Supreme People's Court Draft Interpretation on Application of the Company Law (Public Consultation Draft)

最高人民法院关于适用《中华人民共和国公司法》若干问题的解释（征求意见稿）

Sources:

• Chinese original: Supreme People's Court (court.gov.cn)
• English translation below: Independent translation

For the correct application of the Company Law of the People's Republic of China, and in light of adjudication practice, the following provisions are hereby made with respect to legal issues applicable to disputes involving companies adjudicated by the people's courts.

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Part I — General Provisions (11 Articles)

Article 1 — Resignation and Removal of Legal Representatives

Where a legal representative files a lawsuit against the company as defendant, requesting confirmation that his or her resignation has taken effect and that the company shall process a change of registration or removal of registration information, the people's court shall accept the case and render different rulings based on the facts of the case:

1. Where the company has determined a new legal representative within the period designated by the people's court, the court shall order the company to apply to the registration authority for a change of registration;

2. Where the company participated in the litigation but failed to determine a new legal representative within the period designated by the people's court, or where the company did not participate in the litigation, the court shall order the company to apply to the registration authority for removal of the registration information;

3. Where laws or administrative regulations contain special provisions regarding the resignation or departure of legal representatives, the court may dismiss the claim in accordance with such special provisions.

Where the people's court orders the company to process a change of registration or removal of registration information pursuant to the preceding paragraph, it shall simultaneously confirm that the legal representative's resignation took effect from the date the company received the written resignation notice. During the period between the legal representative's resignation and the company's processing of the change of registration or removal of registration information, where the legal representative engages in civil activities in the name of the company and the counterparty requests the company to bear the legal consequences, the people's court shall support such request, unless the company proves that the counterparty knew or should have known that the legal representative had already resigned.

Where the company adopts a resolution to remove the legal representative in accordance with laws, administrative regulations, or the articles of association, the legal representative shall be removed from the date the resolution is adopted. Where the removed legal representative raises a defense on the ground that the company has not processed the change of registration, the people's court shall not support such defense.

The resignation or removal of a legal representative shall not affect the liabilities that the legal representative should bear during his or her tenure.

Article 2 — Guarantees Provided by the Company to External Parties

Where a company provides a guarantee for a company directly or indirectly controlled by its controlling shareholder or actual controller, Article 15 of the Company Law concerning affiliated guarantees shall apply by analogy, unless the counterparty, after conducting a reasonable examination at the time of entering into the guarantee contract, still did not know about the aforementioned control relationship.

Where a limited liability company provides a guarantee for others to acquire equity in the company itself or its parent company, Article 15 of the Company Law concerning affiliated guarantees shall apply by analogy.

Article 3 — Related-Party Transactions

Where directors, supervisors, or senior management personnel and their related parties directly or indirectly enter into related-party transactions with the company without following the statutory reporting or corporate resolution procedures, and the company requests confirmation that such transactions have no effect on the company, the people's court shall support such request. Where a party requests the return of property or compensation for losses, the matter shall be handled in accordance with Articles 24 and 25 of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code.

Where a related-party transaction involves grounds of invalidity, pending validity, voidability, or having no effect on the company, and the company does not file a lawsuit, and qualified shareholders file a derivative action in accordance with law, the people's court shall accept the case.

Where a controlling shareholder, actual controller, director, supervisor, or senior management personnel causes losses to the company through related-party transactions, and the company requests compensation for such losses, the people's court shall support such request in accordance with law. Where the defendant raises a defense solely on the ground that the related-party transaction has already undergone reporting, shareholder meeting approval, or board of directors approval procedures as prescribed by laws, administrative regulations, or the articles of association, the people's court shall not support such defense.

Article 4 — Piercing the Corporate Veil and Its Determination

Where a shareholder abuses the independent status of a legal person and the limited liability of shareholders, through means such as excessive control over the company, commingling of the shareholder's and company's assets, and investment of capital significantly insufficient for the company, thereby seriously harming the interests of the company's creditors, and the company's creditors request such shareholder to bear joint and several liability for the company's debts, the people's court shall support such request.

When determining whether a controlling shareholder exercises excessive control over a company, the following factors shall be comprehensively considered: first, whether multiple companies are all controlled by the same controlling shareholder and the relevant companies have lost their independent will; second, whether there is improper transfer of benefits among the multiple companies; and third, whether the improper transfer of benefits is intended to evade the company's debts.

When determining whether a shareholder's assets and the company's assets are commingled, the following factors shall be comprehensively considered: first, whether the shareholder's assets can be distinguished from the company's assets, primarily by examining whether proper financial records have been maintained; second, whether the shareholder has used or even misappropriated the company's assets without compensation; and third, whether there exists commingling of personnel, business, or premises. Where necessary, the people's court may, upon application by a party, determine whether asset commingling exists through means such as commissioning an audit.

When determining whether the capital invested by a shareholder in the company is significantly insufficient, the following factors shall be comprehensively considered: first, whether the capital actually invested by the shareholder in the company is clearly disproportionate to the risks inherent in the company's operations; and second, whether the shareholder has acted in bad faith by causing the company to incur excessive debt or malicious borrowing, thereby transferring investment risks to creditors.

Article 5 — Piercing the Corporate Veil Among Affiliated Companies

Where two or more companies are directly or indirectly excessively controlled by the same controlling shareholder, or their assets are commingled and cannot be distinguished, thereby seriously harming the interests of the company's creditors, and the creditors request any one company to bear joint and several liability for the debts of other companies, the people's court shall support such request; where the company's creditors simultaneously request the controlling shareholder to bear joint and several liability pursuant to Article 23, Paragraph 1 of the Company Law, the people's court shall support such request.

Where two or more companies are directly or indirectly excessively controlled by the same actual controller, or their assets are commingled and cannot be distinguished, thereby seriously harming the interests of the company's creditors, the preceding paragraph shall apply by analogy.

Article 6 — Litigation Procedures for Piercing the Corporate Veil

Where a creditor's claim against a company has not been confirmed by an effective judgment, and the creditor requests only the shareholders or other companies to bear joint and several liability for the company's debts pursuant to Article 23 of the Company Law, the people's court shall inform the creditor and advise it to add the company as a co-defendant; where the creditor refuses to do so, the court shall dismiss the action.

Where a creditor's claim against a company has been confirmed by an effective judgment, but the creditor has not filed a lawsuit pursuant to Article 23 of the Company Law requesting shareholders or other companies to bear joint and several liability, and instead directly applies to change or add shareholders or other companies as persons subject to enforcement to bear joint and several liability for the company's debts, the people's court shall dismiss the application for change or addition and advise the creditor to file a separate lawsuit. Where the applicant for enforcement is dissatisfied with such ruling, it may apply for reconsideration to the people's court at the next higher level; where the applicant directly files an enforcement objection action, the people's court shall not accept such case.

Article 7 — Sole-Shareholder Companies and Determination of Asset Independence

Where the shareholder of a sole-shareholder company provides evidence proving that the company has prepared annual financial accounting reports meeting statutory requirements at the end of each relevant fiscal year, the people's court may preliminarily find that the shareholder has fulfilled the burden of proof regarding the independence of the shareholder's assets from those of the sole-shareholder company. Where the company's creditors allege that the aforementioned annual financial accounting reports are untrue, incomplete, or inaccurate, the company or shareholder shall provide a reasonable explanation and corresponding evidence.

