The equity structure is the four beams and eight pillars of the company, you may not see its existence, but it determines whether an enterprise can be stable and long-term. In the practice of corporate governance, the reason why Alibaba, Jingdong, millet, Meituan and other companies can always have a clear development direction has a great relationship with their stable equity structure; To a large extent, the company's sound ownership structure ensures that the company's development direction is promoted efficiently along the business philosophy of the founder and management team. On the contrary, the turmoil in the later development process of real Kung fu, Mobike, Hungry and other companies is not unrelated to their slightly thin equity structure, when the founder and management can not control the company's right to speak, the company's development direction will be in the wind and rain, or even out of control. To open a century-old store, it is necessary to have a good equity structure, and the unreasonable equity structure will greatly affect the development space of the company. This paper will discuss the shareholding structure of the limited liability company based on the case of the real Kung Fu equity dispute for the reference of the operator.

Company shareholders' meeting

The shareholders' meeting is the authority of the company. The governance structure of China's limited liability company consists of the shareholders' meeting, the board of directors (executive directors) and the supervisor (supervisor). Among them, the shareholders' meeting is the authority of the company, which decides the management policy of the company, decides the selection of directors, supervisors and other senior executives, and then determines the development direction of the company. (1) To decide on the company's business policy and investment plan; (2) to elect and replace directors and supervisors who are not employees' representatives, and to decide on matters related to the remuneration of directors and supervisors; (3) To examine and approve the report of the Board of directors; (4) To examine and approve the reports of the board of supervisors or the supervisors; (5) To examine and approve the company's annual financial budget plan and final account plan; (6) To examine and approve the company's profit distribution plans and plans for making up losses; (7) To make resolutions on the increase or reduction of the company's registered capital; (8) To make resolutions on the issuance of corporate bonds; (9) To make resolutions on merger, division, dissolution, liquidation or change of company form; (10) amending the articles of association; (11) Other functions and powers provided for in the articles of association. Among them, (7), (9) and (10) are major business matters of the company; Other matters are general business matters of the company. In the corporate governance structure of our country, the shareholders' meeting is the most important institution.

Corporate ownership structure

Corporate ownership structure refers to the proportion of shares held by shareholders of a company and their mutual relations. As the corporate authority, the shareholders' meeting decides the company's business affairs in the form of the shareholders' meeting resolution, and then controls the company's business development direction. The right to participate in corporate governance is an important right of shareholders, including: the shareholders' right to vote in the shareholders' meeting, the right to propose, the right to propose, the right to convene, etc., as well as the right to know and supervise the company's operating and financial conditions. A company has independent legal personality, and the shareholders of the company must exercise their rights in accordance with the procedures prescribed by the Company Law and the articles of association, participate in the resolutions of the shareholders' meeting on relevant matters through the exercise of their voting rights, participate in the operation and management of the company, and obtain profits from the company. Shareholders' meeting is an important institution for shareholders to exercise their right to participate in corporate governance. The shareholders' decision on the company's business matters is the implementation of the capital majority principle, and the final decision of the shareholders' shareholding ratio and mutual relationship. The higher the proportion of shareholder shares, the greater the right to speak; A large number of shareholders acting in concert have a great impact on the resolution of the shareholders' meeting. Therefore, the operation of the shareholders' meeting of the corporate authority and the decision on the management of the company are the external embodiment of the corporate ownership structure. Stable and controllable ownership structure can form efficient and consistent business decisions; The likely result of a volatile ownership structure is inefficiency, operational variability, and ultimately fragmentation of entrepreneurial teams and project failure. Only stable and reasonable equity structure can build tall buildings, such as Alibaba, Jingdong, millet and other companies. Corporate ownership structure is the basis of corporate governance, which determines the operation efficiency and decision-making direction of the shareholders' meeting, determines the future of the enterprise, and is the key to the success or failure of the enterprise.

Real Kung Fu equity battle

True Kung Fu is the representative brand of Chinese fast food chain enterprises. Its predecessor is Pan Yuhai (CAI standard's brother-in-law) in 1990 in Dongguan Chang 'an Town 107 National Road opened a 168 dessert shop, the main steamed rice, steamed soup and desserts. In 1994, CAI and his spouse Pan Minfeng (Pan Yuhai's sister) invested 40,000 yuan to join the business, and 168 Dessert Shop was renamed 168 Fast Food restaurant. At this time, the shareholding structure is: Pan Yuhai holds 50%, CAI Jibao holds 25% and Pan Minfeng holds 25%. In the early stage of operation, Pan Yuhai served as the legal representative, executive director and general manager, responsible for the overall management of the company and mastering the corporate leadership. CAI standard is mainly responsible for store opening; Pan Minfeng is in charge of the cashier.

