Lawyer specializing in shareholder disputes and equity controversies: From auditing and shareholder meetings to management rights and shareholder exit

The real difficulty in shareholder disputes lies not in the lack of provisions in company law, but in the fact that different issues require different procedures.

Many shareholder disputes begin with the same phrase: "The company won't let me manage it." But the actual legal issues can be completely different. Some people really want to see the books. Some want to convene a shareholders' meeting. Some want to replace the directors. Some suspect that company funds have been misappropriated by major shareholders or responsible persons. Others no longer want to co-manage the company and only want to withdraw their shares. Without first clarifying the true purpose, it's easy to initiate a procedure without solving the real problem.

Therefore, the first step in resolving shareholder disputes should be to combine: equity, corporate governance, accounting records, cash flow, and ultimate goal.

If the company won't let you see the books, what can shareholders actually do?

The understanding that "I am a shareholder, so I should be able to see all company information" is inaccurate. The legal methods of accessing and supervising documents may differ depending on the type of company, the shareholder's status, and the specific documents involved. In practice, one should first organize:

• Articles of Association;
• Shareholder register;
• Financial statements;
• Accounting books;
• Board meeting minutes;
• Shareholders' meeting minutes;
• Transaction certificate;
• Bank information;

Related party transaction information. Reconfirm: Which information the company is legally obligated to provide; which information needs to be obtained through audit, shareholder meetings, or court proceedings. If the company completely refuses to provide information, this should also be recorded.

• Written request;
• Email;
• LINE;
• Evidence-based correspondence;

The company's refusal to respond or provide records may become an important basis for subsequent court proceedings.

Under what circumstances can one petition the court to appoint an inspector?

According to the currentArticle 245 of the Company LawShareholders who have held 1% or more of the issued shares for more than six months may apply to the court, providing reasons, evidence, and an explanation of the necessity, to appoint an inspector to examine the company's business accounts, financial situation, specific matters, and specific transaction documents and records to the extent necessary. However, simply stating "I am a shareholder, and I suspect there is a problem" is usually insufficient. The actual application should still state:

• Which period;
• What type of transaction;
• Which related company;
• Which sum of money;
• Why there is reasonable suspicion;
• Why is the existing data insufficient?

And the scope of the investigation. The function of the inspector is not to allow shareholders unlimited access to all company documents, but to establish an investigation mechanism under court supervision for specific and necessary areas.

If the major shareholder doesn't hold a shareholders' meeting, is there any way for the minority shareholders to convene one themselves?

It depends on the shareholding and the holding period. For example, in a joint-stock company,Article 173 of the Company LawA system is in place for eligible shareholders to request the board of directors to convene an extraordinary shareholders' meeting, and, under certain conditions, to convene it themselves with the permission of the competent authority. In addition,Article 173-1 of the Company LawAnother provision states that shareholders holding more than half of the total issued shares for a period exceeding three months may convene an extraordinary shareholders' meeting. Therefore: The board of directors is unwilling to hold a meeting.

This does not mean that shareholders can never initiate corporate governance procedures. However, shareholders who convene a shareholders' meeting on their own initiative can:

• Shareholding calculation;
• Shareholder register;
• Stop the transfer of ownership;
• Summoning notice;
• Agenda;

Voting decisions must be handled in accordance with the law. Otherwise, even after the shareholders' meeting is held, there may still be litigation regarding the validity of the resolutions.

What if there are problems with the resolutions after the shareholders' meeting has been held?

First, it is necessary to distinguish between: procedural issues and: the illegality of the resolution itself. Article 189 of the Company LawThe rule states that if the procedures for convening a shareholders' meeting or the methods for making resolutions violate laws or the articles of association, shareholders may petition the court to revoke the resolution within 30 days from the date of the resolution. Article 191 of the Company LawThe law stipulates that resolutions passed at shareholders' meetings that violate laws or the articles of association are invalid. The legal effects and procedures differ between the two approaches. Therefore, one should not simply state, "This shareholders' meeting was illegal," but rather confirm precisely:

• Was there an error in the summons notification?
• Is there an error in the voting rights calculation?
• A person without the right to convene a meeting?
• Is there a problem with the bill's procedure?
• Or does the resolution itself violate the law or regulations?

In particular, there is a clear timeframe for litigation to revoke a resolution, and it is not advisable to delay once a dispute arises.

Is it true that shareholders can only replace directors if they hold more than half of the shares?

The removal of a director may involve different procedures. Article 199 of the Company LawThe regulations stipulate that directors can be removed at any time by a resolution of the shareholders' meeting, with certain attendance and voting thresholds specified. Furthermore, if a director, in the course of their duties, engages in conduct that significantly harms the company, or commits material acts that violate laws or the articles of association, and the shareholders' meeting fails to resolve to remove them, Article 200 of the Company LawThere is also a system in place where eligible shareholders can file a lawsuit with the court to remove the shareholder from office within a certain period. Therefore, shareholder disputes cannot be viewed solely from the perspective of:

"I didn't get enough votes, so there's nothing I can do." Also see:

• Does the director have engaged in any serious illegal or harmful conduct that harms the company?
• How the shareholders' meeting previously handled the matter;
• During the procedure;

And evidence.

