How to remedy one's own rights and interests when "shareholder status" falls from the sky?

Author | Jia Xiaoya Lawyer

Mr. Zhang recently received a subpoena for an inexplicable lawsuit demanding supplementary liability for a company's debts. At this time, Mr. Zhang knew that as early as 2014, he had been falsely registered as a shareholder of this company, and now he was sued by creditors because the company was insolvent. The identity of a shareholder that fell from the sky made Mr. Zhang worried about whether the company would have other unpredictable debts.

In such cases, the court will generally apply the principle of commercial appearance doctrine to determine its shareholder liability.Because the administrative department for industry and commerce is the registration authority for company establishment and change, the company information it registers has public credibility.If the evidence submitted by the parties is not sufficient to deny that the industrial and commercial registration is a shareholder of the company, and whether it is a false registration without administrative confirmation, the false shareholder can only be resolved through other legal procedures.

Administrative relief

Mr. Zhang's first remedy is to cancel the registration and administrative litigation.

(I) Cancellation of registration

In order to protect the legitimate rights and interests of such parties, the State Administration for Market Regulation issued the "Guiding Opinions of the State Administration for Market Regulation on Revoking the Registration of Companies Using the Identity Information of Others" in 2019 (No. 128 of the State Administration for Market Regulation), which stipulates that shareholders who have been registered under false names can apply for revocation of registration.

The shareholder who has been registered under a false name submits the "Application Form for Cancellation of Impersonation Registration (Filing) " and the "Application Form" to the registration authority to reflect the situation, and provides the basic materials that help to determine the fact of impersonation registration, such as the alarm receipt for the loss of identity documents, the announcement of the loss of identity documents, and the handwriting identification report issued by a professional organization, for review by the registration authority.

The registration authority will make a final decision on whether to revoke it through procedures such as publicity (45 days of publicity) and investigation (including on-site inspection). Now Mr. Zhang is still waiting.

However, the method of deregistration does not of course deny its shareholder qualification in essence. For example, in the case of Shanghai 02 Minxing No. 7070 (2021), the court held that the registration of the shareholder's name only has the effect of publicity to the outside world, and does not have the effect of creating rights; correspondingly, the revocation of the shareholder registration only revokes the effect of the registration to the outside world, and does not have the effect of eliminating the shareholder qualification; in addition, the company registration information, as part of the appearance of the company's rights to publicity, constitutes the appearance of trust for bona fide creditors to judge the company's comprehensive commercial ability.

Therefore, it is not conducive to protecting the transaction security of bona fide creditors, nor to maintaining the stability of legal relations and economic order. Therefore, the court still has to conduct substantive examination and judgment on whether the parties are registered as shareholders of the company under false names.

Similarly, in the (2021) Beijing 02 Xingxing No. 136 case, because the administrative agency did not fully consider the adverse impact of the Decision on Revocation of Administrative License on the legitimate rights and interests of creditors when making the decision to revoke shareholder registration, the court ultimately ruled to revoke the decision.

(2) Administrative litigation

The remedies for direct administrative litigation, in judicial practice, often occur in the following situations:

One is limited by the time limit for prosecution. According to Article 46 of the Administrative Litigation Law and Article 65 of the Interpretation of the Supreme People's Court on the Application of the Administrative Litigation Law of the People's Republic of China (Legal Interpretation [2018] No. 1), the shareholder who has been impersonated shall file a complaint within six months from the date when he knows or should have known that the administrative act has been made. If he does not know that the registration has been impersonated, it shall not exceed five years from the date when the registration act of the administrative department for industry and commerce is made, otherwise the court will not accept it.

Coincidentally, nearly 10 years had passed when Mr. Zhang knew that he was registered under a false name. Therefore, the relief method of administrative litigation does not apply to Mr. Zhang.

Second, the court may rule to dismiss the party's lawsuit on the grounds that "due to the limited scope of administrative trial, it is impossible to determine the basic civil legal relationship involved in the above, and it is appropriate for the parties to first resolve such litigation through civil channels." For example, (2021) Beijing 01

02case No. 1116.

