Judicial Remedy for Change of Nominal Legal Representative
According to Article 13 of the Company Law of the People's Republic of China, the legal representative of a company shall be the chairperson, executive director or manager in accordance with the provisions of the company's articles of association, and shall be registered according to law. In practice, many legal representatives are not the chairperson, executive director or manager of the company, or have resigned from the original company, or have been removed from the relevant position of chairperson, or have only agreed with the company as the nominal legal representative, and have not participated in the actual operation and management of the company. The identity of the legal representative is separated from the actual operation and management of the company.
The legal representative in the above situation is called the "nominal legal representative". The nominal legal representative hides many legal risks, such as litigation disputes, restrictions on high consumption, restrictions on leaving the country, etc., which affects the normal work and life of the nominal legal representative. However, because the nominal legal representative does not participate in the actual operation and management of the company, such legal risks are obviously unfair to him.
If the nominal legal representative cannot agree with the company to change the identity registration of the legal representative in accordance with the company's articles of association and the normal industrial and commercial change registration process, it will seek judicial relief, file a civil lawsuit, and request to change the registration of its legal representative identity as its only means of relief. This paper analyzes the main points reviewed by the court in the litigation of changing the identity registration of the nominal legal representative in combination with judicial cases.
(1) Correctly file a petition for change of company registration.
In public court judgments, the wrong ways for the nominal legal representative to sue include: filing a lawsuit on the grounds that the company continues to use his name as the legal representative without his authorization, and his name rights, reputation rights, and credit rights are infringed; or simply using the shareholders of the nominal legal representative company as defendants, requesting the shareholders to hold a shareholders' meeting to make a resolution to change the legal representative; or requesting the court to confirm that any legal act of the company has nothing to do with the nominal legal representative; or requesting the court to directly change the legal representative of the company to another natural person.
However, the above claims were basically rejected by the court or rejected.
If the cause of action brought by the nominal legal representative is to request a change in the company registration dispute, the company where the nominal legal representative is located shall be the defendant, or the shareholders of the company listed at the same time shall be other defendants.
When simultaneously listing the company's shareholders as defendants, there are two ways to sue: first, you can consider suing all the shareholders of the company and request the shareholders to hold a shareholders' meeting to make a resolution to change the legal representative; second, you can consider suing some shareholders of the company. The promoter shareholders of the company are jointly and severally obligated to contribute capital, so in theory, the shareholders who are jointly obligated should also be the defendants in the lawsuit to change the company's registration. In order to improve the efficiency of litigation, you can choose to sue the shareholders who have reached the minimum voting authority.
The nominal legal representative shall not participate in the operation and management of the company.
Shanghai Huangpu District People's Court (2020) Shanghai 0101 Minchu No. 8003 civil court verdict shows: Chen was appointed as the chairperson of the company and registered as the chairperson and legal representative of the company. During the period, Chen never actually participated in the operation and management of the company, the company's official seal and business license and other important documents were not under his control, and the company's daily operation, financial income and expenditure, personnel appointment and removal and other operations were not known.
Later, Chen asked the company to go through the formalities for changing the registration of the legal representative and chairperson, but the company did not handle it. Chen filed a lawsuit. Regarding Chen's request to remove the industrial and commercial registration items that he is the legal representative and chairperson of the company, the court held that: a legal person is a fictitious personality in nature, and a natural person who becomes the legal representative of the company should have a substantial interest relationship with the company. This relationship is the premise of his acting as the legal representative. It violates the original intention of the company law to continue to serve as the legal representative of the company by a natural person who has no interest relationship.
Shenzhen Nanshan District People's Court (2020) Guangdong 0305 Minchu No. 25482 civil court verdict shows: Fu's term as the chairperson of the company has long expired and has resigned from the company. Fu continues to serve as the company's nominal legal representative, which obviously deviates from the legislative purpose of our country's company law.
As a legal person, a company is a legal fictitious personality, and its external civil activities are mainly carried out through its legal representative, so there is a substantive connection between the legal representative and the legal person it represents.
If the legal representative has left the company and no longer participates in the operation and management of the company, it is obviously contrary to the legislative purpose to continue his status as the nominal legal representative. Therefore, the court supports the deletion of the registration of the nominal legal representative.