Where the shareholder of a sole-shareholder company cannot provide annual financial accounting reports meeting the requirements of the preceding paragraph, but provides complete and continuous company financial books and applies for a special audit, the people's court may grant such application, and the relevant audit costs shall be borne by such shareholder.

Where the shareholders are a married couple, Article 23, Paragraph 3 of the Company Law concerning sole-shareholder companies shall not apply.

Article 8 — Liability of Shareholders in Multi-Layered Sole-Shareholder Company Structures

Where the shareholder of a sole-shareholder company is itself a sole-shareholder company, and the company's creditors file a lawsuit against both the sole-shareholder company and its sole shareholder, and simultaneously request such shareholder's shareholder to bear joint and several liability solely on the ground that such shareholder's shareholder cannot prove the independence of its assets from the shareholder's assets, the people's court shall not support such request, unless the circumstances described in Article 5, Paragraph 2 of this Interpretation are met.

Article 9 — Litigation Concerning the Validity of Corporate Resolutions

Where the people's court renders a judgment confirming the validity of a corporate resolution, and a shareholder subsequently files a separate action to rescind the corporate resolution, the people's court shall accept such case in accordance with law; where a party raises a defense on the ground that another case has already confirmed the validity of the resolution, the people's court shall not support such defense.

Where a shareholder requests rescission of a corporate resolution on the ground that the voting shareholders or directors were subject to fraud or duress, and upon examination, the voting conduct of the relevant shareholders or directors, although meeting the Civil Code's requirements for voidability, would not have had a material impact on the resolution even if such voting conduct were rescinded due to the change in the number of persons or the proportion of voting rights in favor of the resolution, the people's court shall not support such request.

Where a party requests confirmation that a corporate resolution is valid, invalid, or non-existent, the party shall hold the status of shareholder, director, supervisor, or otherwise have a direct interest in the case at the time of filing the lawsuit. Where a removed director or supervisor requests rescission of the removal resolution, the people's court shall not accept such case.

Where a party requests confirmation that a corporate resolution is valid, invalid, non-existent, or requests rescission of a corporate resolution, the company shall be named as the defendant. Other interested parties involved in the corporate resolution may participate in the litigation as third parties in accordance with law. Before the conclusion of the first-instance court debate, other persons with standing as plaintiffs who apply to join the litigation may be listed as co-plaintiffs.

Article 10 — Prohibition on Requesting Convening of Shareholders' or Board Meetings

Where a party requests the people's court to order the company to convene a shareholders' meeting or board of directors meeting, the people's court shall not accept such case.

Where the shareholders' meeting adopts a resolution in violation of law, delegating powers that may only be exercised by the shareholders' meeting to the board of directors, or reclaiming powers that the law expressly provides may only be exercised by the board of directors to the shareholders' meeting, and a party requests confirmation that such resolution is invalid, the people's court shall support such request. Where the shareholders' meeting or the board of directors exceeds its authority and adopts a resolution on a matter that is not within the scope of corporate resolutions in accordance with law, and a party requests confirmation that such resolution is invalid, the people's court shall support such request.

Article 11 — Treatment of Claims Filed Beyond the Statutory Period

Where a party requests rescission of a corporate resolution or a shareholder objects to the forfeiture of rights, and the lawsuit is filed after the expiration of the period prescribed in Article 26 of the Company Law or Article 52, Paragraph 3 of the Company Law, the people's court shall not support such request.

Where a party requests the company to repurchase equity pursuant to Article 89, Paragraph 2 or Article 161, Paragraph 2 of the Company Law, and the lawsuit is filed after the expiration of the period prescribed by the Company Law, the people's court shall not support such request.

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Part II — Shareholder Capital Contributions and Related Liabilities (19 Articles)

Article 12 — Shareholder Agreements and Articles of Association

Where an agreement signed between some or all shareholders is not invalid or voidable, and a shareholder requests other shareholders to bear liability based on such agreement, the people's court shall support such request; where a shareholder claims that such agreement has binding effect on the company, the people's court shall not support such claim, unless one of the following circumstances exists:

1. All shareholders have unanimously agreed in writing on a matter subject to shareholders' meeting resolution, and have signed or affixed their seals on the decision document;

2. The law expressly provides that an agreement by all shareholders is binding on the company;

3. The company has expressly recognized the agreement through a resolution, and such agreement does not violate the mandatory provisions of laws or administrative regulations.

Article 13 — Contracts Signed by Promoters in the Name of the Company Under Formation

Where a promoter engages in civil activities in the name of a company under formation, and the counterparty requests the company to bear civil liability, the people's court shall support such request in accordance with law, unless the company can prove that such civil activity is unrelated to the formation of the company.

Where a promoter engages in civil activities in the name of a company under formation and the company is not established, and the counterparty requests other promoters to bear joint and several liability, the people's court shall support such request in accordance with law, unless the other promoters can prove that such civil activity is unrelated to the formation of the company.

The term "promoter" as used in this Interpretation includes the shareholders at the time of establishment of a limited liability company and persons who sign the formation agreement for the purpose of establishing a company, as well as the sponsors of a joint stock company.

Article 14 — Valuation of Non-Monetary Capital Contributions

When determining whether the actual value of a non-monetary capital contribution is significantly lower than the amount of shareholder contribution specified in the articles of association, the people's court may commission a lawfully established asset valuation institution to evaluate the value of such property at the time of contribution.

Where the parties' agreement on the valuation of non-monetary property differs from the valuation made by the evaluation institution, the asset valuation report shall serve as the basis for determining the value of the non-monetary property.

Where a contributor has made a non-monetary capital contribution with property meeting the statutory requirements, and the property subsequently depreciates due to market changes or other objective reasons, and the company requests the contributor to make up the shortfall in contribution, the people's court shall not support such request, unless otherwise provided in the articles of association or otherwise agreed between the contributor and the company.

Article 15 — Non-Monetary Capital Contributions

Where a contributor makes a capital contribution with construction land use rights, buildings, and other land attachments and similar immovable property, and has delivered such property for the company's use but has not completed the transfer of title registration within the period specified in the articles of association, and the company requests the contributor to complete the transfer of title registration, the people's court shall support such request in accordance with law; where the transfer of title registration has been completed but the property has not been delivered for the company's use within the period specified in the articles of association, and the company requests the contributor to deliver the property for the company's use and compensate for losses, the people's court shall support such request in accordance with law.

Where a contributor makes a capital contribution with allocated land use rights or buildings thereon, and the company requests the contributor to transfer the title of the allocated land use rights or buildings thereon to the company's name, and there are no legal or factual impediments to the transfer, the people's court shall support such request; where there are legal or factual impediments, the people's court may inform the company and advise it to amend its claims; where the company refuses to amend its claims, the court shall dismiss the claims.

Where a contributor makes a capital contribution with intellectual property rights that require transfer of title registration or approval, the preceding two paragraphs shall apply by analogy.

Article 16 — Capital Contributions with Encumbered Property

Where a contributor makes a capital contribution with construction land use rights, buildings, other land attachments, and similar property that are subject to a mortgage, and the company requests the contributor to transfer the title of the mortgaged property to the company's name, the following circumstances shall be distinguished:

1. Where the parties have not agreed to prohibit or restrict the transfer of the mortgaged property, Article 15, Paragraph 1 of this Interpretation shall apply by analogy;

2. Where the parties have agreed to prohibit or restrict the transfer of the mortgaged property and such agreement has been registered, and the mortgagee consents, the people's court shall support the request; where the mortgagee does not consent, the people's court may inform the company and advise it to amend its claims; where the company refuses to amend its claims after being so informed, the court shall dismiss the claims.

