In our previous articles this month, we’ve introduced the effectiveness of company resolutions, shareholders’ right to know, shareholders’ right of first refusal. Today we’ll further introduce the shareholders’ right of distribution of profit, as well as representative lawsuits.

  1. Shareholders’ right of distribution of profit

Generally, whether and how to share the profit is a matter of the company’s internal business and shareholders’ free will, which shall not be interfered much by the Court. Therefore the Judicial Interpretations IV emphasized that if the shareholder intends to file a case to the Court to share the profit of the company, a shareholders’ resolution with detailed profit distribution plan shall be provided. The Court will not support the shareholder’s claim otherwise, unless the failure of distribution is attributed to any abuse of shareholders’ rights, which results in losses to other shareholders.

In such lawsuit, the defendant shall be the Company.

2.Representative Lawsuits

In accordance with Company Law, in case of any member from the management team infringes the company’s interests, some certain members are entitled to sue. As when the Supervisor sues the Directors and/or the Senior Managers of the Company, or when the Director sues the Supervisor(s), the lawsuit is actually filed on behalf of the Company, therefore the Judicial Interpretations IV further clarified that the Company shall be named as the plaintiff in this case.

However, when the shareholder initiates a lawsuit against the Director, the Supervisor or the Senior Managers, the Company shall be named as the third Party but shall get the winning interests from this lawsuit.

Till now we’ve finished our introduction of the Judicial Interpretations IV on Company Law. If you have any further questions, please reach us via info@dandreapartners.com.