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Copyright 2014 by Stanford University
Guiding Cases in PerspectiveTM
指导性案例透视TM
Dr. Mei Gechlik
Founder and Director, China Guiding Cases Project
Derek Qingtao Xie
Associate Managing Editor, China Guiding Cases Project
Guiding Case No. 9: CGCP Annotations
August 2014 (Final Edition)∗
∗
The citation of this piece is: Mei Gechlik and Derek Xie, Guiding Case No. 9: CGCP Annotations, CHINA
GUIDING CASES PROJECT, Guiding Cases in PerspectiveTM, Aug. 2014, available at
http://cgc.law.stanford.edu/guiding-cases/guiding-case-9/. The authors thank Ted Karch for translating the Chinese
version of a preliminary draft into English.
Guiding Cases in PerspectiveTM is a unique serial publication of the China Guiding Cases Project that
identifies the original judgments selected by the Supreme People's Court, examines their transformation into
Guiding Cases, and explores the treatment of the Guiding Cases in subsequent cases.
Final Edition
Copyright 2014 by Stanford University
2
I. The Process of Selecting Guiding Case No. 9
Shanghai Cunliang Trading Co., Ltd. v. JIANG Zhidong, WANG Weiming et al., A
Sale and Purchase Contract Dispute (“Guiding Case No. 9” or “GC9”) is one of the guiding
cases (“GCs”) included in the third batch of GCs released by the Supreme People’s Court
(“SPC”) on September 18, 2012.1 Its original judgments are the (2009) Song Min Er (Shang)
Chu Zi No. 1052 Civil Judgment rendered by the Songjiang District People’s Court of
Shanghai Municipality,2 and the (2010) Hu Yi Zhong Min Si (Shang) Zhong Zi No. 1302
Civil Judgment rendered by the No. 1 Intermediate People’s Court of Shanghai Municipality.3
This case was selected as a GC through the following process (see Chart 1):4
1. The No. 1 Intermediate People’s Court of Shanghai Municipality chose this case as a
potential GC and reported it to the Higher People’s Court of Shanghai Municipality.
2. Following discussion, the Adjudication Committee of the Higher People’s Court of
Shanghai Municipality decided to recommend this case to the Office for the Work on
Case Guidance of the SPC.
3. After research and discussion, the Office for the Work on Case Guidance sent the case
to the Second Civil Division of the SPC for examination and comment. Deeming that
the case applied the law correctly and could provide guidance on the adjudication of
similar cases, the Second Civil Division agreed to release it as a GC. On September
3, 2012, the Adjudication Committee of the SPC discussed and concluded that the
case conformed to Article 2 of the Provisions of the Supreme People’s Court
Concerning Work on Case Guidance and thus agreed to confirm this case as a GC and
release it as such on September 18.
1 《上海存亮贸易有限公司诉蒋志东、王卫明等买卖合同纠纷案》(Shanghai Cunliang Trading Co.,
Ltd. v. JIANG Zhidong, WANG Weiming et al., A Sale and Purchase Contract Dispute), CHINA GUIDING CASES
PROJECT, English Guiding Case (EGC9), Nov. 9, 2012 Edition, available at http://cgc.law.stanford.edu/guiding-
cases/guiding-case-9. 2 The first-instance judgment has not been found and may have been excluded from publication.
3 《蒋某等与上海存亮某公司买卖合同纠纷上诉案》(2010)沪一中民四(商)终字第 1302 号 (A
Certain Jiang et al. v. Shanghai Cunliang A Certain Company, An Appeal Case on A Sale and Purchase
Contract Dispute, (2010) Hu Yi Zhong Min Si (Shang) Zhong Zi No. 1302 Civil Judgment), CHINA GUIDING
CASES PROJECT, Guiding Cases in PerspectiveTM
, Guiding Case No. 9 Original Second-Instance Judgment, Aug.
25, 2014, available at http://cgc.law.stanford.edu/guiding-cases/guiding-case-9/. 4 See 最高人民法院案例指导工作办公室 (The Office for the Work on Case Guidance of the Supreme
People’s Court), 指导案例 9 号《上海存亮贸易有限公司诉蒋志东、王卫明等买卖合同纠纷案》的理解与
参照 (Understanding and Referring to Guiding Case No. 9, Shanghai Cunliang Trading Co., Ltd. v. JIANG
Zhidong, WANG Weiming et al., A Sale and Purchase Contract Dispute), 《人民司法·应用》 (THE PEOPLE’S
JUDICATURE·APPLICATION), Issue No. 3 (2013), available at
http://tjfy.chinacourt.org/public/detail.php?id=19098.