Where a contributor makes a capital contribution with intellectual property rights, equity interests, or similar property that are subject to a pledge of rights or have been subjected to preservation measures, the preceding Paragraph, Item 2 shall apply by analogy.

Article 17 — Capital Contributions with Property Without Disposal Rights or with Property Obtained Through Crime

Where a contributor makes a capital contribution with property over which the contributor has no right of disposal, and a dispute arises between the parties regarding the fulfillment of the contribution obligation, the people's court may make its determination by reference to Article 311 of the Civil Code.

Where a contributor makes a capital contribution with property obtained through illegal or criminal activities and acquires equity, when pursuing and punishing the illegal or criminal conduct, the equity shall be disposed of through auction or sale.

Article 18 — Capital Contributions with Claims Against Third Parties

Where a contributor makes a capital contribution with a claim against a third party, and the claim cannot be realized after the performance period has expired, and the company requests the contributor to make up the contribution and compensate for losses, the people's court shall not support such request, unless one of the following circumstances exists:

1. The articles of association provide or the contributor and the company agree that the contributor shall bear supplementary liability for the non-realization of the claim;

2. The shareholder makes a capital contribution with a fictitious claim or a claim whose actual value is significantly lower than the amount specified in the articles of association.

Issues concerning the valuation of claims used as capital contributions shall be governed by the provisions of Article 14 of this Interpretation regarding non-monetary capital contributions.

Article 19 — Shareholder Set-Off of Capital Contributions with Claims Against the Company

Where a shareholder sets off a monetary claim against the company with the shareholder's monetary capital contribution obligation, or after a resolution by the shareholders' meeting, sets off such claim with the shareholder's non-monetary capital contribution obligation, and the shareholder asserts that it has fulfilled its contribution obligation, the people's court shall support such assertion, unless the company has already entered bankruptcy proceedings or, although not yet in bankruptcy proceedings, has substantial grounds for bankruptcy. Where a shareholders' meeting resolution is required, the shareholder asserting the set-off shall recuse itself from voting.

When adjudicating related cases, the people's court shall ascertain the authenticity of the shareholder's claim against the company as a basic fact of the case, in order to prevent shareholders from evading their contribution obligations and harming the legitimate interests of the company and its creditors through set-offs with fictitious claims.

Article 20 — Burden of Proof for Contribution Obligations

Where a dispute arises between the parties as to whether the contribution obligation has been fulfilled, the contributor shall bear the burden of proof to establish that the contribution obligation has been fully fulfilled.

For non-monetary capital contributions, the contributor shall provide evidence proving that it has engaged a lawfully established asset valuation institution to evaluate the contributed property. Where the company, creditors, or others assert that the evaluation procedure was unlawful or the valuation was excessive or insufficient, they shall bear the burden of proof.

Article 21 — Liability of Shareholders for Defective Capital Contributions

Where a shareholder has not fully fulfilled its capital contribution obligation, and the company or other shareholders who have fully paid their contributions request such shareholder to fulfill its contribution obligation to the company and bear the resulting losses, the people's court shall support such request in accordance with law. Where other shareholders who have fully paid their contributions simultaneously request such shareholder to bear liability for liquidated damages pursuant to the formation agreement or other agreements, the people's court shall support such request in accordance with law; where such shareholder asserts that the agreed liquidated damages are excessively higher than the losses incurred and should be appropriately reduced, the people's court shall handle the matter in accordance with the relevant provisions of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code.

Where other shareholders who have fully paid their contributions only request the shareholder to bear liability for liquidated damages, the people's court may, upon application by a party or ex officio, add the company as a third party, and shall inform the other shareholders and advise them to amend or add their claims to include the shareholder's obligation to fulfill the capital contribution to the company or bear losses; where the other shareholders refuse to amend or add their claims after being so informed, their claims shall be dismissed.

Where a shareholder has not fully fulfilled its capital contribution obligation, and the company does not assert its rights through litigation or arbitration, resulting in the company's creditors being unable to realize their matured claims against the company, and the company's creditors sue such shareholder as defendant with the company as third party, requesting such shareholder to bear liability for the creditors' unrealized matured claims within the scope of the unpaid capital contributions and resulting losses to the company, the people's court shall support such request in accordance with law.

After a company increases its capital, where a shareholder has not fully fulfilled its capital contribution obligation, and the company's creditors request such shareholder to bear liability in accordance with this Article within the scope of the unpaid capital contributions and resulting losses to the company, and the shareholder raises a defense on the ground that it had not yet become a shareholder when the claim arose, the people's court shall not support such defense.

Article 22 — Multiple Creditors Requesting the Same Shareholder to Bear Defective Capital Contribution Liability

Where the company's creditors request a shareholder to bear capital contribution liability pursuant to the preceding Article, the case shall be under the jurisdiction of the people's court at the location of the company's domicile. Where two or more creditors file two or more cases against the same shareholder as defendant, the case shall be heard first by the people's court at a higher level; where the cases are accepted by the same people's court, they may be consolidated; where consolidation is not possible, the case whose first-instance hearing was conducted first shall be heard first. Other cases shall be stayed during the period in which the case is being heard first. After an effective judgment is rendered in the case heard first, the stayed cases and other cases subsequently filed against such shareholder for capital contribution liability shall be decided based on the capital contribution liability of such shareholder as determined in the effective judgment, unless the party has contrary evidence sufficient to overturn the facts found in the effective judgment and the judgment requires reversal in accordance with law.

Where disputes arising from the addition of a shareholder as a person subject to enforcement result in enforcement objections or enforcement objection actions, they shall be under the jurisdiction of the enforcement court, and the relevant procedures shall be handled by reference to the preceding paragraph.

Where two or more creditors file two or more lawsuits against the same shareholder as defendant, and a party applies for preservation measures against such shareholder's property, the amount preserved shall be limited to the capital contribution liability and losses that such shareholder should bear; any amount in excess shall be preserved through sequential measures of seizure, impoundment, or freezing. Where multiple dispute cases covered by the preceding two paragraphs enter enforcement proceedings, enforcement shall be carried out by the court that first took enforcement measures, and distribution shall be carried out in accordance with the enforcement distribution procedures.

Article 23 — Multiple Shareholders Bearing Defective Capital Contribution Liability

Where two or more shareholders have not fully fulfilled their capital contribution obligations, and the company's creditors request each shareholder to bear liability within the scope of each shareholder's unpaid contributions and resulting losses to the company in accordance with Article 21 of this Interpretation, the people's court shall support such request, except where all promoters were required to actually pay their capital contributions at the time of the company's formation pursuant to the articles of association, and Article 50, Article 99, or other provisions of the Company Law provide otherwise.

Article 24 — Accelerated Maturity of Subscribed Capital Contributions

Where a company, due to its objective inability to pay, cannot discharge its matured debts, and does not request shareholders to fulfill their contribution obligations through litigation or arbitration in accordance with law, and the company's creditors request shareholders who have subscribed capital contributions but whose contribution deadline has not yet arrived to bear liability, the matter shall be handled by reference to Article 21, Paragraph 3, Article 22, and Article 23 of this Interpretation.

