Small shareholders often complain to the author: "I have invested in a company, only 10% of the equity, the company is fully responsible for the operation and management of the major shareholders, see the company has been operating for four or five years, but every year the major shareholders say losses, never distribute profits, and do not hold shareholders' meetings, how is the company's operation in the end, I do not know, how to do?" This kind of experience is not common for many small shareholders, in the face of major shareholders to control the company, as a small shareholder can only be "slaughtered"? This article will give the majority of minority shareholders of limited liability companies advice, take up legal weapons, and bravely safeguard their own shareholder rights.

      1. The Company Law stipulates relevant measures for the protection of minority shareholders' rights and interests

      The existing Company Law and judicial interpretation have clearly stipulated in many provisions the relief rights of minority shareholders who are "bullied" by major shareholders, mainly including the following provisions:

     1. Protection of minority shareholders' right to know

Article 33 of the Company Law clearly stipulates: "Shareholders of a limited liability company have the right to consult and copy the articles of association, minutes of shareholders' meetings, resolutions of the board of directors, resolutions of the board of supervisors, and financial and accounting reports." Shareholders may request access to the accounting books of the company. Where a shareholder requests to inspect the accounting books of the company, he shall make a written request to the company, stating the purpose. Where the company has reasonable grounds to believe that a shareholder's inspection of the accounting books has an improper purpose and may harm the legitimate interests of the company, it may refuse to provide such inspection, and shall give a written reply to the shareholder and explain the reasons within 15 days from the date the shareholder makes a written request. If the company refuses to provide such inspection, the shareholders may request the people's court to require the company to provide such inspection."

The shareholders' right to know is the most basic right granted to shareholders by the Company Law. No matter how many shares the shareholders hold, as long as they are still shareholders of the company at the time of litigation, as long as the company cannot provide reasonable grounds to show that the shareholders have improper purposes for consulting, they must provide the shareholders with the information agreed in the articles of association and the shareholders need to consult and copy. Moreover, according to the provisions of the second paragraph of Article 10 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), where a shareholder consulates the company documents and materials in accordance with the effective judgment of the People's Court, in the presence of the shareholder, It may be assisted by accountants, lawyers and other practitioners of intermediary institutions who have confidentiality obligations according to law or according to the code of practice. This provides a legal basis for minority shareholders to exercise their right to know.

     2. Protection of minority shareholders' right to speak

First of all, in order to effectively protect the rights and interests of minority shareholders, the Company Law grants minority shareholders the right to convene and preside over extraordinary meetings. Paragraph 3 of Article 40 of the Company Law stipulates that if the board of directors or the executive director is unable to perform or fails to perform the duty of 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. However, one-tenth of the shareholders must go through the pre-procedure to exercise the convening right.

Secondly, in terms of the exercise of voting rights, the Company Law stipulates the "avoidance system" of shareholders, that is, if a certain shareholder or director has a certain interest in the matters of the shareholders' meeting and the resolutions of the board of directors, its voting rights are excluded. Article 16 Where a company invests in other enterprises or provides guarantees for others, a decision shall be made by the board of directors or the shareholders' meeting or the general meeting of shareholders in accordance with the articles of association of the company; Where the articles of association of the company stipulate a limit on the total amount of investment or guarantee or the amount of a single investment or guarantee, the prescribed limit shall not be exceeded. Where a company provides guarantees for its shareholders or actual controllers, a resolution must be made by the shareholders' meeting or the shareholders' assembly. The shareholder mentioned in the preceding paragraph or the shareholder under the control of the actual controller mentioned in the preceding paragraph shall not vote on the matters mentioned in the preceding paragraph. The vote shall be passed by more than half of the votes held by the other shareholders present at the meeting. The recusal vote of the associated shareholders of a limited liability company is stipulated here, but obviously the Company Law has relatively narrow provisions on the content of recusal vote of a limited liability company, which will be described in detail in the following paper.

      3. Minority shareholders have the right to revoke or confirm the invalidity of resolutions

      Article 22 (1) and (2) of the Company Law provide that: "The contents of the resolutions of the shareholders' meeting or the shareholders' meeting or the board of directors of the company are invalid if they violate laws or administrative regulations." If the convening procedure or voting method of the shareholders' meeting or the shareholders' general meeting or the board of directors violates laws, administrative regulations or the articles of association of the company, or the content of the resolution violates the articles of association of the company, the shareholders may, within 60 days from the date of making the resolution, request the people's court to cancel it. When a minority shareholder finds that a major shareholder takes advantage of its controlling position to make a resolution of the shareholders' meeting that is detrimental to its own interests or the interests of the company, it may, in accordance with this article, file a lawsuit to the court for confirmation of invalidation or cancellation within 60 days after the resolution is made. Article 1 to Article 6 of the Provisions of the Supreme People's Court on Several Issues relating to the application of the Company Law of the People's Republic of China (IV) also provides for the resolution not to be established and the resolution to be revoked. Therefore, minority shareholders should pay more attention to the content and formation procedures of the resolution of the shareholders' meeting in order to confirm the invalidity, invalidity or cancellation of the resolution.