For the process of selecting Guiding Cases, see《最高人民法院关于案例指导工作的规定》
(Provisions of the Supreme People’s Court Concerning Work on Case Guidance), passed by the Adjudication
Committee of the Supreme People’s Court on Nov. 15, 2010, issued on and effective as of Nov. 26, 2010, CHINA
GUIDING CASES PROJECT, English Guiding Cases Rules, June 12, 2015 Edition, available at
http://cgc.law.stanford.edu/guiding-cases-rules/20101126-english/.
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3
Chart 1: The Process of Selecting Guiding Case No. 9
II. Comparison Between Guiding Case No. 9 and Its Original Judgment(s)
1. Basic Facts of the Case
Based on the “Basic Facts of the Case” section of GC9, the following table compares
the similarities and differences between GC95 and the original second-instance judgment:
Guiding Case No. 9 Original Second-Instance
Judgment
1
Plaintiff Shanghai Cunliang Trading Co., Ltd.
(“Cunliang Company”) performed its
contractual obligation of supplying goods that
were worth RMB 7,095,006.6 to defendant
Changzhou Tuoheng Mechanical Equipment
Co., Ltd. (“Tuoheng Company”). Tuoheng
Company had already paid RMB 5,699,788
for the goods, but still owed RMB
1,395,228.6.
Essentially the same.
2 Tuoheng Company did not undergo its annual Essentially the same, but did not
5 《上海存亮贸易有限公司诉蒋志东、王卫明等买卖合同纠纷案》(Shanghai Cunliang Trading Co.,
Ltd. v. JIANG Zhidong, WANG Weiming et al., A Sale and Purchase Contract Dispute), CHINA GUIDING CASES
PROJECT, Guiding Cases in PerspectiveTM
, Guiding Case No. 9 Highlighted Edition, Aug. 25, 2014, available at
http://cgc.law.stanford.edu/guiding-cases/guiding-case-9/.
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4
Guiding Case No. 9 Original Second-Instance
Judgment
inspection, and its business license was
revoked by the industry and commerce
department. FANG Hengfu, JIANG Zhidong,
and WANG Weiming were the shareholders
of Tuoheng Company, owning 40%, 30%,
and 30% of the shares, respectively. These
shareholders’s idleness in performing their
liquidation obligation led to the loss of
Tuoheng Company’s principal assets and
financial books, etc., and made liquidation
impossible. Enforcement against Tuoheng
Company in other cases was suspended
because the company did not have any assets
available for enforcement.
mention the percentage of shares
owned by FANG Hengfu, JIANG
Zhidong, and WANG Weiming. Did
not clearly mention that enforcement
against Tuoheng Company in other
cases was suspended because the
company did not have any assets
available for enforcement.
3
Cunliang Company claimed that FANG
Hengfu, JIANG Zhidong, and WANG
Weiming should bear joint and several
liability for Tuoheng Company’s debts.
Cunliang Company also requested that [the
court] order Tuoheng Company to pay
Cunliang Company RMB 1,395,228.6 for
payment of goods and pay [separate]
damages for breach of contract and order
FANG Hengfu, JIANG Zhidong, and WANG
Weiming to bear joint and several liability for
clearance of Tuoheng Company’s debts.
Essentially the same.
4 Defendants JIANG Zhidong and WANG
Weiming defended their positions, claiming:
(1) The two of them had never participated in
Tuoheng Company’s operation and
management.
NOTE: In “Reasons for the Adjudication”
and “Main Points of the Adjudication”
sections (see below), the phrase “actually
participated in [the company’s] operation and
management” is used. But, here, the word
“actually” is missing. Since the shareholders’
liquidation obligations cannot be waived,
regardless of whether there is actual
participation in the company’s operation and
The two persons’ grounds of appeal
did not include this point. But
during the second-instance
proceeding, they provided evidence
to prove that they had not “actually”
participated in Tuoheng Company’s
“operation and management”
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Guiding Case No. 9 Original Second-Instance
Judgment
management, this omission does not affect
understanding of this case.
(2) Tuoheng Company was actually
controlled by major shareholder FANG
Hengfu, and the two of them had no means to
carry out liquidation [for the company]
No such expressions.