In the enforcement of monetary claims, where the company's creditors apply to change or add shareholders whose contribution deadline has not yet arrived as persons subject to enforcement, the people's court shall dismiss the application for change or addition and advise the creditors to file a separate lawsuit. Where the applicant for enforcement is dissatisfied with such ruling, it may apply for reconsideration to the people's court at the next higher level; where the applicant directly files an enforcement objection action, the people's court shall not accept such case.

Article 25 — Restriction of Shareholder Rights Due to Non-Fulfillment of Capital Contribution Obligations

Where a shareholder has not fully fulfilled its capital contribution obligation, and the company, pursuant to the articles of association or a shareholders' meeting resolution, imposes reasonable restrictions on such shareholder's rights to profit distribution, preemptive rights to subscribe for new shares, rights to distribution of residual assets, and other shareholder rights, and such shareholder requests a declaration that the restrictions are invalid, the people's court shall not support such request.

Where a shareholder has subscribed capital contributions, and shareholders representing more than two-thirds of the voting rights adopt a resolution to determine the proportion of voting rights based on actual capital contributions paid or other standards, and a shareholder requests confirmation that the resolution is invalid, the people's court shall not support such request.

When adjudicating cases involving the validity of corporate resolutions under this Article, where the parties dispute whether a shareholder has fully fulfilled its capital contribution obligation, or whether the convening procedures or voting methods of the shareholders' meeting comply with the requirements, the people's court shall determine the validity of the corporate resolution based on the ascertained relevant facts.

Article 26 — Forfeiture of Shareholder Rights

Where a company suffers losses due to the forfeiture of a shareholder's rights, and the company requests the forfeited shareholder to bear liability for damages, the people's court shall support such request.

After a shareholder's rights are forfeited, where the equity is not transferred or cancelled within six months, and the company requests other shareholders to fully pay the corresponding capital contributions in proportion to their respective equity shares, the people's court shall support such request; where the company's creditors request other shareholders to bear liability for their unrealized matured claims within the scope of their equity proportions in accordance with the relevant provisions of this Interpretation, the people's court shall support such request. Where other shareholders fully pay the corresponding capital contributions in proportion to their equity shares and claim to acquire the corresponding equity, the people's court shall support such request.

Where a shareholder requests restoration of shareholder status on the ground that the board of directors resolution to forfeit the shareholder's rights is invalid, non-existent, or voidable, and upon examination the shareholder filed the lawsuit after the statutory thirty-day period has expired, the people's court shall not support such request.

Article 27 — Directors' Liability for Demanding Capital Contributions

Where any of the following circumstances exists, resulting in losses to the company, and the company requests the responsible directors to bear liability for damages, the people's court shall support such request:

1. The board of directors failed to verify the shareholders' capital contribution status;

2. A shareholder failed to pay its capital contribution within the period specified in the articles of association, and the board of directors failed to promptly issue a written demand for payment in the name of the company;

3. The board of directors adopted a resolution on forfeiture or non-forfeiture of shareholder rights that is contrary to the company's interests;

4. After a shareholder's rights were forfeited, the company transferred the forfeited equity to a transferee, and the transferee failed to timely fulfill its contribution obligation or the transfer price was lower than the subscribed capital contribution;

5. Other circumstances in which the directors violated their duties of loyalty and diligence in the course of verification, demand, and handling of forfeited equity, resulting in losses to the company.

Where the circumstances described in the preceding paragraph arise, and the company's creditors sue a director as defendant with the company as third party, requesting such director to bear liability for the creditors' unrealized matured claims within the scope of the losses caused to the company, the people's court shall not support such request, unless otherwise provided by law or this Interpretation.

Article 28 — Withdrawal of Capital Contributions

Where, after the company is established, a shareholder withdraws its capital contribution through means such as fabricating creditor-debtor relationships or misappropriating company property, without following statutory procedures and to the detriment of the company's legitimate interests, and the company, the company's creditors, or others request a finding that such shareholder has withdrawn its capital contribution, the people's court shall support such request. Where a shareholder fabricates false financial statements to inflate profits for distribution or uses related-party transactions to transfer capital contributions out of the company, the people's court shall handle the matter in accordance with the relevant provisions on illegal distribution of profits and related-party transactions.

Where a shareholder withdraws its capital contribution, and the company requests the shareholder to return the capital contribution and compensate for losses, and the responsible directors, supervisors, and senior management personnel bear joint and several liability for losses caused by the shareholder's inability to return the capital contribution, the people's court shall support such request. After the responsible directors, supervisors, and senior management personnel have borne such liability, they shall have the right to seek recourse against the shareholder who withdrew the capital contribution.

Where a shareholder withdraws its capital contribution, and the company does not assert its rights through litigation or arbitration, resulting in the company's creditors being unable to realize their matured claims against the company, and the company's creditors sue the persons liable under the preceding paragraph as defendants with the company as third party, requesting the persons liable under the preceding paragraph to bear liability for the creditors' unrealized matured claims within the scope of their liability, the matter shall be handled by reference to Article 21, Paragraph 3, Article 22, and Article 23 of this Interpretation.

Where a shareholder withdraws its capital contribution, and the company, pursuant to the articles of association or a shareholders' meeting resolution, imposes reasonable restrictions on such shareholder's rights, Article 25 of this Interpretation shall apply by analogy; where the company notifies the shareholder of forfeiture of rights, Article 52 of the Company Law and Article 26 of this Interpretation shall apply by analogy.

Where the company, the company's creditors, or others request a shareholder who has withdrawn its capital contribution to return the contribution and compensate for losses, they shall bear the burden of proof to establish that such shareholder has withdrawn its capital contribution.

Article 29 — Illegal Capital Reduction

Where a company reduces its registered capital in violation of the Company Law, and the company's creditors whose rights are infringed request shareholders to bear liability for the company's debts within the scope of the benefits obtained by the shareholders through the capital reduction, or request directors and senior management personnel who acted with intent or gross negligence to bear liability for damages, the people's court shall support such request. Where multiple creditors request the same shareholder to bear liability, or where creditors request multiple shareholders to bear liability, Article 22 and Article 23 of this Interpretation shall apply by analogy respectively.

Article 30 — Capital Contributions Under Assumed Identity

Where a person makes a capital contribution in the name of another person and registers that other person as a shareholder with the company registration authority, and the person whose name was used sues the company as defendant requesting confirmation that he or she is not a shareholder and requests a change of equity registration or removal of the registration information, the people's court shall support such request. Where the person whose name was used suffered damages, and such person requests the person who assumed the identity to bear liability for damages, the people's court shall support such request.

Where the company, the company's creditors, or others request the person whose name was used to fulfill the capital contribution obligation or bear liability for damages for the company's inability to discharge its matured debts, the people's court shall not support such request.

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Part III — Equity Holding by Proxy and Protection of Investor Rights (9 Articles)

Article 31 — Disclosure of the Actual Investor's Identity

Where the actual investor of a limited liability company and the nominee shareholder enter into a contract agreeing that the actual investor shall make the capital contribution and enjoy the investment returns, and the nominee shareholder shall hold the company's equity on behalf of the actual investor, and the actual investor requests confirmation of shareholder status, the actual investor shall file a lawsuit with the company as defendant and the nominee shareholder as third party, and other shareholders may participate in the litigation as third parties.

Where one of the following circumstances exists, and the actual investor requests the company to confirm the actual investor's shareholder status and to issue a capital contribution certificate, amend the shareholder register, and process the change of equity registration, the people's court shall support such request, unless otherwise provided by laws, administrative regulations, or the articles of association:

1. The company has recognized the actual investor's shareholder status through a shareholders' meeting resolution;

2. More than half of the other shareholders agree that the actual investor may exercise shareholder rights, or more than half of the other shareholders knew or should have known about the proxy equity holding arrangement and did not raise objections to the actual investor's actual exercise of shareholder rights.