What can shareholders do if a major shareholder or director uses company funds for related-party transactions?

The first step is usually not to jump to conclusions like, "He's hollowing out the company." Instead, it's about rebuilding:

• How much money did the company pay?
• To whom should the payment be made?
• What is the relationship between the other party and the directors or major shareholders?
• What goods or services does the company acquire?
• Is the price reasonable?
• Who approved it;
• Is there a board of directors or other internal procedures?

What harm did the transaction ultimately cause? If it does involve directors' liability to the company,Article 214 of the Company LawThis system allows eligible shareholders to request the company to file lawsuits against its directors through a supervisor, and, under certain conditions, allows shareholders to file lawsuits on behalf of the company. Different cases may also involve:

• Civil damages;
• Company Law;
• Breach of trust;

Other criminal liabilities. However, criminal and civil strategies cannot be determined solely by the word "empty out".

Shareholders suspect the company has been emptied of funds or its funds have been misappropriated.When doing so, obtaining information, reconstructing cash flow, and selecting a qualified claimant should be handled together.

If the shareholder relationship has completely broken down, can I ask the company to buy back my shares?

This is one of the most easily misunderstood aspects in practice. Shareholders cannot simply demand the company buy back their shares because they "don't want to continue." Whether they can exit depends on:

• Company type;
• Articles of Association;
• Shareholders Agreement;
• Is there a buyback or opt-out agreement?
• Are there any other shareholders willing to acquire it?
• Does the Company Law include situations where a specific share purchase right is exercised?

And the actual negotiation terms. Therefore, a genuine shareholder exit typically involves two levels: legal rights and commercial negotiations. In some cases, the most effective solution is not to fight to the end, but rather to:

• Equity price;
• Payment methods;
• Director/Person in Charge;
• Corporate debt;
• Guarantee liability;
• Non-compete;
• Confidential;

In the past, responsibility was handled in one go.

The exit arrangements should be reviewed first.Shareholder Agreement, Voting Rights and Exit MechanismIf the dispute stems from the investment agreement and the request for return, they must be confirmed separately.Equity investment and investment contract litigationThe basis of rights.

What to do about a 50-50 shareholder deadlock?

A company structure where two shareholders each hold 50% is often one of the most difficult to manage. If the two shareholders lose trust, the following may occur:

• The shareholders' meeting was unable to reach an effective decision;
• Board deadlock;
• Disputes over bank account access;
• The employees don't know who to listen to;
• Unable to decide on important contracts;

The company's assets began to flow out. In cases like this, it's not enough to simply ask: who holds the most shares? Because both parties could have the same number. A simultaneous analysis is usually necessary.

• Articles of Association;
• Board seats;
• Chairman's authority;
• Shareholders Agreement;
• The company is under actual control;
• Account books;
• Important contracts;

And whether there are negotiable equity exit options. If the company is no longer functioning properly, it may also be necessary to further evaluate other remedies and exit arrangements under corporate law.

Complete methods for handling shareholder disputes and company deadlockThe decision should be based on the company type, equity and control structure, and then compared with the specific procedures and exit objectives.

When should preliminary injunctions or other preservation measures be considered in shareholder disputes?

If the dispute already involves:

• Preparing to convene a shareholders' meeting to re-elect directors;
• The equity may be transferred;
• The company is preparing to sell major assets;
• The company's control is about to undergo an irreversible change;

Accounting books or important documents may be lost, and simply waiting for a judgment in this case may be too slow. In such cases, it may be necessary to assess: a provisional injunction; a preliminary seizure; or other preservation procedures. However, obtaining a preservation order is not guaranteed simply by increasing negotiating pressure. Further confirmation is still needed.

• The legal basis of this case;
• Urgency;
• The necessity to avoid significant damage or imminent danger;

And guarantees that the court may require.

Why do shareholder disputes often involve both civil and criminal issues?

Internal disputes within the company may arise simultaneously:

• They wouldn't let us see the accounts;
• Related-party transactions;
• The flow of funds is unclear;
• Forging meeting minutes;
• Unauthorized use of company assets;
• Directors breach their fiduciary duties;

Even suspected breach of trust or embezzlement. However: A corporate governance dispute does not necessarily equate to a criminal offense. Similarly, the establishment or non-establishment of a criminal case will not automatically resolve the issues of equity and management rights. Therefore, it is crucial to clarify the following at the outset:

• Which objective is to obtain information?
• Which one prevents a change of control of the company?
• Which one is seeking compensation?
• Which one represents the company in holding the directors accountable?

Which one truly requires criminal prosecution?

If the dispute involvesCompany executives and corporate criminal casesHowever, the acquisition of information, corporate governance, claims for compensation, and criminal liability must still be assessed separately.