(3) Due to poor operations, Tuoheng
Company already bore a large amount of debt
and was insolvent before its business license
was revoked, and Tuoheng Company’s asset
loss was not caused by JIANG Zhidong’s and
WANG Weiming’s idleness in performing
their liquidation obligations.
Essentially the same.
(4) They had entrusted a lawyer to conduct
the liquidation of Tuoheng Company, but
because Tuoheng Company’s assets had been
looted by creditors on multiple occasions,
liquidation was impossible, and therefore
they could not be considered as having been
idle in performing their liquidation
obligations.
Essentially the same.
Accordingly, JIANG Zhidong and WANG
Weiming requested that the court reject
Cunliang Company’s litigation claims against
them.
Essentially the same.
5
Defendants Tuoheng Company and FANG
Hengfu did not appear in court to participate
in the litigation, nor did they make a reply.
Essentially the same.
Overall, the “Basic Facts of the Case” section of GC9 is largely based on the original
second-instance judgment.
2. Reasons for the Adjudication
The Songjiang District People’s Court of Shanghai Municipality rendered the first-
instance judgment: 1. Tuoheng Company pays Cunliang Company RMB 1,395,228.6 for
payment of goods and corresponding damages for breach of contract; 2. FANG Hengfu,
JIANG Zhidong, and WANG Weiming bear joint and several liability for clearance of the
aforementioned debts of Tuoheng Company. Dissatisfied with the judgment, JIANG Zhidong
and WANG Weiming appealed to the No. 1 Intermediate People’s Court of Shanghai
Municipality, which finally rejected the appeal and upheld the original judgment.
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GC9 quite clearly provides the adjudication reasons of the No. 1 Intermediate
People’s Court of Shanghai Municipality, but there are still differences. Based on the
“Reasons for the Adjudication” section of GC9, the following table compares the similarities
and differences between GC9 and the original second-instance judgment:
Guiding Case No. 9 Original Second-Instance
Judgment
1
“After Cunliang Company supplied goods in
accordance with the contract, Tuoheng
Company was unable to follow the contract to
make the full payment of goods and should
bear the corresponding responsibility for
payment and for breach of contract.”
Did not mention this point. Since the
second-instance court rejected the
appeal and upheld the original
judgment, and that point was clearly
mentioned in the first-instance
judgment (as summarized by the
second-instance court), this point
was thus indirectly acknowledged by
the second-instance court.
2
“Tuoheng Company is a limited liability
company. Legally, all of its shareholders, as a
whole, should be the company’s liquidation
obligor.”
Did not mention this point.
3
As the shareholders of Tuoheng Company,
FANG Hengfu, JIANG Zhidong, and WANG
Weiming should have promptly organized the
liquidation after Tuoheng Company’s
business license was revoked.”
Essentially the same.
4
“The Company Law and its related judicial
interpretations do not provide the exceptions
claimed in defense by JIANG Zhidong and
WANG Weiming. Therefore, regardless of the amount of shares JIANG Zhidong and
WANG Weiming held in Tuoheng Company
and whether or not they actually participated
in the company’s operation and management,
both individuals, after Tuoheng Company’s
business license was revoked, had an
obligation to conduct liquidation of Tuoheng
Company in accordance with law within the
time limit prescribed by law.”
NOTE: Articles 20 and 184 of the Company
Law of the People’s Republic of China are
only mentioned in the “Related Legal
Rule(s)” section of GC9.
(1) Directly pointed out the
conclusion that JIANG Zhidong and
WANG Weiming “had an obligation
to promptly form a liquidation group
to conduct liquidation after Tuoheng
Company’s business license was
revoked”. But did not provide the
related reasons as listed in the left
column.
(2) Did not specify in the “[t]his
Court opines” section related legal
rules upon which the court relied. It
merely stated, in its summary of the
first-instance judgment, that “Based
on this, according to […] Article 18
Paragraph 2 of the Provisions of the
Supreme People’s Court on Several
Issues Concerning the Application of
the “Company Law of the People’s
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Guiding Case No. 9 Original Second-Instance
Judgment
Republic of China” (II), it is held:”
5
“Because FANG Hengfu, JIANG Zhidong,
and WANG Weiming were idle in performing
their liquidation obligation, leading to the loss
of Tuoheng Company’s principal assets and
financial books, etc., and making liquidation
impossible, the acts of FANG Hengfu, JIANG
Zhidong, and WANG Weiming in being idle
in performing their liquidation obligations
violated the relevant provisions of the Company Law and its judicial interpretations.
