13 Where any creditor of a company that fails to declare his or its debt claims within a specified time limit makes a supplementary declaration before the completion of the liquidation procedures of the company, a liquidation group for the company shall make a corresponding registration.
Completion of the liquidation procedures of a company shall mean the completion of the confirmation as to a liquidation report for a company made by a meeting of shareholders of the company, a general meeting of shareholders thereof, or a people's court.
Article 14 Debt claims declared additionally by any creditor of a company may, in accordance with the law, be repaid with the undistributed properties of the company.
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Fa Shi [2020] No.18
December 29, 2020
(Adopted at the 1447th meeting of the Judicial Committee of the Supreme People's Court on May 5, 2008; and amended for the first time in accordance with the Decision on Amending the Provisions on Several Issues concerning the Application of the Company Law of the People's Republic of China which was adopted at the 1607th meeting of the Judicial Committee of the Supreme People's Court on February 17, 2014; and amended for the second time in accordance with the Decision of the Supreme People's Court on Revising 29 Judicial Interpretations on Commercial Cases Including the Official Reply of the Supreme People's Court on Whether the Land Use Right of the Allotted State-Owned Land of a Bankrupt Enterprise Shall Be Listed as Insolvent Property adopted at the 1823rd meeting of the Judicial Committee of the Supreme People's Court on December 23, 2020)
In order to correctly apply the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law"), in light of judicial trial practices, issues concerning the application of the laws in the hearing of company dissolution and liquidation cases by the people's courts are hereby prescribed as follows:
Article 1 Where shareholder(s) individually or jointly holding 10% or more of the voting rights of all shareholders of a company initiates a company dissolution action for any of the following causes and the provisions of Article 182 of the Company Law are complied with, a people's court shall accept such action:
1. where the company has failed to call a meeting of shareholders or a general meeting of shareholders for two consecutive years or longer, and the operation and management of the company are in great difficulties;
2. where due to the fact that the statutory quorum or the quorum specified in the articles of association of the company cannot be present at the time of voting by shareholders, a meeting of shareholders or a general meeting of shareholders has not been able to adopt any valid resolution for two consecutive years or longer, and the operation and management of the company are in great difficulties;
3. where long-term disagreement between the directors of the company cannot be settled through meetings of shareholders or general meetings of shareholders, and the operation and management of the company are in great difficulties; or
4. where the operation and management of the company are in other great difficulties, and the continued existence of the company will cause great losses to the interests of shareholders.
Where any shareholder of a company initiates a company dissolution action on the grounds that his or its rights and interests, such as the right to know and the right to request profit distribution, have been harmed, or that the company suffers losses or its assets are inadequate to pay off all of its debts, or that the company has not gone through liquidation after its enterprise legal person business license has been revoked and so on, the relevant people's court shall not accept the action.
Article 2 Where any shareholder of a company initiates a company dissolution action in a people's court and at the same time submits an application to the people's court for liquidation of the company, the people's court shall not accept the liquidation application submitted by the shareholder. The people's court may advise the relevant plaintiff to liquidate the company himself or otherwise apply to the relevant people's court for liquidation of the company after the people's court renders a judgment of dissolution, subject to Article 70 of the Civil Code, Article 183 of the Company Law and Article 7 hereof.
Article 3 Where any shareholder of a company applies to a people's court for preserving property or evidence when initiating a company dissolution action, the people's court may preserve the property or evidence under the circumstances where the shareholder provides corresponding guarantee and the ordinary operation of the company is not affected.
Article 4 Any shareholder of a company who commences a company dissolution action shall list the company as the defendant.
Where the plaintiff in a company dissolution action lists any other shareholder of the company as a co-defendant, the relevant people's court shall advise the plaintiff to list such other shareholder as a third party; where the plaintiff refuses to make the corresponding change, the people's court shall dismiss the action against any such other shareholder initiated by the plaintiff.
The plaintiff in a company dissolution action shall inform other shareholders of such an action. Alternatively, the relevant people's court shall notify other shareholders to participate in the action. Where any other shareholder or any interested party applies to participate in the action as a co-plaintiff or a third party, the people's court shall approve the application accordingly.
Article 5 In hearing a company dissolution action, a people's court shall attach importance to mediation. Where the parties concerned agree to the continued existence of the company in question through the acquisition of relevant shares of the company by the company itself or any other shareholder thereof, or by way of capital reduction or otherwise, which are not in violation of the mandatory provisions of laws and administrative regulations, the people's court shall support the mediation between the parties. Where the parties concerned fail to reach an agreement after negotiation as to the continued existence of the company in question, the people's court shall promptly render a judgment.