     4. Minority shareholders object to withdrawal of equity

      Article 74 of the Company Law stipulates that "under any of the following circumstances, a shareholder who votes against the resolution of the shareholders' meeting may request the company to purchase its equity at a reasonable price: (1) The company has not distributed profits to shareholders for five consecutive years, but the company has made profits for five consecutive years, and the conditions for profit distribution as provided for in this Law are met; (2) Merger, division or transfer of major assets of the company; (3) When the business term stipulated in the articles of association expires or any other cause for dissolution stipulated in the articles of association occurs, the shareholders' meeting passes a resolution to amend the articles of association so that the company can survive. If a shareholder and the company fail to reach an equity purchase agreement within 60 days from the date of the adoption of the resolution at the shareholders' meeting, the shareholder may bring a lawsuit in the people's court within 90 days from the date of the adoption of the resolution at the shareholders' meeting. After the occurrence of the above circumstances, the shareholders may request the company to exercise the right of share repurchase.

     5. Minority shareholders apply for the right to dissolve the company

Article 182 of the Company Law stipulates: "If a company suffers from serious difficulties in its operation and management, and its continued existence will cause significant losses to the interests of the shareholders, and it cannot be resolved through other means, the shareholders holding more than 10 percent of the voting rights of all the shareholders of the company may request the people's court to dissolve the company." According to 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 (II), the four circumstances under which serious difficulties in the operation and management of the company are identified are: (1) The company cannot hold a shareholders' meeting or a shareholders' meeting for more than two years, and the company has serious difficulties in operation and management; (2) The shareholders fail to reach the proportion prescribed by law or the articles of association when voting, fail to make effective resolutions of the shareholders' meeting or the shareholders' meeting for more than two years, and the company has serious difficulties in operation and management; (3) There is a long-term conflict between the directors of the company, which cannot be resolved through the shareholders' meeting or the shareholders' meeting, resulting in serious difficulties in the operation and management of the company; (4) Other serious difficulties occur in the operation and management, and the continued existence of the company will cause significant losses to the interests of shareholders.

It can be seen that if a shareholder holding more than 10% of the voting rights of all shareholders of the company can prove the existence of the above four circumstances, he may bring a lawsuit to the people's court, and the court shall make a judgment to force the company to dissolve.

However, before the shareholders exercise the right to dissolve the company, they must perform the pre-procedure, which generally requires the company to buy back the shares or the major shareholders to purchase the shares, and only after the above procedures are performed can they exercise the right to dissolve.

      6. Minority shareholder representative litigation

Article 151 of the Company Law provides that: "Where a director or senior manager falls under the circumstances prescribed in Article 149 of this Law, a shareholder of a limited liability company or a shareholder of a joint stock limited company who holds more than one percent of the company's shares individually or in aggregate for more than 180 consecutive days may request in writing the Board of Supervisors or the supervisor of a limited liability company without a board of supervisors to bring a lawsuit before a people's court; If the supervisor falls under any of the circumstances provided for in Article 149 of this Law, the aforementioned shareholder may request in writing the board of directors or the executive director of a limited liability company without a board of directors to bring a suit before the people's court. Where the board of supervisors, the supervisor of a limited liability company without a board of supervisors, or the board of directors or the executive director of a limited liability company refuses to bring a suit after receiving the written request of the shareholder as provided for in the preceding paragraph, or fails to bring a suit within 30 days from the date of receipt of the request, or if the circumstances are urgent and failure to bring a suit immediately will cause irreparable harm to the interests of the company, The shareholders mentioned in the preceding paragraph shall have the right to bring a suit directly in the people's court in their own name for the benefit of the company. Where any other person infringes upon the lawful rights and interests of the company and causes losses to the company, the shareholders mentioned in the first paragraph of this Article may bring a suit in a people's court in accordance with the provisions of the preceding two paragraphs."

