Since May 27, 2016, the State Administration for Industry and Commerce and the State Administration of Taxation issued the "Notice on Issues related to the work of cleaning up Enterprises that have been suspended for a long time" (hereinafter referred to as the "Notice"), decided to clean up enterprises that have been suspended for a long time (" zombie enterprises ") nationwide, and through the cleaning up work, wake up a number of enterprises, regulate a number of enterprises, revoke a number of enterprises, and guide enterprises to operate in good faith. Purify the market environment. After this, a large number of companies began to actively or passively enter the dissolution and liquidation procedures. The purpose of this article is to apply in accordance with the Company Law and the Supreme People's Court

First, the company is revoked business license, the company legal personality does not exist?

Since the issuance of the notice, local industrial and commercial departments have revoked the business licenses of companies that have not carried out operations for a long time, cannot be contacted at their registered residence or business premises after on-site inspection, and have failed to file tax returns for two consecutive years in accordance with Article 211 of the Company Law. After this round of adjustment, many companies that have been revoked think that since their business licenses have been revoked, they will naturally lose their legal personality, so the company's existing debts such as payoffs will no longer have to perform, is that true?

According to Article 180 of the Company Law, the company is dissolved for the following reasons:

(1) the term of operation stipulated in the articles of association expires or other causes for dissolution stipulated in the articles of association occur;

(2) dissolution by resolution of the shareholders' meeting or the shareholders' general meeting;

(3) The company needs to be dissolved due to merger or division;

(4) The business license is revoked, the business is ordered to close down or the business is revoked according to law;

(5) The people's court shall dissolve it in accordance with the provisions of Article 182 of this Law.

It can be seen that the company is revoked business license belongs to the legal situation of company dissolution. The dissolution of a company refers to the legal act of a company that has been established, because of the occurrence of the company's articles of association or legal reasons, stops the company's external business activities, and starts the liquidation of the company, and deals with the unfinished affairs, so that the company's legal personality is eliminated. The legal personality of the company can be destroyed only after the liquidation procedure, that is, the liquidation of creditor's rights and debts, the disposal of residual property, and the cancellation of registration.

The dissolution of the company only reduces the scope of the civil rights capacity of the company. Although the company is in a state of existence after entering the liquidation procedure, it shall not carry out business activities unrelated to the liquidation. Therefore, the company's revocation of its business license does not necessarily mean that it has lost the qualification as a legal person, but should, in accordance with the Company Law and Article 183 of the Company Law, set up a liquidation group within 15 days from the date of the occurrence of the cause of dissolution, perform the liquidation procedure according to law, and complete the final deregistration of the enterprise in the industrial and commercial department, at which time the qualification as a legal person will be counted as disappearing. The original debts of the company shall be liquidated and paid by the liquidation team.

Case: On December 18, 2001, Chongqing Municipal Bureau of Industry and Commerce decided to revoke the business license of Taihua Company on the grounds that Taihua Company failed to conduct annual inspection according to law. However, Taihua Company has not been cancelled, nor has it established a liquidation organization. Later, due to disputes with Chenguang Group, Chenguang Department Store, and Chenguang Hotel, Taihua Company filed a lawsuit with the Chongqing High Court, requesting an order that: Chenguang Group, Chenguang Department Store, and Chenguang Hotel should immediately move from the Chenguang Building owned by Taihua Company and return it to Taihua Company. Chongqing High Court ruled that Taihua company does not have the qualification of the plaintiff's litigation subject, and rejected Taihua company's lawsuit. Taihua Company refused to accept the judgment and appealed to the Supreme People's Court. The Supreme Court held that the first-instance ruling held that Taihua Company did not have the qualification of the plaintiff as the subject of litigation, and the application of the law was wrong, and ordered the retrial.

Case source: Supreme People's Court, "Chongqing Taihua Real Estate Development Co., LTD., Chongqing Chenguang Industrial Development (Group) Co., LTD., Chongqing Chenguang Department Store Co., LTD., Chongqing Chenguang Hotel Co., LTD., the Second Trial of House Relocation Dispute" [(2005) Min Yizhong No. 57], Bulletin of the Supreme People's Court of the People's Republic of China No. 10 (total No. 120), 2006.