Where, upon mediation by the people's court, the company in question acquires the shares of the plaintiff in the action, the company shall transfer or deregister the relevant shares within six months of the effective date of the mediation agreement. Prior to the transfer or deregistration of the shares in question, the plaintiff shall not claim against any creditor of the company on the grounds that the company has acquired the shares of the plaintiff.
Article 6 A judgment rendered by a people's court with respect to the dissolution of a company shall be binding on all shareholders of the company.
After a people's court has delivered a judgment that a request for dissolving a company filed by any shareholder of the company shall be dismissed, a company dissolution action initiated by the same shareholder or any other shareholder based on the same facts and causes shall not be accepted by the people's court.
Article 7 A company shall, in accordance with the provisions of Article 70 of the Civil Code and Article 183 of the Company Law, establish a liquidation group within fifteen days of the occurrence of any cause for dissolution and commence liquidation itself.
Where, under any of the following circumstances, any creditor, shareholder or other interested parties of the company applies to a people's court for designation of a liquidation team, the people's court shall accept the application:
1. where, upon the dissolution of the company, no liquidation group is established to carry out the relevant liquidation work;
2. where a liquidation group has been established, but the liquidation group willfully delays carrying out the relevant liquidation work; or
3. where any illegal act in the liquidation of the company severely threatens the interests of creditors or shareholders of the company.
Article 8 After the acceptance of a company dissolution case, a people's court shall promptly establish a liquidation group by appointing relevant persons.
Members of a liquidation group may be selected from the following individuals or institutions:
1. shareholders, directors, supervisors and officers of the company in question;
2. legally established intermediaries such as law firms, accounting firms, and bankruptcy and liquidation firms; and
3. staff members with relevant professional knowledge and holding the relevant practicing qualification of legally established intermediaries such as law firms, accounting firms, and bankruptcy liquidation firms.
Article 9 Under any of the following circumstances, a people's court may, on the basis of an application by any creditor, shareholder, director or other interested parties of the relevant company or in accordance with its power, change any member of a liquidation group it designates:
1. where the member acts in violation of laws or administrative regulations;
2. where the member loses the relevant practicing competency or civil capacity; or
3. where the member acts in any way which severely harms the interests of the company or its creditors.
Article 10 Before the cancellation of a company subsequent to the completion of the liquidation carried out in accordance with the law, any civil action with respect to the company shall proceed in the name of the company.
Where a liquidation group has been established by the company, the liquidation group shall be responsible for representing the company in participating in the action. Where a liquidation group has not been established by the company, the original legal representative of the company shall represent the company in participating in the action.
Article 11 In carrying out the liquidation of a company, a liquidation group for the company shall notify in writing all known creditors thereof of matters relating to the dissolution and liquidation of the company in accordance with the provisions of Article 185 of the Company Law and shall, in light of the scale of the company and areas covered by its business, make a corresponding public announcement in a national newspaper or a provincial newspaper of the place in which the company is registered.
Where failure to perform the notification and public announcement obligations in accordance with the provisions of the preceding paragraph by a liquidation group for a company results in failure to promptly declare debt claims by any creditor of the company and to get the debt liquidated and any such creditor asserts that members of the liquidation group shall be responsible for indemnifying the creditor against any loss arising therefrom, the people's court shall support the claim in accordance with the law.
Article 12 In the course of the liquidation of a company, any creditor of the company that raises objections to debt claims ascertained by a liquidation group may request the liquidation group to ascertain debt claims once again. Where the liquidation group refuses to do so or any such creditor continues to raise objections to debt claims ascertained anew and the creditor brings an action against the company for a determination of the debt claims in a people's court, the people's court shall accept the action.
Article 13 Where any creditor of a company that fails to declare his or its debt claims within a specified time limit makes a supplementary declaration before the completion of the liquidation procedures of the company, a liquidation group for the company shall make a corresponding registration.
Completion of the liquidation procedures of a company shall mean the completion of the confirmation as to a liquidation report for a company made by a meeting of shareholders of the company, a general meeting of shareholders thereof, or a people's court.
Article 14 Debt claims declared additionally by any creditor of a company may, in accordance with the law, be repaid with the undistributed properties of the company.
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