III. The nominal legal representative has clearly expressed his intention to terminate the entrusted relationship with the company.
Article 5 of the Civil Code of the People's Republic of China stipulates that civil subjects engaging in civil activities shall follow the principle of voluntary consent and establish, modify and terminate civil legal relations according to their own wishes. Article 933 of the Civil Code of the People's Republic of China stipulates that the principal or the principal may terminate the commission contract at any time.
A trust relationship is established between the company and its directors and legal representatives, and the directors and legal representatives are entrusted by the company to exercise their powers as trustees, and the trust relationship can be terminated at any time.
The civil court verdict of Shanghai Hongkou District People's Court (2022) Shanghai 0109 Minchu No. 14144 shows: The articles of association of a limited company in Shanghai state: The legal representative of the company shall be the executive director. The company made the "Shareholder Decision": Appoint Feng as the executive director of the company, and the legal representative shall be Feng, and register according to law.
A few months later, Feng mailed the company the "Application for Resignation of Legal Person", indicating his resignation as legal representative and asking the company to go through the registration formalities for the change of legal representative. Later, he mailed the company the "Resignation Report of Executive Director and General Manager and Legal Representative", indicating his resignation as executive director, general manager and legal representative.
Afterwards, Feng sent the "Resignation Report of the Executive Director and General Manager and Legal Representative" to the shareholders who held 100% of the company's equity, indicating that he resigned as the executive director, general manager and legal representative of the company, and requested the company to go through the industrial and commercial procedures for removing the aforementioned job registration.
The court held that: after a Shanghai limited company received a written notice, the legal consequences of the termination of the entrusted relationship occurred according to law, and Feng no longer served as the legal representative and executive director of the defendant.
The Supreme People's Court pointed out in the (2022) Supreme People's Court Civil Ruling No. 94 that: as far as the company is concerned, the legal relationship between the company and the legal representative is entrusted, and the basis for the legal representative to exercise the powers of the representative is the authorization of the company power authority. If the authorization of the company power authority is terminated, the legal representative's authority to engage in civil activities on behalf of the company shall be terminated, and the company shall promptly handle the registration of industrial and commercial changes in accordance with the law.
That is, if the company makes a resolution to terminate the status of the legal representative or the original legal representative makes a clear indication to the company that he will no longer serve as the legal representative, the legal consequences of the termination of the entrusted relationship will occur according to law, and the company shall promptly handle the registration of industrial and commercial change.
IV. The nominal legal representative has exhausted the company's internal remedies and then filed a lawsuit.
Some courts hold that a company's change of legal representative is a matter of internal autonomy of the company, and a valid resolution to change the legal representative must be made by the company's shareholders' meeting before the court can support the legal representative's change registration request. However, in practice, companies often do not hold a shareholders' meeting to change the legal representative, or do not give a clear reply to the nominal legal representative.
If the effective resolution of the shareholders' meeting is used as a prerequisite for the request for change registration, it will lead to a serious imbalance of rights and obligations caused by the nominal legal representative being unable to leave office.
Tianjin Dongli District People's Court (2022) Jin 0110 Minchu No. 11987 civil court verdict shows: Liu has become the legal representative of a company since April 13, 2021, and served as an executive director and manager at the same time. On November 3, 2022, Liu mailed a resignation report to a company and its shareholders through EMS, asking to resign as the legal representative, manager, executive director and other positions of the company.
The company and its shareholders both signed for it, but never replied. The court held that: Article 37 of the "Regulations of the People's Republic of China on the Administration of Company Registration" stipulates that if a company's directors, supervisors, and managers change, they should file with the original company registration authority. Although changing the functions of the company's legal representative, manager, and executive director is a matter of company autonomy, in this case, Liu was not a shareholder of the company and could not make a resolution on the change of position after consulting through such means as convening a shareholders' meeting.
At the same time, if a company and shareholders continue to refuse to cooperate, Liu's legal risks will continue to exist and cannot be remedied by other means, which will cause a serious imbalance of rights and obligations due to his long-term inability to leave office. Therefore, the court upheld Liu's claim for removal of his registration as legal representative, manager, and executive director.