In the main text of the judgment, the court held that Taihua Company was registered as an enterprise legal person in accordance with the law on October 22, 1992, and the chairman of Taihua Company at that time was Bao Mou, the legal representative. Later Taihua Company changed its chairman to Wu Mou on June 14, 1994. On December 18, 2001, the Municipal Bureau of Industry and Commerce revoked the business license of Taihua Company as a legal person on the grounds that Taihua Company did not carry out annual inspection according to law, but did not cancel Taihua Company. As an independent enterprise legal person, Taihua Company's legal person status should be based on whether the administrative authority for industry and commerce has cancelled its legal person status as a standard. Although the term of Taihua Company's joint venture has expired according to the provisions of the Joint Venture Contract, it cannot be denied that it still has the legal personality as long as it has not been cancelled. Revoking the business license of an enterprise legal person is a kind of administrative punishment made by the administrative authorities for industry and commerce on the basis of the state administrative regulations for industry and commerce. After the business license of an enterprise as legal person is revoked, it shall be liquidated according to law. After the liquidation procedure is completed and the industrial and commercial cancellation registration is handled, the enterprise legal personnel shall be eliminated. If the business license of an enterprise as legal person is revoked until its registration is cancelled, the enterprise as legal person shall still be regarded as existing and may carry out litigation activities in its own name. Therefore, after the Taihua company is revoked its business license, it still has the right to Sue and the ability to act, and has the right to file civil lawsuits in its own name. The fact that Taihua Company has not established a liquidation organization should not be the reason for restricting its participation in civil litigation. The ruling of the first instance held that Taihua Company did not have the qualification of the plaintiff's litigation subject, and the application of law was wrong.

Can a shareholder apply to the court for a forced dissolution of a company just because it loses money?

In case of serious difficulties in the operation and management of the company as provided for in Article 182 of the Company Law, the continued existence of the company 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.

Article 1 Where a shareholder holding more than 10 percent of the voting rights of all shareholders of a company, individually or collectively, files a lawsuit for dissolution of the company on one of the following grounds and complies with the provisions of Article 183 of the Company Law, the people's court shall accept it

Reasons for requesting dissolution:

• When the company has serious difficulties in operation and management,

• Continued existence would cause significant loss of interest to shareholders,

• What cannot be resolved by other means,

• Shareholders holding more than 10% of the voting rights of all shareholders of the company may request the people's Court to dissolve the company.

The essence of this article is a judicial intervention system dominated by public power, its purpose is to force the dissolution of the company through the intervention of judicial power, in order to protect the interests of the minority shareholders and creditors who are oppressed in the company. But is it not true that minority shareholders can request the people's Court to dissolve the company according to the above article as long as they find that the company is losing money?

As a special type of case in the company litigation, the people's court accepts the case of the shareholder's request for dissolution of the company, in addition to examining whether it conforms to the provisions of Article 108 of judicial interpretation, it also needs to consider from three aspects: the cause of the shareholder's lawsuit for dissolution of the company, the qualification of the shareholder, and whether it meets the pre-procedure.

First of all, shareholders mentioned the conditions for the dissolution of the company because "the company has serious difficulties in operation and management, and its continued existence will cause significant losses to shareholders." The serious difficulties in the operation and management of a company are the key elements for shareholders to file a lawsuit for dissolution of a company. But how to define the company management has serious difficulties? According to the Judicial Interpretation of Company Law (II), the circumstances listed are as follows:

1. The company cannot hold the shareholders' (general) meeting for more than two consecutive years, resulting in serious difficulties in the company's operation and management;

2. Shareholders have difficulty in voting, unable to make an effective vote for more than two consecutive years, and the company's operation and management have serious difficulties;

3. Long-term conflicts between directors, which cannot be resolved by the shareholders' (large) meeting, cause serious difficulties in the company's operation and management;

4. Other circumstances.

The above circumstances are the serious difficulties in the operation of the company as prescribed by law, and the main focus is the serious difficulties in operation caused by the deadlock of shareholders or directors, that is, the company is in a de facto state of paralysis, which is reflected in the failure of the corporate governance structure and cannot carry out normal business activities. If it is allowed to continue, substantial losses will be caused to the company. In this case, the shareholders are entitled to file a lawsuit to dissolve the company and protect their legitimate rights and interests. If shareholders apply for the dissolution of the company solely on the grounds of serious losses, the court will not accept it. Secondly, it cannot be solved by other means. Under normal circumstances, the court in the case of a dissolution of a company is careful to use its judicial power to dissolve the company unless other remedies have been exhausted. But what are the other ways? According to Article 5 of the Judicial Interpretation of the Company Law (II), we can find that it is mainly mediation. Generally, the company agrees to repurchase shareholders' shares or reduce capital through mediation channels such as multiple communications between the plaintiff and the defendant before the lawsuit, mediation hosted by relevant departments or participation in mediation, and mediation organized by the court. If this approach does not achieve the purpose, it is a "cannot be solved by other means" situation. Finally, the shareholders holding more than 10 percent of the voting rights of all shareholders of the company may request the people's court to dissolve the company.