Therefore, they should bear joint and several
liability for clearance of Tuoheng Company’s
debts.”
Provided something similar. But did
not use, in the “[t]his Court opines”
section, statements like “violated the
relevant provisions of the Company
Law and its judicial interpretations.”
It merely pointed out that “there is
legal basis for [requiring] the
shareholders to bear joint and several
liability for Tuoheng Company’s debts and the [Court] should support
this.”
6
“Regarding JIANG Zhidong and WANG
Weiming’s defense claim that Tuoheng
Company had already carried a large amount
of debt before its business license was
revoked, [and as such,] even if they were idle
in performing their liquidation obligation,
[the idleness] had no causal relationship with
Tuoheng Company’s loss of assets… [T]he
circumstance that enforcement against
Tuoheng Company was suspended in other
cases because of lack of assets available for
enforcement could only prove that the
people’s court had not found Tuoheng Company’s assets during enforcement. It
could not prove that all of Tuoheng
Company’s assets had been lost before its
business license was revoked. There existed
a cause-and-effect relationship between the
idleness of the three Tuoheng Company
shareholders to perform their liquidation
obligations and Tuoheng Company’s loss of
its assets and financial books. JIANG
Zhidong and WANG Weiming’s ground of
defense on this point could not stand.
Essentially the same.
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Guiding Case No. 9 Original Second-Instance
Judgment
7
“Regarding JIANG Zhidong and WANG
Weiming’s defense claim that Tuoheng
Company had already carried a large amount
of debt before its business license was
revoked, [and as such,] even if they were idle
in performing their liquidation obligation,
[the idleness] had no causal relationship with
Tuoheng Company’s loss of assets… [T]he
circumstance that enforcement against
Tuoheng Company was suspended in other
cases because of lack of assets available for
enforcement could only prove that the
people’s court had not found Tuoheng
Company’s assets during enforcement. It
could not prove that all of Tuoheng
Company’s assets had been lost before its
business license was revoked. There existed
a cause-and-effect relationship between the
idleness of the three Tuoheng Company
shareholders to perform their liquidation
obligations and Tuoheng Company’s loss of
its assets and financial books. JIANG
Zhidong and WANG Weiming’s ground of
defense on this point could not stand.
Essentially the same.
Overall, there are quite a few differences between the “Reasons for the Adjudication”
section of GC9 and the original second-instance judgment. The analysis of these differences
touches on the reasons for selecting GC9 as a GC, which are discussed below.
III. Reasons for Selecting Guiding Case No. 9
According to the Office for the Work on Case Guidance of the SPC, GC9 was selected
to be a GC because “in adjudication practice, some shareholders of a limited liability
company or some directors and controlling shareholders of a joint stock limited company
have defended their positions on the ground that they are not de facto control persons or do
not actually participate in the company’s operation and management. [Courts in] different
regions understand and handle this differently.”6
The different understanding and
inconsistent approach originated from courts’ different understanding of Article 18 of the
Provisions of the Supreme People’s Court on Several Issues Concerning the Application of
6 最高人民法院案例指导工作办公室 (The Office for the Work on Case Guidance of the Supreme
People’s Court), supra note 4, at 25.
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the “Company Law of the People's Republic of China” (II) (“Provisions (II)”).7 Article 18
states:
Where the shareholders of a limited liability company or the directors and
controlling shareholders of a joint stock limited company do not form a
liquidation group to start the liquidation within the statutory time limit,
causing the depreciation, loss, damage, or disappearance of company
properties, if any creditors claim that the aforesaid shareholders or the
aforesaid directors and controlling shareholders shall bear joint and several
liability for compensation of the company’s debts within the scope of losses,
the people’s court should support the claim in accordance with law.
Where the shareholders of a limited liability company or the directors and
controlling shareholders of a joint stock limited company are idle in
performing obligations, causing the disappearance of main properties,
accounts, and important documents of the company and making it impossible
to conduct the liquidation, if any creditors claim that the aforesaid
shareholders or the aforesaid directors and controlling shareholders shall bear
joint and several liability for clearance of the company’s debts, the people’s
court should support the claim in accordance with law.
