On the surface, there are three elements. In fact, the core is "serious difficulties in management". It is difficult to prove that the continued existence does not harm the interests of shareholders; It is difficult to prove that "it cannot be solved by other means", and strict application of this requirement will become an excuse to refuse to provide relief.
So what is "serious management difficulties"? Is the loss of foreign business serious? Or is there a governance difficulty in internal management that shareholders oppose? Or both.
In 2005, the legislation of Article 182 of the Company Law was intended to solve the problem that the company was on the verge of bankruptcy due to operational difficulties, and the serious differences among shareholders led to the deadlock of the company, and it was impossible to make a resolution to dissolve the company.
Article 1 of Interpretation II of Company Law in 2008 specifically explains what is "company deadlock": shareholders' meeting cannot be held within 2 years; No effective resolutions can be made at the meeting; Long-standing conflicts between directors cannot be resolved through shareholders' meetings (for example, directors cannot be replaced).
However, the Supreme Court's guiding case No.2012 refers to the internal management dilemma that the company can no longer manage through the resolution of the shareholders' meeting, which is in a deadlock state and has nothing to do with whether the company is in a loss state.
In the follow-up cases of the Supreme Court, the failure of the shareholders' meeting with difficulties in internal management of the company does not even refer to the extreme situation of company deadlock. Although there is no deadlock, it cannot reflect the collective will of shareholders, which means the failure of the shareholders' meeting. If there is a problem with the integrity of shareholders, it means serious difficulties in internal management.
Furthermore, whether the obstacle of shareholders' cooperation is caused by the plaintiff's own fault behavior, such as the malicious lawsuit that the plaintiff refused to attend the shareholders' meeting to create a deadlock, will not be considered. The Supreme Court held that "the cause and responsibility of the deadlock have no influence on the dissolution of the company."
The lower court did not accept the views expressed by the Supreme Court in the above case. The vast majority of lower courts still take the company's operating conditions as the core consideration factor.
The judgment standard of taking the failure of shareholders' meeting as the consideration standard of company dissolution procedure established by the Supreme Court in Guiding Case No.8 actually gives shareholders who are dissatisfied with the company's current situation the right to dissolve the company and quit the company without reason. The Supreme Court seems to have gone too far on this issue, but the support of the local courts for the dissolution procedure seems to be insufficient.
In fact, even if the court decides to dissolve the company, it will only give the suppressed shareholders a bargaining tool. If the company is profitable, the two sides will negotiate to solve the problem and not liquidate and cancel the company that is still profitable. The oppressed minority shareholders need effective tools to restrain the opportunistic behavior of the large shareholders, and the company dissolution lawsuit is more effective than other remedies and can be valued by the suppressed large shareholders.
This article is a reading note for the following article: Geng, "Judicial Practice and Perfection of Adjudication Rules for Company Dissolution Disputes", China Law No.6, 20 16.