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Law in Context

Abstract from Volume 25 No 2 (2007) Law and Finance

The Role of the Shareholders’ Meeting’s Reserve Power in Corporate Governance in China

Charles Zhen Qu is an Assistant Professor at the School of Law of City University of Hong Kong. In 2008, he will join Murdoch University School of Law as a Senior Lecturer. He formerly taught at Griffith Law School. He has written on commercial law, company law, securi­ties regulation, and Chinese law.

Under China’s company law regime, the power to represent the com­pany resides not in the board of directors but in an individual senior corporate officer called the legal representative (fading daibiaoren). The office of the legal representative, however, is often rendered ineffective as it is inherently susceptible to abuse. The mechanism becomes dysfunctional when the legal representative who is capable of faithfully implementing the decision of the company is unavailable. The unavai­la­bility of the legal representative, especially where the board of directors is also ineffective, raises questions as to the general meeting’s power to control corporate actions. This paper makes an attempt to answer this question by considering a range of issues relating to corporate powers and three recent cases wherein the general meeting’s litigational powers were raised. This article supports the view that the legal representative functions as an agent rather than, as argued by most of scholars of China’s company law, an organ of the company. It will be argued that given the nature of the legal representative’s role and the power allocation arrangement under China’s company law regime, the general meeting has power, subject to the ‘no abuse of rights’ principle, to control corporate actions where the board of directors and the legal representative are ineffective.

(2007) 25 No 2 Law in Context 53

   
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