Where the actual investor cannot obtain shareholder status pursuant to the preceding paragraph, and requests the equity to be auctioned or sold and the proceeds to be paid to the actual investor, the people's court shall support such request. Where the nominee shareholder requests payment of reasonable remuneration, if the proxy equity holding contract contains an agreement, such agreement shall prevail; where there is no agreement or the agreement is unclear, the remuneration shall be reasonably determined by comprehensively considering the nominee shareholder's participation in business management, the returns on the equity, and other factors. Where one party's fault causes losses to the other party, and the other party requests compensation for losses, the people's court shall support such request.

When determining whether a genuine proxy equity holding arrangement exists between the actual investor and the nominee shareholder, the people's court shall make a prudent determination by comprehensively considering factors such as the existence of a genuine proxy equity holding contract, whether capital contributions were actually paid, the source of funds, the capacity to make contributions, and whether a special relationship exists between the parties.

Article 32 — Invalidity of Proxy Equity Holding Contracts and Its Consequences

The people's court shall find a proxy equity holding contract between the actual investor and the nominee shareholder to be invalid where one of the following circumstances exists:

1. The parties agree to hold equity in a financial institution by proxy, in violation of prohibitive provisions of laws or administrative regulations, or in violation of national regulatory provisions that affect financial order or financial security;

2. The parties agree to hold shares of a listed company by proxy, in violation of prohibitive provisions of laws or administrative regulations, or in violation of national regulatory provisions on information disclosure and other matters that affect securities market order;

3. A civil servant or a person subject to civil servant management has others hold equity by proxy to circumvent legal provisions prohibiting participation in for-profit activities;

4. Other circumstances in which the contract is invalid due to violation of the mandatory provisions of laws or administrative regulations, or violation of public order and good morals.

Where a proxy equity holding contract is invalid, and the actual investor who meets the conditions for disclosure set forth in Paragraph 2 of the preceding Article requests confirmation of shareholder status, the people's court shall support such request; where the actual investor who does not qualify to hold shares or does not meet the conditions for disclosure requests the equity to be auctioned or sold, the people's court shall support such request, and the return of proceeds, reasonable remuneration, damages, and other matters shall be handled by analogy to Article 24, Paragraphs 1 and 2 of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code.

Where a proxy equity holding contract is suspected of illegality and has not been dealt with, and may result in one or both parties obtaining improper benefits through illegal conduct, the people's court shall issue a judicial recommendation to the relevant authorities. Where the parties' conduct is suspected of constituting a crime, the case leads shall be referred to the relevant authorities; where the case is a criminal private prosecution case, the parties shall be informed that they may file a separate lawsuit with the people's court having jurisdiction.

Article 33 — Nominee Shareholder's Disposal of Equity

Where the nominee shareholder transfers or pledges the equity held in its name to a third party without the actual investor's consent, and the actual investor requests the counterparty to return the equity to the nominee shareholder or requests confirmation that the pledge was not validly established, the people's court shall support such request, unless the transferee acquired the equity in good faith by analogy to Article 311 of the Civil Code.

Where the circumstances described in the preceding paragraph arise, in applying the bona fide acquisition system by analogy, the counterparty shall be presumed to be acting in good faith. Where the actual investor asserts that the counterparty does not constitute good faith — i.e., that the counterparty knew or should have known about the proxy equity holding arrangement between the parties — the actual investor shall bear the burden of proof.

Where the nominee shareholder's disposal of equity causes losses to the actual investor, and the actual investor requests the nominee shareholder to bear liability for damages, the people's court shall support such request.

Article 34 — Company's Request for Shareholder to Bear Defective Capital Contribution Liability

In a proxy equity holding arrangement, where a shareholder has not fully fulfilled its capital contribution obligation, and the company requests the actual investor who meets the conditions for disclosure set forth in Article 31, Paragraph 2 of this Interpretation to bear capital contribution liability, the people's court shall support such request; where the actual investor raises a defense solely on the ground that it has not yet been recorded in the shareholder register or registered as a shareholder, the people's court shall not support such defense.

Where the company requests the nominee shareholder to fully fulfill its capital contribution obligation, and the nominee shareholder raises a defense solely on the ground that it is not the actual investor, the people's court shall not support such defense. Where the nominee shareholder asserts that the actual investor shall bear the capital contribution liability, the people's court shall, upon the nominee shareholder's application or ex officio, add the actual investor as a third party to the litigation; where the nominee shareholder proves that the actual investor meets the conditions for disclosure set forth in Article 31, Paragraph 2 of this Interpretation, the people's court may inform the company and advise it to amend its claims; where the company refuses to amend its claims after being so informed, the court shall dismiss the claims.

Where the company requests the actual investor and the nominee shareholder to bear joint and several liability, the people's court shall advise the company to choose whether to request the actual investor or the nominee shareholder to bear the capital contribution liability. Where the company refuses to make such choice, the matter shall be handled in accordance with Paragraph 2 of this Article.

Article 35 — Company Creditors' Request for Shareholder to Bear Defective Capital Contribution Liability

In a proxy equity holding arrangement, where a shareholder has not fully fulfilled its capital contribution obligation, and the company's creditors request the nominee shareholder or the actual investor to bear liability for their unrealized matured claims within the scope of the unpaid capital contributions and resulting losses to the company in accordance with Article 21, Paragraph 3, Article 22, Article 23, and Article 24 of this Interpretation, the matter shall be handled in accordance with the preceding Article.

Where the nominee shareholder discloses the actual investor's identity by transferring the equity to the actual investor, and the company's creditors request the nominee shareholder to bear capital contribution liability pursuant to the provisions of Article 88 of the Company Law regarding equity transfers, the people's court shall focus its hearing on whether the nature of the legal relationship is an equity transfer or a disclosure of the actual investor, and shall handle the matter in accordance with the preceding paragraph.

Article 36 — Actual Investor's Exclusion of Compulsory Enforcement Against Nominee Shareholder

Where the nominee shareholder's monetary creditors apply to the people's court for compulsory enforcement of the limited liability company equity registered under the nominee shareholder's name, and the actual investor who meets the conditions for disclosure set forth in Article 31, Paragraph 2 of this Interpretation or who has fully paid all capital contributions requests exclusion of compulsory enforcement in an enforcement objection action, the people's court shall support such request, unless the actual investor failed to raise an objection in accordance with law within a reasonable period after the people's court first seized the equity.

Where the actual investor's monetary creditors have evidence proving that the actual investor meets the conditions for disclosure set forth in Article 31, Paragraph 2 of this Interpretation or that the actual investor has fully paid all capital contributions, and apply to the people's court for compulsory enforcement of the limited liability company equity registered under the nominee shareholder's name, the people's court shall support such request. Where the nominee shareholder requests exclusion of compulsory enforcement on the ground that it is the shareholder recorded in the shareholder register or registered in the company registration records, the people's court shall not support such request.

Article 37 — Validity and Performance of Valuation Adjustment Agreements

Where an investor enters into a valuation adjustment agreement with a company or its shareholders or actual controllers, stipulating that when the company fails to achieve the agreed performance targets or listing conditions within a certain period, the company or its shareholders or actual controllers shall repurchase the equity, bear monetary compensation obligations, or assume similar commitments, and a party requests confirmation that such agreement is invalid, the people's court shall not support such request, unless otherwise provided by this Interpretation.