The civil court verdict of Shenzhen Bao'an District People's Court (2021) Guangdong 0306 Minchu No. 15277 shows: From the appointment and removal letter submitted by Luo, social security payment records, etc., it can be seen that Luo has left the company, and Luo has made a request to change the legal representative through WeChat, and made it mean that he will no longer serve as the legal representative of the company, but the company has not yet registered the change.
In the case of the failure of the company's internal relief mechanism, the court supported Luo's request to the court to order the company to remove the registration items of its legal representative through litigation.
Fifth, the company is negligent in fulfilling the obligation to change the registration, and the relief of the nominal legal representative.
Shenzhen Nanshan District People's Court (2020) Guangdong 0305 Minchu No. 25482 civil court verdict shows: because a technology company and other companies have a number of economic disputes and lost, Shenzhen Nanshan District People's Court at the same time on a technology company's legal representative Fu issued a restriction order.
The restrictions on consumption have greatly affected Fu's work and life. Fu has repeatedly asked the company to change the legal representative and chairperson in the industrial and commercial registration information to other natural persons, but the company has been delaying the change so far. Since the term of office of Fu's chairperson has long expired and he has left.
The court upheld Fu's request to remove his registration as the legal representative and chairperson of the company.
If the company fails to perform the change registration, the nominal legal representative has the right to complain to the market supervision department. Article 31 of the Implementing Rules of the Regulations of the People's Republic of China on the Administration of the Registration of Market Entities stipulates that a market entity shall change the registration items, and shall apply for change registration within 30 days from the date of making a change resolution, decision or statutory change; Article 72 If a market entity fails to handle the change registration as required, the registration authority shall order it to make corrections; if it refuses to make corrections, it shall be fined not less than 10,000 yuan but not more than 100,000 yuan; if the circumstances are serious, the business license shall be revoked.
In addition, for the relief of the nominal legal representative who has been restricted from consumption due to company litigation, he may apply to the enforcement court for correction, and if he is not satisfied with the decision to reject the application, he may apply to the people's court at a higher level for reconsideration. Article 12 of the "Several Provisions of the Supreme People's Court on Publishing Information on the List of Untrustworthy Persons Subject to Execution" stipulates that if a citizen, legal person or other organization applies for correction to be included in the list of distrustworthy persons subject to enforcement, the enforcement court shall review it within 15 days from the date of receipt of the written application for correction. If the reasons are established, it shall be corrected within three working days; if the reasons are not established, it shall be
If a citizen, legal person or other organization is not satisfied with the decision of rejection, it may apply for reconsideration to the people's court at the next higher level within ten days from the date of service of the written decision. The people's court at the next higher level shall make a decision within fifteen days from the date of receipt of the application for reconsideration. During the reconsideration period, the implementation of the original decision shall not be stopped. Therefore, after the nominal legal representative has been restricted from high consumption, he shall promptly apply to the enforcement court to correct the application for lifting the restricted high consumption.
conclusionIn recent years, it has become more and more common for the nominal legal representative to bear adverse legal liabilities due to company lawsuits, which often leads to a serious imbalance in the rights and obligations of the nominal legal representative. Therefore, in judicial practice, the court has gradually paid attention to the substantive review of whether the legal representative has the conditions for employment, and will support the litigation request of the nominal legal representative who has no substantive interest in the company.
At the same time, it is also recommended that when the legal representative establishes a trust relationship with the company, consult a professional lawyer for advice. When encountering infringement of legitimate rights and interests, they should take up legal weapons to safeguard their legitimate rights and interests. Legal services, professional lawyers are by your side.
Lawyer Profile
Mu Qing, Lawyer
Attorney of
Guangdong
is a practicing lawyer, deputy secretary-general of the Labor and Social Security Law Professional Committee of Guangdong Bar Association, member of the Financial Crime Defense Legal Professional Committee of Shenzhen Bar Association, enterprise human resource planning division (national second level), enterprise labor relations coordinator (national second level), enterprise legal risk manager, enterprise legal consultant Qualification, engaged in corporate compliance governance, company articles of association sorting, company control disputes, labor and employment compliance review, company mergers and acquisitions, due diligence, contract formulation and modification, commercial negotiation, debt disputes, criminal defense and other legal services.
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Intern lawyer of
Guangdong
intern lawyer, engaged in corporate compliance, equity disputes, debt disputes, marriage and family disputes, criminal defense and other legal services.