Article 149 of the Company Law provides that "Directors, supervisors and senior managers who violate laws, administrative regulations or provisions of the articles of association while performing their duties of the company and thus cause losses to the company shall be liable for compensation."

This is the provision of shareholder representative litigation, when "directors, supervisors, senior managers perform company duties" in violation of the provisions to cause damage to the company shareholders' relief rights, one is through the board of supervisors or supervisors to file a lawsuit to protect their rights; Second, the board of directors or directors can file lawsuits to protect their rights; If both of the first two refuse to exercise their rights, shareholders may exercise their rights on behalf of the company in accordance with the third way, except where the situation is urgent. There is no equity restriction for the shareholders of a limited company to bring a representative action, and they can be exercised as long as they are shareholders.

      7. Minority shareholders' right to direct litigation

Article 152 of the Company Law provides that "If a director or senior manager violates any law, administrative regulation or the articles of association of the company, thereby harming the interests of a shareholder, the shareholder may bring a suit in a people's court." Direct shareholder action is a lawsuit filed by shareholders against others who infringe their interests based on the status of stock owners for their own interests. Direct litigation system supports shareholders to directly investigate the responsibility of corporate managers such as directors and senior managers who infringe on their legitimate rights and interests, which is of great significance to the protection of shareholders' interests.

The above are the relief rights granted by the Company Law and its judicial interpretation to minority shareholders at the legal level when their interests are infringed. However, in view of the fact that the law itself will not interfere excessively in the internal operation process of the company, in order to protect the interests of minority shareholders in a more comprehensive and feasible way, it is necessary to prevent risks in advance. Therefore, minority shareholders should make full use of the company's articles of association. When designing the internal "constitution" - articles of association, provisions to protect their rights and interests should be set up in advance. It is also necessary to further refine these statutory rights to be implementable, so that "this invisible hand" can effectively avoid or control possible risks in the entire operation process of the company. The following author will put forward relevant design ideas from the perspective of charter autonomy.

      2. Charter design

      1. Equity structure setting

Before the shareholders discuss the establishment of the company, the shareholding ratio of each shareholder should be set according to the principle that is conducive to the efficient development of the company and guarantees the effective balance of rights. As a minority shareholder, because the amount of investment is small, the corresponding proportion of equity is small, but it is best to ensure that it is more than 1/3, because 1/3 of the 3 equity proportion often has a veto vote in the consideration of major matters. If it is really impossible to reach 1/3, the minimum limit can not be less than 10%, because 10% of the equity ratio is the premise for shareholders to enjoy the company's dissolution right.

2. Personnel setting

Because minority shareholders do not participate in the actual operation, it is generally recommended to appoint deputy financial director, because the financial operation is the core indicator to measure the company's operating status, and only by effectively mastering financial information can the realization of equity profits be guaranteed. In addition, when the rights of shareholders are infringed, financial evidence is the most direct evidence to prove.

At the same time, it is also suggested that minority shareholders can appoint supervisors, because the supervisors, as a supervisory body with the same name as the board of directors, enjoy the right of supervision. Through the supervisors, minority shareholders can supervise the finance, the behavior of directors and senior executives during the operation of the company, prevent risks in the matter, and also file lawsuits or collect relevant evidence after the damage occurs.

3. Setting of voting rights

(1) A limited liability company may vote separately on major and general matters in its voting rights, and may agree that the voting rights are not consistent with the proportion of shares, so as to ensure the effective voting of minority shareholders on major matters. (2) In the articles of association concerning the election of directors and supervisors, it can also be agreed to adopt a cumulative voting system, which can make it impossible for major shareholders to manipulate the election of directors by taking advantage of their voting rights, prevent the repeated use of major shareholders' voting rights, and give minority shareholders stronger voting rights. (3) It is stipulated in the articles of association to adopt a proxy voting system to unite the voting rights of minority shareholders in the case that all shareholders are relatively dispersed, so as to ensure that major shareholders cannot abuse their voting rights. (4) In certain matters, a system of exclusion from voting rights may be expressly established in the Constitution. If the matters voted at the shareholders' meeting have a special interest in a shareholder, which may cause damage to the interests of the company and other shareholders, the shareholder or its agent shall not exercise the voting right, nor shall he exercise the voting right on behalf of other shareholders. At the same time, the act of concealing the facts of affiliated transactions against other shareholders can be agreed, such as "before the shareholders' meeting votes on the company's external guarantees, affiliated transactions, major investments and other matters, the affiliated shareholders must truthfully state the affiliated transactions to the shareholders' meeting." If an associated shareholder conceals an associated relationship and misleads a decision made by an unaffiliated shareholder, and subsequently damages the rights and interests of an unaffiliated shareholder, the associated shareholder must compensate." It can also be further agreed on the basis of Article 17 of the delisting agreement in accordance with 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 (III) that "when a shareholder fails to perform his contribution obligation and fails to perform it after being urged by other shareholders, the shareholders and their representatives shall not have the right to vote when the shareholders' meeting decides to delist the shareholder." This will further refine the legal rights to enhance operability.