Where an investor enters into the aforementioned agreement with the company, and the company has not carried out capital reduction procedures or distributed profits in accordance with law, and a party requests continued performance, the people's court shall not support such request. Where the parties stipulate that the company shall bear liability for breach of contract or provide security in rem in connection with the company's failure to carry out capital reduction procedures or distribute profits in accordance with law, and a party requests the company to bear liability for breach of contract or security liability based on such stipulation, the people's court shall not support such request; where a third party provides security and the investor requests such third party to bear security liability, the people's court shall support such request.

Article 38 — Characterization of Investor's Request for Shareholder to Repurchase Equity

Where a shareholder and an investor agree that the equity shall be transferred to the investor's name, and upon the fulfillment of certain conditions, the shareholder shall repurchase the equity, and after the agreed repurchase conditions are met, the investor requests the shareholder to repurchase the equity, the people's court shall, upon application by a party or ex officio, add the company as a third party to the litigation, and while ordering the shareholder to fulfill the repurchase obligation, shall specify in the judgment that the company shall amend the shareholder register and process the change of equity registration after the shareholder fulfills the repurchase obligation; where the shareholder's assets are insufficient to pay the repurchase price, the investor shall have the right to apply for auction or sale of the equity and receive payment from the proceeds. Before the shareholder fulfills the repurchase obligation, where the company or the company's creditors request the investor to bear liability for failure to fully fulfill the capital contribution obligation, the people's court shall support such request in accordance with law.

Where a shareholder and an investor agree that the equity shall be transferred to the investor's name, and upon the fulfillment of certain conditions, the investor has the option of whether to require the shareholder to repurchase the equity, and after the conditions are met, the investor makes such choice within the agreed period or within a reasonable period after the shareholder's demand, and requests the shareholder to repurchase the equity, the judgment shall be formulated and the investor's shareholder contribution obligations shall be handled by reference to the preceding paragraph. Where the investor requests the shareholder to repurchase the equity after the expiration of the aforementioned period, the people's court shall not support such request, unless the shareholder consents.

Where a shareholder and an investor agree that the equity shall be transferred to the investor's name, and upon the expiration of a certain period, the shareholder shall repurchase the equity at the principal amount plus a premium, and if the repurchase is not made on time, the equity shall belong to the investor or the investor may foreclose, auction, or sell the equity and the proceeds shall be used to pay the repurchase price, the matter shall be handled in accordance with Articles 68 and 69 of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the Security System Provisions of the Civil Code regarding equity transfer as security. However, where the investor actually exercises shareholder rights beyond the purpose of security, the matter shall be handled in accordance with Paragraph 1 of this Article.

Article 39 — Shareholder's Request for Company to Repurchase Equity

Where a company's controlling shareholder abuses its shareholder rights, resulting in other shareholders' inability to achieve their purposes of participating in the company's management or obtaining investment returns, and other shareholders request the company to purchase their equity at a reasonable price in accordance with Article 89, Paragraph 3 of the Company Law, the people's court shall support such request. Where the company raises a defense on the ground that the controlling shareholder has already borne liability for damages in accordance with Article 21, Paragraph 2 of the Company Law, the people's court shall not support such defense.

Where a company's controlling shareholder abuses its shareholder rights and causes losses to other shareholders, but has not yet resulted in their inability to achieve their purposes of participating in the company's management or obtaining investment returns, and other shareholders request the controlling shareholder to bear liability for damages in accordance with Article 21, Paragraph 2 of the Company Law, the people's court shall support such request; where other shareholders request the company to purchase their equity at a reasonable price in accordance with Article 89, Paragraph 3 of the Company Law, the people's court shall not support such request.

Where other shareholders request the company to purchase their equity at a reasonable price, they shall specify the repurchase price of the equity. The people's court shall, taking into account the adversarial positions of the parties, comprehensively consider factors such as the quantity of equity to be transferred, the company's net assets as recorded on the previous year's balance sheet, the transaction prices of equity in the company and comparable companies within the preceding six months, and other relevant factors to determine a reasonable price for the equity; where such methods are still insufficient to determine the price, the court may determine it through judicial appraisal or other means.

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Part IV — Equity Transfers and Preemptive Purchase Rights (9 Articles)

Article 40 — Equity Changes in Limited Liability Companies

Where the parties transfer equity in a limited liability company, unless laws or administrative regulations require the contract to undergo approval procedures, the transferee shall acquire the equity from the date it is recorded in the shareholder register; where the company has not maintained a shareholder register, the transferee shall acquire the equity from the date it actually exercises shareholder rights or notifies the company of the equity transfer.

Where the equity transferee has been recorded in the shareholder register but the change of registration has not yet been processed with the company registration authority, and the transferor's monetary creditors apply for enforcement against the equity under the transferor's name, and the transferee requests exclusion of compulsory enforcement, the people's court shall support such request.

Article 41 — Handling of Double Sales of Equity

Where, after an equity transfer contract is entered into but before the change of registration is processed with the company registration authority, the original shareholder disposes of the equity again through transfer, pledge, or other means, and a third party claims to have acquired the equity or established a pledge right, the people's court shall handle the matter by reference to Article 311 of the Civil Code regarding bona fide acquisition. When the transferee asserts that a third party does not constitute good faith, the determination shall be made by comprehensively considering factors such as whether the company maintained a shareholder register at the time the third party acquired the equity or established the pledge, whether the transferee was already recorded as a shareholder in the shareholder register, whether the shareholder register records are consistent with the company registration records, and whether the third party reviewed the shareholder register or the company registration records or inquired with the company about the equity transfer.

Where the circumstances described in the preceding paragraph arise, and the third party or the equity transferee that did not lawfully acquire the equity or establish the pledge requests the transferor to bear liability for breach of contract pursuant to the contract, the people's court shall support such request. Where a third party acquires the equity or pledge right in good faith, and the transferee requests directors or senior management personnel who were at fault for the failure to timely process the change of registration to bear liability for damages, the people's court shall support such request; where the transferee was at fault for failing to timely cooperate in processing the change of registration, the liability of the directors or senior management personnel at fault may be appropriately reduced.

Article 42 — Statutory Nature of Capital Contribution Obligations

Where an equity transfer agreement contains provisions regarding capital contribution liability that are inconsistent with Article 88 of the Company Law, and a party claims that such provisions are invalid on the ground that they violate mandatory provisions of law, the people's court shall not support such claim; however, such provisions shall not be asserted against the company or the company's creditors. Where a party claims that the parties should bear liability in accordance with the aforementioned provisions on the ground that the company has approved such provisions through a shareholders' meeting or board of directors resolution, the people's court shall not support such claim.

Article 43 — Equity Transfer When Capital Contributions Are Subscribed

Where a shareholder transfers equity for which the contribution deadline has not yet arrived, and the statutory grounds for accelerated maturity have already been met, and the company, the company's creditors, or others request the transferor to bear liability, or request the transferor and the transferee to bear joint and several liability within the scope of the capital contribution shortfall, in accordance with Article 88, Paragraph 2 of the Company Law, the people's court shall not support such request. However, the people's court may, after focusing the hearing on legal application and relevant factual issues and organizing the parties to fully present evidence and arguments, directly render a judgment in accordance with Article 88, Paragraph 1 of the Company Law.