Where any of the aforesaid circumstances are caused by the de facto
control persons, if any creditors claim that the de facto control persons
shall bear the corresponding civil liability for the debts of the company,
the people’s court should support the claim in accordance with law.
(Emphasis added.)
According to Article 216, Item 3 of the Company Law of the People’s Republic of
China, “a de facto control person is one who can, through investment relations, agreements,
or any other arrangements, actually control the acts of the company, even though the person
is not a shareholder.”8 In practice, when the courts apply Article 18 of Provisions (II),
different understandings and issues have emerged. First, are “de facto control person” also
“liquidation obligors” as defined by law? If yes, should “de facto control person” also form
liquidation groups within the statutory limit or bear the corresponding liability if they do not?
Second, if the situations stated in Article 18, Paragraphs 1 and 2 of Provisions (II) are caused
by the de facto control persons, may the liabilities of the shareholders of a limited liability
company, or the directors and controlling shareholders of a joint stock limited company, be
reduced or waived?9
The SPC provides some clarifications of the above issues in the “Main Points of the 7 《最高人民法院关于适用〈中华人民共和国公司法〉若干问题的规定(二)》(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)), passed by the Adjudication Committee of the Supreme People’s Court on May 5, 2008,
issued on May 12, 2008, effective as of May 19, 2008, amended on Feb. 17, 2014, effective as of Mar. 1, 2014,
available at http://www.chinacourt.org/law/detail/2014/02/id/147551.shtml. Article 18 was not amended. 8 《中华人民共和国公司法》 (Company Law of the People’s Republic of China), passed and issued on
Dec. 29, 1993, effective as of July 1, 1994, amended three times, most recently on Dec. 28, 2013, effective as of
Mar. 1, 2014, available at http://www.pkulaw.cn/fulltext_form.aspx?Db=chl&Gid=218774. 9 最高人民法院案例指导工作办公室 (The Office for the Work on Case Guidance of the Supreme
People’s Court), supra note 4, at 27.
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Adjudication” of GC9, which reads: “Shareholders of a limited liability company, or directors
and controlling shareholders of a joint stock limited company, should, in accordance with
law, perform liquidation obligations upon revocation of the company’s business license.
They cannot be relieved of the liquidation obligations on the ground that they are not de facto
control persons or do not actually participate in the company’s operation and management.”
In other words, because “de facto control persons” do not have any legal obligations
to organize the liquidation of a company, they are not “liquidation obligors” as defined by
law. Thus, shareholders of a limited liability company, or directors and controlling
shareholders of a joint stock limited company, cannot be relieved of the liquidation
obligations on the ground that they are not de facto control persons.10
Further, because
shareholders of a limited liability company, or directors and controlling shareholders of a
joint stock limited company, are “liquidation obligors” as defined by law, these “liquidation
obligors” should organize liquidation in accordance with legal procedures, regardless of
whether the situations stated in Article 18, Paragraphs 1 and 2 of the Provisions (II) are
caused by the de facto control persons, and their joint and several liability for clearance of the
company’s debts cannot be waived.11
Because this case “confirms the applicable legal standards and is a model example in
constructing rational and orderly procedures for company liquidation”, the Office for the
Work on Case Guidance of the SPC considered it to be “significant” and chose it to be a
GC.12
IV. Brief Comments
With respect to the similarities and differences between GC9 and the original second-
instance judgment and to the reasons for selecting the case as a GC, the authors have the
following observations:
1. The “Reasons for the Adjudication” in Guiding Case No. 9 are unclear.
As mentioned above, the original second-instance court did not specify, in its “[t]his
Court opines” section, the legal rules upon which the court relied. It only stated, in its
summary of the first-instance judgment, that “[b]ased on this, according to […] Article 18,
Paragraph 2 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” (II), it is held”.
GC9 has not fully addressed this deficiency. In the “Reasons for the Adjudication” section of
GC9, it is stated that “[t]he Company Law and its related judicial interpretations do not
provide the exceptions claimed in defense by JIANG Zhidong and WANG Weiming.” GC9,
in the “Related Legal Rule(s)” section, merely gives “Articles 20 and 184 of the Company
Law of the People’s Republic of China”, but GC9 does not provide further explanation. This
inadequate description can hardly help readers to clearly understand the legal basis of this
10
See id. 11
See id. 12
See id. at 25.
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case. The authors provide supplementary discussion here.