4. Further refine the setting of the right to know

In view of the fact that the Company Law has given shareholders the right to audit accounts, it is not clear whether they can inspect and copy the original financial documents or some major transaction contracts and other important materials related to the company, so it is proposed to further list in detail the relevant specific materials that shareholders have the right to inspect and copy in the articles of association. At the same time, the Provisions of the Supreme People's Court on Several Issues relating to the Application of the Company Law of the People's Republic of China (IV) have already authorized minority shareholders to hire professional accounting firms to assist in auditing accounts, but there are no provisions on the fees of hiring professional accounting firms. Generally, whoever hires a professional accounting firm pays the fees, which puts greater pressure on minority shareholders, so it can be stipulated in the articles of association. The major shareholders are responsible for financial management, while the minority shareholders are responsible for financial audit. In this way, the audit behavior of the accounting firm hired by the minority shareholders will be changed from the individual behavior of the shareholders to the behavior of the company, and the cost will be borne by the company, which can more effectively protect the minority shareholders' right to know.

5. Further refine the setting of minority shareholders' proposal rights

(1) There is no agreement on the right of proposal of shareholders of limited liability companies, and the right of proposal of minority shareholders can be set up in the articles of association with reference to the provisions of the Company Law on the right of proposal of shareholders of joint stock limited companies. (2) The proposal procedure can be further refined in the articles of association. First, shareholders who meet the conditions stipulated in the articles of association shall submit a proposal in writing 10 days before the shareholders' meeting and send it to the board of Directors or the executive Director as required. Secondly, in order to enable shareholders to fully grasp the specific content of the proposal before the meeting, the board of directors is required to send the proposal in writing to shareholders within 2-3 days after receiving the proposal. Finally, if the board of Directors refuses to submit the qualified provisional bill to the shareholders' meeting for consideration, the proposing shareholders may file a lawsuit in the people's court requesting that the resolution of the shareholders' meeting be invalid. Refining the procedure of shareholders' right to propose can effectively prevent the board of directors from arbitrarily refusing to submit the proposal to the shareholders' meeting for consideration.

6. Further refine the setting to protect minority shareholders' investment income rights

Minority shareholders do not participate in the actual operation of the company, and the purpose of investing in the company is undoubtedly to obtain equity profits, but in fact, the major shareholders of many companies control the company and refuse to distribute profits for various reasons all year round, which may be the most troublesome problem for minority shareholders, so it is necessary to further refine the above rights in the articles of association. (1) A mandatory dividend clause may be stipulated in the articles of association, such as the agreement that the company must pay 30% of the net profit to dividends every year. If a shareholder proposes to pay no dividend and use the profits for the expansion and development of the company, then unless all shareholders agree, they must pay a dividend. (2) In the constitution stipulates the withdrawal mechanism of minority shareholders, if the major shareholders do not agree to dividends for two consecutive years, and the minority shareholders insist on dividends, then it is necessary to ask the major shareholders to buy the shares of minority shareholders. At the same time, agree on the acquisition period, such as the minority shareholders within 6 months of the date of the acquisition application, if the major shareholders still do not buy the shares of the minority shareholders within the period, the minority shareholders can apply to the court to dissolve the company. (3) The articles of association shall specify the pricing basis for the company's equity buyback or the major shareholders' acquisition of minority shareholders' equity, and it may be agreed that the major and small shareholders shall jointly select an accounting firm with qualifications and no conflict of interest to conduct asset evaluation, or it may be directly stipulated in the articles of association that the calculation method shall be the actual payment of registered capital plus the corresponding interest. In addition, the ways and methods of hiring accounting firms and the assessment of costs can be further refined to reduce disputes when minority shareholders withdraw.

The above are some solutions to the main puzzles of minority shareholders. The original intention of the Company Law is to maintain the trading order and encourage the autonomy of the company, so the minority shareholders should further refine, improve and implement their rights on the basis of the rights granted by the Company Law, and "have rules to follow" when safeguarding their rights and interests, so as to change the situation of "being slaughtered by others".