That is to say, when there is an obvious dispute over the basic fact on which the industrial and commercial registration is based, that is, whether the party is registered as a shareholder as an indication of true intention, the court may require a civil lawsuit to be resolved first, and then an administrative lawsuit.

To sum up, administrative remedies cannot be fully relieved to all situations, and it is very likely to return to civil remedies, and to confirm whether they are shareholders of the company through substantive review by the court.

II. Civil remedies

(1) Action for confirmation of shareholder qualifications

This plan is more common. To be on the safe side, Mr. Zhang also filed a reverse shareholder qualification confirmation lawsuit at the same time, asking the court to confirm that he is not a shareholder of the company. The confirmation lawsuit corresponds to the right of formation, and the right of formation is not the object of the statute of limitations, so the shareholder qualification confirmation lawsuit is not like an administrative lawsuit, and it does not apply to the statute of limitations.

(2) Actions of infringement

Of course, it is also possible to file a lawsuit for infringement against the impostor, because the impostor violates the personal rights such as the right to name of the impostor.

In this case, the shareholder qualification confirmation lawsuit initiated by Mr. Zhang is still in the filing stage, but the creditor's lawsuit against him for supplementary compensation liability is already in the trial process. The author believes that the progress and results of the two cases are crucial to Mr. Zhang's impact. Therefore, for the creditor's recovery of shareholder liability case that is already in the trial process, it is necessary for Mr. Zhang to apply to the court to suspend the trial of the case in time.

Returning to the theme, we should understand that such cases can only be determined whether the parties have been registered as shareholders of the company under the false name of others after being tried by the court entity, and even if the fact of being registered under the false name is established, the solution is only the internal legal relationship, which does not necessarily deny the external legal responsibility based on commercial law publicity and appearance.

Therefore, when you are unfortunate to be hit by "shareholder status", you must choose appropriate relief measures in a timely manner according to the specific situation, so as to avoid being forced to be taken advantage of by missing the best opportunity for relief.

III. Legal basis

Administrative Procedure Law of the People's Republic of China (2017 Amendment)

Article 46: Where a citizen, legal person, or other organization files a lawsuit directly with the people's court, it shall file the lawsuit within six months from the date on which it knew or should have known that the administrative act was taken, unless otherwise provided by law.

The people's court shall not accept cases brought for real estate more than 20 years from the date of the administrative act, and other cases brought for more than five years from the date of the administrative act.

2. "Interpretation of the Supreme People's Court on the Application of the Administrative Procedure Law of the People's Republic of China"

Article 65: Where citizens, legal persons, or other organizations do not know the content of an administrative act made by an administrative organ, the time limit for prosecution shall be calculated from the date on which they knew or should have known the content of the administrative act, but the maximum time limit for prosecution shall not exceed the time limit stipulated in paragraph 2 of Article

46of the Administrative Litigation Law.

3. Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (III)

Article 28: Where a person makes an investment in the name of another person and registers the other person as a shareholder in the company registration authority, the person who makes the registration under a false name shall bear the corresponding liability; if the company, other shareholders or company creditors request that the person who is registered under a false name as a shareholder shall bear the responsibility for making up the capital contribution or the liability for compensation for the part of the company's debt that cannot be paid off, the people's court shall not support it.

4. "Minutes of the Symposium on Several Issues Concerning the Trial of Administrative Cases of Company Registration" (Judicial [2012] No. 62)

Where an applicant conceals relevant information or provides false materials, resulting in an error in registration, the people's court may, according to the specific circumstances, make a judgment to revoke the registration, confirm that the registration is illegal, or order the registration authority to perform its duty of correction. Where the legal representative or shareholder of a company requests confirmation of the illegal registration or revocation of the registration on the grounds that the application materials are not signed or sealed by him, the people's court shall, in principle, handle the matter in accordance with the provisions of the first paragraph of this article.

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Jia Xiaoya specializes in legal services in the fields of corporate, investment and financing, insurance law, etc., including but not limited to corporate legal counsel, equity investment, commercial contract disputes, insurance dispute resolution, family (business) governance and wealth management, etc., with extensive business experience.

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