Research On The Restriction Of Voting Rights Of Shareholders With Defective Capital Contributions

Shareholders' voting right is a legal right of the shareholders.The shareholders use their voting rights to realize the effective management and control of the company.Therefore,the voting right is actually a kind of control right.As a tool for the shareholders to manage and control the company,voting right not only concerns the interests of the shareholders,but also concerns the development of the company.Shareholders shall be entitled to shareholders' rights due to their capital contributions.In the event of any defect in its capital contributions,the rights of the shareholders with defective capital contributions shall be restricted.However,the Company Law does not provide a clear legal basis for restricting the rights of shareholders with defective capital contributions.Article 17 of the Judicial Interpretation of the Company Law(III)after its promulgation acknowledges the company's restrictions on the equity of shareholders with defective capital contributions,but it is unclear whether the voting right are included therein.Based on the study of the ways to restrict the voting rights of the shareholders with defective capital contributions,this paper finds out the flaws in the present law,and tries to perfect the ways to restrict the voting rights of shareholders with defective capital contributions.This article carries on statistical analysis to cases which related to the limitation of the voting rights of shareholders with defective capital contributions on the itslaw.com website and discovers that in judicial practice,there are four main viewpoints on the restriction of voting right by courts.I.Notwithstanding special provisions contained herein,the shareholders shall exercise their voting rights in proportion to their respective paid-in capital contributions.II.The shareholders shall exercise their voting rights in proportion to their capital contributions,and the company shall not restrict their exercise of voting rights.III.The shareholders shall exercise their voting rights in proportion to their capital contributions but the company shall only restrict their voting rights through the articles of association.IV.The shareholders shall exercise their voting rights in proportion to their capital contributions subscribed for;provided,however,the company may restrict their voting rights in accordance with the Articles of Association or the shareholders' meeting.In judicial practice,affirmative conclusion about how to limit the voting rights of shareholders with defective capital contributions is still not formed,which indicates the insufficiency of relative law and regulations on the matter.Given the large annual span of the samples,the earliest cases occurred in 2007,and the most recent case was as of December 2019.During this period,two significant events occurred: the enactment of the Judicial Interpretation of the Company Law(III)in February 2011 and the reform of the company capital system in December 2013.This paper divides the study into three different periods on the relationship between the court's view and legal changes by way of the above-mentioned two issues.According to the results of the study:since 2011,View I has rarely or almost never existed in judicial practice,and has been replaced by the other three opinions with the core of “exercise voting rights according to the proportion of subscribed capital”.Among them,the acceptance rate of View III and View IV with the spirit of “emphasizing corporate autonomy” in judicial practice after2014 is obviously higher than that of “unlimited”,accounting for 79% in total,and showing a rising trend.On the one hand,it embodies the guiding significance of the law to the judicial practice;on the other hand,the court have reached different conclusions based on the same provisions,which further indicates that the current law still has no unified conclusion on the issue,and whether the company has the right to exercise autonomy over the restriction of voting rights is still unknown.It is held herein that the limitation on voting rights of the shareholders with defective capital contributions belongs to the autonomous affairs of the company and shall be managed by the company authorized by law.From the perspective of interests' measurement,the principle of corporate autonomy should be put in the first place in corporate governance.From the perspective of incomplete contract theory,the residual rights of control enjoyed by the shareholders with the residual claims should also be matched.Under the circumstances where the right of a shareholder to request the distribution of his residual properties may be restricted,in order to avoid the separation of his/her residual control rights form his/her residual claim rights,his/her voting rights shall also be restricted under certain circumstances.It is helpful for the company to decide whether to limit the voting rights of the shareholders with defective capital contributions which can make the most conducive to its own decisions according to its own characteristics and market changes,and it's also helpful for the company to reduce the transaction costs and to improve economic efficiency.Through the interpretation of legal provisions,supplemented by comparative studies of the German Company Law and the PRC Company Law,it is suggested that the company law could specify the legality of restrictions on voting rights through the articles of association or shareholders' resolutions,and suggested the application of the exclusion system for relevant shareholders' voting rights at theshareholders' meeting which provide specific and uniform basis for settling this kind of cases in practice.In addition,in view of the problems that may be encountered in the practical operation of the above recommendations,specific suggestions on the applicants,preconditions and applicable procedures to restrict the voting rights of in the resolutions of the shareholders' meeting are given in this paper.