Article 184 of the Company Law states:13
Where any company is dissolved according to the provisions of Article 181
Items (1), (2), (4), or (5) of this Law, a liquidation group should be formed
within fifteen days after the occurrence of the cause of dissolution so as to
begin the liquidation. The liquidation group of a limited liability company
is composed of the shareholders, while that of a joint stock limited
company is composed of the directors or other people as determined by
the shareholders’ meeting. Where no liquidation group is formed within the
time limit, the creditors may apply to the people’s court to designate relevant
persons to form a liquidation group. The people’s court should accept the
application and promptly form a liquidation group to carry out the liquidation.
(Emphasis added.)
That article merely confirms that shareholders of a limited liability company have
liquidation obligations after the company is dissolved. It does not clearly provide what
liabilities the shareholders should bear if they do not perform those obligations.
Article 20, Paragraph 3 of the Company Law states:14
Where a shareholder of a company abuses the independent status of the
corporate legal person and the shareholder’s limited liabilities to evade
payments of debts and to seriously harm the interests of the company’s
creditors, [the shareholder] should bear joint and several liability for the
company’s debts.
If shareholders of a limited liability company are idle in performing their liquidation
obligations, it is not clear from the above article whether they are considered to “abuse[] the
independent status of the corporate legal person and the shareholder’s limited liabilities.”
However, Article 18, Paragraph 2 of the Provisions (II) connects these two articles together to
provide: “Where the shareholders of a limited liability company or the directors and
controlling shareholders of a joint stock limited company are idle in performing obligations,
causing the disappearance of main properties, accounts and important documents of the
company and making it impossible to conduct the liquidation, if any creditors claim that the
aforesaid shareholders or the aforesaid directors and controlling shareholders shall bear joint
and several liability for clearance of the company’s debts, the people’s court should support
the claim in accordance with law.” Therefore, Articles 20 and 184 of the Company Law and
Article 18 of the Provisions (II) are the legal bases of GC9.
Another ambiguity in the “Reasons for the Adjudication” section of GC9 is that it
does not clarify the meaning of being “idle in performing obligations” as stated in Article 18,
13
Company Law of the People’s Republic of China, supra note 8, Article 184. Through the 2013
amendment, Article 184 became Article 183. The reference to Article 181 in the text of this article, after the
amendment, is to Article 180. The amendment did not otherwise change this content. 14
Id., Article 20. Article 20 was not changed by the 2013 amendment to the Company Law.
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Paragraph 2 of the Provisions (II). According to the “Reasons for the Adjudication” section
of GC9: “JIANG Zhidong and WANG Weiming’s agent entrustment contract entrusting a
lawyer to conduct the liquidation, as well as the lawyer’s proof, could prove only that JIANG
Zhidong and WANG Weiming intended to conduct liquidation of Tuoheng Company.
Actually, no liquidation of Tuoheng Company was conducted. Accordingly, [the court] could
not ascertain that JIANG Zhidong and WANG Weiming had performed their liquidation
obligation in accordance with law. Therefore, it did not adopt JIANG Zhidong and WANG
Weiming’s ground of defense on this point.” It is thus clear that the SPC seems to have
equated “idle in performing obligations” with “actually, no liquidation […] was conducted”.
If, however, the liquidation obligor has tried his or her best, but, due to objective
circumstances or the fact that other shareholders with bad faith do not cooperate, he or she
cannot actually organize the liquidation, is he or she still consider to have been “idle in
performing obligations”? If the answer is affirmative, is this adjudication result fair?
2. The “Main Points of the Adjudication” was prepared by the SPC to carry special significance.
In the “Basic Facts of the Case” section of GC9, it is mentioned that FANG Hengfu,
JIANG Zhidong, and WANG Weiming were the shareholders of Tuoheng Company, owning
40%, 30%, and 30% of the shares, respectively. It is also mentioned that defendants JIANG
Zhidong and WANG Weiming defended their positions, claiming that “Tuoheng Company
was actually controlled by major shareholder FANG Hengfu, and the two of them had no
means to carry out liquidation [for the company].” None of these descriptions were included
in the original second-instance judgment. In addition, the following paragraph is included in
the “Reasons for the Adjudication” section of GC9, while no similar references can be found
in the original second-instance judgment:
Tuoheng Company is a limited liability company. Legally, all of its
shareholders, as a whole, should be the company’s liquidation obligor. … The
Company Law and its related judicial interpretations do not provide the
exceptions claimed in defense by JIANG Zhidong and WANG Weiming.