In the enforcement of monetary claims, where the applicant for enforcement applies to change or add a shareholder who transferred equity before the contribution deadline as a person subject to enforcement, the people's court shall dismiss the application for change or addition and advise the applicant to file a separate lawsuit. Where the applicant for enforcement is dissatisfied with such ruling, it may apply for reconsideration to the people's court at the next higher level; where the applicant directly files an enforcement objection action, the people's court shall not accept such case.

Article 44 — Equity Transfer Where Capital Contributions Are Defective

Where a shareholder transfers equity without having fully fulfilled its capital contribution obligation, and the company, the company's creditors, or others request the transferor and the transferee to bear joint and several liability within the scope of the capital contribution shortfall in accordance with Article 88, Paragraph 2 of the Company Law, and the transferee raises a defense on the ground that it did not know and should not have known that the transferor had not fully fulfilled its capital contribution obligation, the transferee shall bear the burden of proof. Where the transferee bears liability and then seeks recourse against the transferor shareholder, the people's court shall support such request, unless the parties have otherwise agreed.

Where a shareholder transfers equity after withdrawing its capital contribution, and the company, the company's creditors, or others request the transferee to bear joint and several liability by analogy to Article 88, Paragraph 2 of the Company Law, the people's court shall not support such request. Where the transferor and the responsible directors, supervisors, and senior management personnel are unable to compensate for the losses caused to the company by the withdrawal of capital contributions, and the company requests the transferee who knew of the transferor's withdrawal of capital contributions to bear supplementary compensation liability, the people's court shall support such request; where the company does not assert its rights through litigation or arbitration, resulting in the company's creditors being unable to realize their matured claims against the company, and the company's creditors sue the transferor, the responsible directors, supervisors, and senior management personnel, and the transferee as defendants with the company as third party, and request the transferee to bear supplementary compensation liability for their unrealized matured claims, the people's court shall support such request in accordance with law.

In the enforcement of monetary claims, where the applicant for enforcement applies to change or add the equity transferee described in the preceding two paragraphs as a person subject to enforcement, the matter shall be handled by reference to Article 43, Paragraph 2.

Article 45 — Shareholder's Withdrawal from Equity Transfer

Where a shareholder of a limited liability company intends to transfer equity to a person other than the existing shareholders, and after other shareholders have asserted their right to purchase on the same terms, the shareholder no longer wishes to transfer the equity, the other shareholders' request for preemptive purchase shall not be supported by the people's court, unless otherwise provided by the articles of association or otherwise agreed by all shareholders.

When the people's court determines "same terms," it shall comprehensively consider factors such as the quantity of equity to be transferred, the price, the payment method, the performance period, and other matters that the transferring shareholder proves constitute transaction conditions, such as the transferee's provision of loans or services to the company.

Article 46 — Consequences of Infringement on Preemptive Purchase Rights

Where a shareholder of a limited liability company transfers equity to a person other than the existing shareholders, and fails to notify the other shareholders, or damages the preemptive purchase rights of other shareholders through fraud, malicious collusion, or other means, and other shareholders assert the right to purchase the equity on the same terms, the people's court shall support such request, unless one of the following circumstances exists:

1. Other shareholders failed to assert the right within thirty days from the date they knew or should have known the same terms for exercising the preemptive purchase right;

2. Other shareholders failed to assert the right within one year from the date the shareholder register was amended;

3. Where the company has not maintained a shareholder register, other shareholders failed to assert the right within one year from the date the company change registration was processed.

Where other shareholders described in the preceding paragraph only request confirmation that the equity transfer contract is invalid, but do not simultaneously assert the right to purchase the equity on the same terms, and still do not assert the right to purchase after being informed by the people's court, the people's court shall not support such request.

Where other shareholders who were unable to exercise their preemptive purchase rights through no fault of their own request the transferor to bear liability for damages on the ground that their preemptive purchase rights were infringed, the people's court shall support such request in accordance with law. Where a transferee who cannot acquire the equity due to other shareholders' exercise of preemptive purchase rights requests the transferor to bear liability for breach of contract pursuant to the equity transfer contract, the people's court shall support such request.

Article 47 — Preemptive Purchase Rights in Competitive Bidding

Where state-owned equity in a limited liability company is transferred through a lawfully established property rights exchange, the trading rules of the property rights exchange may be used by analogy to determine the requirements of "written notice," "same terms," and other elements.

Where equity in a limited liability company is transferred to a person other than the existing shareholders through competitive bidding methods such as auction, issues involving preemptive purchase rights may be handled by reference to the relevant provisions of the Supreme People's Court Provisions on the Auction and Sale of Property in Civil Enforcement by the People's Courts. Where other shareholders who did not participate in the auction or sale through no fault of their own request to exercise preemptive purchase rights, the people's court shall not support such request; where such shareholders request the transferor, the auction institution, or other responsible parties to bear liability for damages, the people's court shall support such request in accordance with law.

Article 48 — General Inapplicability to Non-Listed Joint Stock Companies

Where a shareholder of a non-listed joint stock company asserts preemptive purchase rights against the transferor based on provisions in the articles of association granting other shareholders preemptive purchase rights on the same terms, the people's court shall not support such request, unless the transferee knew or should have known of the provisions in the articles of association.

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Part V — Corporate Governance (11 Articles)

Article 49 — Acceptance and Judgment Formulation in Shareholder Information Right Disputes

Where a shareholder requests, pursuant to the Company Law or the articles of association, to inspect or copy specific documents and materials of the company, and does not have shareholder status at the time of filing the lawsuit, the people's court shall not accept the case, unless the plaintiff has preliminary evidence proving that its legitimate interests were harmed during the period of shareholding.

Where a shareholder has not provided preliminary evidence proving that a written request to inspect or take extracts of the company's accounting books and accounting vouchers has been made to the company and was refused, and directly requests to inspect or take extracts of the accounting books and accounting vouchers, the people's court shall not accept the case.

After the people's court accepts the case, where upon trial the court supports the shareholder's claims, it shall specify in the judgment the time, place, manner, and scope for inspecting and copying the company's specific documents and materials.

Article 50 — Determination of Improper Purpose

Where the company proves that the shareholder applied to inspect or take extracts of accounting books and accounting vouchers for the following purposes, the shareholder may generally be found to have an "improper purpose":

1. The shareholder's self-operated business has a substantive competitive relationship with the company's principal business, unless otherwise provided by the articles of association or otherwise agreed by all shareholders;

2. The shareholder applied to inspect for the purpose of reporting relevant information to others, and such reporting is not an obligation that the shareholder is required to fulfill under laws or administrative regulations;

3. Other circumstances in which the shareholder has an improper purpose.

Where a shareholder requests to inspect or take extracts of the accounting books and accounting vouchers of the company's wholly-owned subsidiary, the preceding paragraph shall apply.

Article 51 — Articles of Association and Shareholder Information Rights

Where the articles of association, agreements among shareholders, or other documents substantively deprive a shareholder of the right to inspect and copy the company's relevant documents and materials as provided by the Company Law, and the shareholder requests confirmation that the relevant provision or agreement is invalid and requests to inspect and copy the company's relevant documents and materials, the people's court shall support such request.

Where the articles of association, agreements among shareholders, or other documents reasonably restrict or expand a shareholder's right to inspect and copy the company's relevant documents and materials as provided by the Company Law, and the shareholder asserts such right against the company based on such provision, the people's court shall support such request.