In 1997, real Kung Fu through the "computer program control steam equipment" to overcome the Chinese fast food "standardization" problem, began to open stores across the country, enterprise development into the fast lane. In 2004, it officially changed its name to "Real Kung Fu" and vowed to build it into "China's McDonald's". In September 2006, CAI and Pan Minfeng divorced. Mr Pan's 25 per cent stake was transferred to Mr CAI. At this time, the shareholding structure changed to: Pan Yuhai 50%, CAI standard 50%. At this stage, CAI Standard, who is responsible for the expansion of stores, plays an increasing role in the enterprise, and the dominance of enterprise development is transferred from Pan Yuhai to CAI Standard.

In July 2007, Zhen Kung Fu Catering Management Co., Ltd. was newly established, and CAI reached the target as the chairman and legal representative of the company. In October 2007, Today's Capital and Zhongshan linkage two private equity investment funds invested in real Kung Fu, after investment valuation of 5 billion yuan, each investment of 150 million yuan, each accounting for 3% of the equity. At this time, the shareholding structure is: Pan Yuhai 47% (of which 5.26% is held by double seed companies), CAI Standard 47% (of which 5.26% is held by double seed companies), Today's capital 3% and Zhongshan Linkage 3%. After the investors entered, the company was urged to quickly do large-scale, aiming to go public in 2010. At this time, CAI standard and Pan Yuhai business ideas appeared differences. CAI standard pursues the rapid development of enterprises, while Pan Yuhai attaches importance to the steady operation of enterprises. Compared with Pan Yuhai, who has a more stable management style, CAI's business strategy is more in line with the interests of investors. Therefore, whether in the shareholders' meeting or the board of directors, private equity investment funds are more supportive of CAI Standard, and urge the establishment of CAI Standard's core position. At this stage, CAI standard fully mastered the dominance of the enterprise, and Pan Yuhai was marginalized.

At the same time, CAI standard in order to fully control the management of the company, began to "family" reform. Many professional managers were recruited from KFC, McDonald's and other restaurant chain enterprises, and many middle and senior executives who were closely related to Pan Yuhai were dismissed from Real Kung Fu, and the shareholder conflict was detonated. In June 2009, Pan Yuhai issued an "Audit Notice" to "True Kung Fu", requiring a designated accounting firm to audit the accounts of "True Kung Fu". After the rejection, Pan Yuhai sued the court in July 2009, claiming the shareholders' right to know. In February 2010, Tianhe Court ruled in favor of Mr. Pan's request for an audit. "True Kung Fu" company refused to accept, appeal to the Guangzhou Intermediate People's Court. In August 2010, the Guangzhou Intermediate People's Court upheld the original judgment of the right to know lawsuit and began to conduct a judicial audit of Zhenkung. At this time, the company's operation was at a stalemate.

In September 2010, in order to break the deadlock of the company, under the efforts of the investors, the investors, CAI Standard and Pan Yuhai reached an agreement, and the investors gradually transferred the shares of Pan Yuhai, thereby reducing the proportion of Pan Yuhai's equity, and finally making CAI Standard become the core shareholder. Although reached an agreement, but at this time Pan Yuhai is not willing to quit the company. On November 4, 2010, on the day when CAI reached the payment of the equity transfer payment, Pan Yuhai and Dou Xiaolei reported CAI to the public security Department on suspicion of economic crimes in the name of the funds. In March 2011, the public security department filed an investigation on the suspected economic crimes of CAI Ziguan and others from Zhenkung Catering Management Co., LTD., and CAI Ziguan was taken compulsory measures. In June 2014, CAI was sentenced to 14 years in prison for embezzlement and misappropriation of funds. During this period, the two sides also engaged in a number of lawsuits. At this stage, the real kung fu management dominance returned to Pan Yuhai. As a representative brand of early Chinese catering, the unreasonable equity institutions of real Kung Fu and the struggle for corporate dominance of the two founders did not give in to each other made the development of the enterprise in turmoil, profits plummeted, the opportunity to miss the listing, and the company's valuation shrank. On the high probability, the real kung Fu two founders CAI standard and Pan Yuhai equity battle will continue to fight. Through the real Kung fu case, we see the importance of the ownership structure to the development of enterprises. Every entrepreneur should examine their own equity structure, establish a relatively stable and reasonable four beams and eight pillars, so that the company can go more stable and farther.