Therefore, regardless of the amount of shares JIANG Zhidong and WANG
Weiming held in Tuoheng Company and whether or not they actually
participated in the company’s operation and management, both individuals,
after Tuoheng Company’s business license was revoked, had an obligation to
conduct liquidation of Tuoheng Company in accordance with law within the
time limit prescribed by law.
Apparently, the SPC’s inclusion of these additional details in GC9 is to provide a
basis for the “Main Points of the Adjudication” of GC9, quoted above and provided here
again for quick reference:
Shareholders of a limited liability company, or directors and controlling
shareholders of a joint stock limited company, should, in accordance with law,
perform liquidation obligations upon revocation of the company’s business
license. They cannot be relieved of the liquidation obligations on the ground
that they are not de facto control persons or do not actually participate in the
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company’s operation and management.
The “Main Points of the Adjudication” found in GGs were all added by the SPC when
they prepared GCs. Their exact legal force is not provided by the Provisions of the Supreme
People’s Court Concerning Work on Case Guidance. But the above analysis suggests that the
SPC specifically added to the “Basic Facts of the Case” and “Reasons for the Adjudication”
sections of GC9 some details that are not found in the original second-instance judgment is to
make the “Main Points of the Adjudication” clearer. This prudent editing reflects the
significance of the “Main Points of the Adjudication”. However, questions such as exactly
how significant these “Main Points of the Adjudication” are and how judges of subsequent
cases should apply them in similar cases still await SPC’s further explanation.
3. The Scope of the “Main Points of the Adjudication” in GC9 is broader than the basic facts of the case.
The parties involved in this case were “shareholders of a limited liability company”.
There were no “directors and controlling shareholders of a joint stock limited company”, as
covered by the “Main Points of the Adjudication”. The inclusion of the latter phrase reflects
the SPC’s intention to use this case to clarify Article 18 of the Provisions (II), as that
provision covers both phrases. However, this also raises a series of questions that must be
considered: is it necessary for the “Main Points of the Adjudication” of a GC to be tied to the
facts of that case? How is the appropriate scope to be determined?
Take a case that is similar to GC9, with the only difference being that the relevant
defendants are not the subjects of liability stated in Article 18 of the Provisions (II), (i.e., “the
shareholders of a limited liability company, or the directors and controlling shareholders of a
joint stock limited company”). The defendants are instead non-director shareholders of a
joint stock limited company, with shares not reaching the level for controlling ownership.
Under these circumstances, should courts refer to GC9 during adjudication? There may be
various points of view, including:
First Point of View: Yes, they should refer to GC9. Since “directors and controlling
shareholders of a joint stock limited company” covered by the “Main Points of the
Adjudication” section of GC9 exceeds the scope of the facts of that case, it seems that the
scope can be further broadened and judges can then refer to GC9 to handle situations
involving “non-directors and non-controlling shareholders of a joint stock limited company”.
Second Point of View: No, they should not refer to GC9. This is because the “Main
Points of the Adjudication” section of GC9 only refers to “shareholders of a limited liability
company, or directors and controlling shareholders of a joint stock limited company”.
Third Point of View: No, they should not refer to GC9. This is because, even though
the “directors and controlling shareholders of a joint stock limited company” covered by the
“Main Points of the Adjudication” of GC9 exceeds the scope of the facts of that case, it does
not exceed the scope of the relevant provision, that is, Article 18 of the Provisions (II).
Therefore, the “Main Points of the Adjudication” can include other subjects of liability stated
in the provision, namely “directors and controlling shareholders of a joint stock limited
company”.
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If the Third Point of View is plausible, it would seem even more important for the
SPC to identify relevant legal rules and judicial interpretations in the main body of GCs. As
mentioned above, GC9 merely mentions “the relevant provisions of the Company Law and its
judicial interpretations”, but does not specify Article 18 of the Provisions (II). It is, therefore,
evident that if the scope is too broad, when courts handling subsequent cases consider
whether the pending case is “similar” to a GC, they will more likely conclude that the case is
similar to a GC and then refer to the GC. If the scope is too narrow, the application of GCs
will be affected. Striking the right balance is certainly not easy, and is an issue that often
confronts other legal systems that also refer to or apply cases.