According to Article 1 (1) of the Second Judicial Interpretation of the Company Law, the "shareholders holding more than 10 percent of the voting rights of all shareholders of the company" mentioned in Article 182 of the Company Law refers to "shareholders holding more than 10 percent of the voting rights of all shareholders of the company individually or collectively". Therefore, the subject of filing a lawsuit for dissolution of the company shall meet the statutory conditions:

(1) The plaintiff bringing the suit for dissolution of the company shall have the status of the shareholder of the company at the time of the suit;

(2) The proportion of voting rights to be enjoyed individually or collectively according to the amount of capital contributed to the Company or the shares held by the Company shall reach or exceed 10% of the total voting rights of the Company.

Why is there a limit on the percentage of voting rights of shareholders who file a dissolution suit? The main purpose is to prevent the shareholders from abusing the litigation power, thus causing difficulties to the normal business activities of the company.

Speaking of which, does a hidden shareholder holding 10% of the shares have the right to request the dissolution of the company?

In my opinion, the shareholders registered in the articles of association and the register of shareholders are the proper subjects for the dissolution of the company, and the hidden shareholders cannot bring the dissolution of the company. According to Article 182 of the Company Law and Article 1 of the Judicial Interpretation of the Company Law (II) of the Supreme People's Court, the subject who has the right to bring a dissolution lawsuit is the shareholder of the company. Although China's "Company Law" does not have a clear definition of shareholders, according to article 25 of the law, "the articles of association of a limited liability company shall contain the following matters... (4) the name of the shareholder..." Article 33 "A limited liability company shall maintain a register of shareholders, which shall record the following matters: (1) the name and domicile of the shareholders... The shareholders recorded in the register of shareholders may claim to exercise the rights of shareholders according to the register of shareholders "provision, the definition of shareholders in the provisions of the Company Law should not be interpreted broadly, referring to the shareholders registered in the register of shareholders. In essence, there is only an agreement within the company. For the event that the application for dissolution has involved the liquidation of the company and other events that have an important impact on the external right holder, the scope should not be arbitrarily expanded.

Case: In 2009, Li Mou was granted 50% of Han Mou's equity to become a shareholder of a technology company. Later, due to major differences between the two sides and private lending disputes, the company has been in a state of suspension since 2014, and has suffered serious losses, and the company has never held a shareholders' meeting. Lee filed for dissolution of the company. The court ruled in favor of Li's claim.

Case source: Guangdong High Court (2015) No. 1040 "Lihaiquan and Guangdong Qingyuan Liyuan Environmental Protection Technology Co., LTD. Dispute Case", see "Review of Conditions in the Lawsuit of Shareholders Requesting Dissolution of the Company" (Li Xinting), People's Justice • Case.

In the main text of the judgment, the court held that: (1) Article 182 of the Company Law provides that: "In case of serious difficulties in the operation and management of the company, the continued existence of the company 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 this provision, the judicial decision to dissolve the company must meet four conditions: first, the shareholder requesting the dissolution of the company must hold more than 10% of the voting rights of all shareholders of the company; Second, the company has serious difficulties in operation and management; Third, the continued existence of the company will cause significant losses to the interests of shareholders; Fourth, it cannot be solved through other means. ② The failure of the company's power mechanism and the company's deadlock are important manifestations of the serious difficulties in the company's operation and management. According to the articles of association of the technology company, the shareholders' meeting is divided into regular meetings and temporary meetings, and the regular meeting is held once a year. After Li transferred Han's shares, the technology company has so far neither held a regular shareholders' meeting nor a temporary shareholders' meeting, indicating that the shareholders' meeting mechanism of the technology company is dysfunctional. Human compatibility is the foundation of the establishment and survival of limited companies. The power mechanism of science and technology companies fails, which shows that the human compatibility of the company has a major crisis. In addition, Li Mou and science and technology companies, Han mou and other private lending disputes, can not be privately negotiated to solve, so the lawsuit to the court, further indicating that Li Mou and Han mou lack of mutual trust, the basis of human cooperation between the shareholders of science and technology companies has been lost, should be identified as a serious difficulty in the management of science and technology companies. (3) In view of the major differences between Li and Han, and the failure of the shareholders' meeting mechanism, such as the continued existence of the technology company, the interests of the company will be damaged, and the interests of shareholders will be damaged, contrary to the original intention of shareholders to establish and maintain the company. In fact, since Li became a shareholder of the technology company, the company has only carried out intermittent and small production, and since the beginning of 2014, the company has no employees and is in a state of production. Clearly, if technology companies continue to exist, shareholders will suffer a significant loss of interest. (4) Li and Han failed to reach a settlement during the two trials, and the court conducted mediation for many times, and the two parties failed to reach an agreement on maintaining the company's existence through equity transfer and other ways. It should be determined that the technology company has met the conditions for dissolution, and the judgment should be made to dissolve the technology company.

(To be continued)