The founders should own no less than 51 per cent of the company

Corporate ownership structure is not only a major issue concerned by the operators of limited liability companies, but also a major issue concerned by investors when investing in the target companies. The unreasonable ownership structure will lead to the uncertain management direction and low decision-making efficiency of the company to a large extent. As far as the shareholding structure of a limited liability company is concerned, the operator must pay attention to the following four shareholding ratios:

(1) Holding more than 67%. Shareholders holding more than two-thirds of the shares have absolute control of the shareholders' meeting. Shareholders holding more than 2/3 of the shares may form relevant resolutions according to their own intentions on all business matters of the company, including but not limited to major matters such as amending the articles of association, increasing or reducing the registered capital, merging, splitting, dissolving or changing the form of the company, so as to determine the direction of development of the company. This means that shareholders with more than 67% of the company can not only veto all proposals of other shareholders at the shareholders' meeting, but also pass all proposals put forward by themselves through the exercise of shareholder voting rights, which can not only form relevant resolutions efficiently, but also ensure that the company's operation is promoted in a consistent direction. When the company founder shareholding ratio reaches more than 67%, it means that the company's management direction is clear and predictable. At the same time, when the founder's shareholding ratio reaches more than 67%, it also leaves room for operation for later equity financing, equity incentive and capital operation, which is an optimal equity structure.

(2) Holding more than 51%. Shareholders holding more than 50% have relative control of the shareholders' meeting. In corporate governance, the shareholders' meeting of the company implements the principle of capital majority decision, and the general matters can form effective resolutions if they are passed by shareholders representing more than half of the voting rights. Except for general matters other than amending the articles of association of the company, increasing or reducing the registered capital, merger, division, dissolution of the company or changing the form of the company, shareholders holding more than 50% of the shares may control the formation of resolutions of the shareholders' meeting by exercising their voting rights. When the company founder shareholding ratio reaches more than 51%, to a certain extent, it can also ensure that the company's business direction is clear and predictable. In the case of early-stage companies, the ideal ownership of the founder is not less than 51%. Considering the later equity financing, employee equity incentive, capital operation and other matters, if the founder's shareholding ratio is less than 51% in the early stage of the project, it will pose many challenges to the operation or management of the company in the later stage.

(3) Holding more than 34%. Shareholders holding more than 1/3 of the company have a veto on major business matters. China's company law stipulates that major resolutions to amend the articles of association, increase or decrease the registered capital, merger, division, dissolution or change the form of the company must be passed by more than 2/3 of the voting rights. If the shareholders holding more than 1/3 of the equity do not agree, the shareholders' meeting will not be able to form an effective resolution on the above major matters. Therefore, shareholders holding 34% equity means that they can control the adoption of the company's resolutions on the above major matters. Although the 34% shareholding ratio has certain legal significance, in terms of the operation of the company in the start-up stage, it is not recommended that the founder's shareholding ratio is less than 51%, otherwise the company's decision-making efficiency and the stability of the business direction will lose the institutional guarantee.

(4) Holding more than 11%. Shareholders holding more than 10% have the right to convene and preside over shareholders' meetings on their own. According to the Company Law of China, where a limited liability company has a board of directors, the shareholders' meeting shall be convened by the board of directors and presided over by the chairman; Where a limited liability company does not have a board of directors, the shareholders' meeting shall be convened and presided over by the executive director. If the board of directors or an executive director is unable or fails to perform his duties in convening a shareholders' meeting, the board of supervisors or the supervisor of a company without a board of supervisors shall convene and preside over the meeting; If the board of supervisors or the supervisor does not convene and preside over the meeting, the shareholders representing more than one-tenth of the voting rights may convene and preside over the meeting on their own. Therefore, when the operation of the company's shareholders' meeting is in a deadlock state, shareholders holding more than 11% can convene and preside over the shareholders' meeting on their own under certain conditions. Therefore, in the law, shareholders hold more than 11%, also has a certain legal significance.