Article 52 — Shareholder's Request for Profit Distribution

Where a shareholder requests the company to distribute profits based on a shareholders' meeting resolution specifying a concrete distribution plan, and the company refuses to distribute profits without legitimate reason, the people's court shall order the company to distribute profits to the shareholders in accordance with the distribution plan specified in the resolution. Where a shareholder requests the company to distribute profits without submitting a shareholders' meeting resolution specifying a concrete distribution plan, the people's court shall not support such request.

Where the company distributes profits to only some shareholders in violation of law, and other shareholders file a derivative action in accordance with law, requesting those shareholders to return the illegally distributed profits to the company and compensate for losses, and requesting the responsible directors, supervisors, and senior management personnel to bear liability for damages caused by the inability to return the profits, the people's court shall support such request; where other shareholders request the company to distribute profits, the people's court shall not support such request, unless the company meets the conditions for profit distribution and a specific distribution plan can be determined based on the provisions of the articles of association or the company's prior profit distribution practices.

Where the company has been profitable for five consecutive years and meets the conditions for profit distribution, yet adopts a shareholders' meeting resolution not to distribute profits to shareholders, and a dissenting shareholder requests the company to purchase its equity at a reasonable price, the people's court shall support such request.

In cases where shareholders request the company to distribute profits, the company shall be named as the defendant. Before the conclusion of the first-instance court debate, other shareholders who request profit distribution based on the same distribution plan and apply to join the litigation shall be listed as co-plaintiffs.

Article 53 — Shareholder Direct Actions

Where a director or senior management personnel, in the course of performing duties, violates laws, administrative regulations, or the articles of association, directly harming a shareholder's rights to profit distribution, preemptive subscription of new shares, distribution of residual assets, and other legitimate interests including participation in corporate management, and the shareholder requests the director or senior management personnel to bear civil liability for cessation of infringement, restoration to original condition, compensation for losses, or other remedies, the people's court shall support such request in accordance with law.

Where a shareholder's legitimate interests are harmed indirectly as a result of harm to the company's interests, and the shareholder requests a director or senior management personnel to bear civil liability for cessation of infringement, restoration to original condition, compensation for losses, or other remedies, the people's court shall advise the shareholder to amend its claims in accordance with Article 188, Article 189, Paragraphs 1 and 2 of the Company Law, and other provisions; where the shareholder refuses to amend its claims, the court shall dismiss the action.

Article 54 — Parties in Direct Actions for Harm to Company Interests by Directors, Supervisors, and Senior Management

Where directors or senior management personnel violate laws, administrative regulations, or the articles of association in performing their duties, causing losses to the company or its wholly-owned subsidiary, and the supervisory board is required to file a lawsuit on behalf of the company against the directors or senior management personnel pursuant to Article 189, Paragraph 1 of the Company Law, the company shall be named as plaintiff, and the chairperson of the supervisory board, or the supervisor where no supervisory board is established, shall represent the company in the litigation; where the company has no supervisor, a member of the audit committee exercising the functions of the supervisory board who has no interest in the matter shall represent the company in the litigation; where the company has neither a supervisor nor an audit committee exercising the functions of the supervisory board, the shareholder who made the written request for the company to file the lawsuit, or another shareholder who has no interest in the matter with the defendant director or senior management personnel, shall represent the company in the litigation.

Where a supervisor violates laws, regulations, or the articles of association in performing duties, causing losses to the company or its wholly-owned subsidiary, and the board of directors is required to file a lawsuit on behalf of the company against the supervisor pursuant to Article 189, Paragraph 1 of the Company Law, the company shall be named as plaintiff, and the chairperson of the board of directors, or the director where no board of directors is established, shall represent the company in the litigation.

Article 55 — Parties in Shareholder Derivative Actions

Where the supervisory board, the supervisor where no supervisory board is established, or the audit committee exercising the functions of the supervisory board, or the board of directors or the director where no board of directors is established, does not file a lawsuit on behalf of the company in accordance with the preceding Article, and a shareholder files a lawsuit on behalf of the company in accordance with law, the shareholder shall serve as plaintiff, and the company or its wholly-owned subsidiary shall participate in the litigation as a third party.

Before the conclusion of the first-instance court debate, where other shareholders meeting the statutory requirements apply to join the litigation with the same claims, they shall be listed as co-plaintiffs. Where a shareholder meets the requirements of Article 189 of the Company Law when filing the derivative action, and the defendant raises a defense on the ground that the plaintiff was not yet a shareholder when the conduct occurred, the people's court shall not support such defense.

Article 56 — Pre-Suit Requirements for Shareholder Derivative Actions and Exceptions

Where a shareholder files a derivative action without first making a written request to the supervisory board or the board of directors to file a lawsuit in accordance with law, the people's court shall not accept such case, unless one of the following circumstances exists:

1. Failure to file the lawsuit immediately would cause the company's interests to suffer irreparable harm;

2. The supervisory board or the board of directors has refused or is unable to file a lawsuit;

3. The company has neither a supervisory board nor an audit committee, and a qualified shareholder files a lawsuit against directors or senior management personnel in accordance with law.

Article 57 — Counterclaims in Shareholder Derivative Actions

Where another person infringes upon the legitimate interests of the company or its wholly-owned subsidiary, causing losses to the company, and a shareholder files a derivative action in accordance with Article 189, Paragraph 3 of the Company Law, and such person files a counterclaim on the ground that the plaintiff shareholder has maliciously filed the lawsuit and infringed upon such person's legitimate interests, the people's court shall accept such counterclaim; where such person files a counterclaim on the ground that the company should bear liability for tort or breach of contract in the relevant dispute, the people's court shall not accept such counterclaim.

Article 58 — Costs and Mediation in Shareholder Derivative Actions

In shareholder derivative action cases, where the shareholder prevails, the company or its wholly-owned subsidiary shall bear the reasonable costs incurred by the shareholder for participating in the litigation, including attorney's fees.

After a shareholder files a derivative action in accordance with law, where the parties reach a mediation agreement and such agreement is approved by a shareholders' meeting or board of directors resolution, the people's court shall issue a mediation document to confirm it.

Article 59 — Liability of Legal Representatives Serving as Directors or Managers to Third Parties

Where a legal representative serving as an executive director or manager causes harm to others through intentional or gross negligence, and the harmed party requests such legal representative to bear compensation liability pursuant to Article 191 of the Company Law, the people's court shall support such request.

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Part VI — Company Dissolution and Liquidation (18 Articles)

Article 60 — Grounds for Compulsory Dissolution

Where a shareholder or shareholders holding individually or collectively ten percent or more of the voting rights of all shareholders of the company files a lawsuit for dissolution of the company, and the requirements of Article 231 of the Company Law are met, the people's court shall accept such case.

Where one of the following circumstances exists, it may be found to constitute "serious difficulty in the company's operations and management" as provided in Article 231 of the Company Law:

1. The company has been unable to convene a shareholders' meeting for two or more consecutive years;

2. The shareholders' votes have been unable to reach the statutory or articles-of-association-required proportion, and no effective shareholders' meeting resolution has been adopted for two or more consecutive years;

3. There is a prolonged conflict among the company's directors that cannot be resolved through the shareholders' meeting;

4. Other circumstances in which serious difficulty has arisen in the company's operations and management.

Where a shareholder files a dissolution action on the grounds that the shareholder's information rights, profit distribution rights, or other rights have been infringed, or that the company is suffering losses, or that the company's assets are insufficient to pay all debts, or that the company's business license has been revoked and no liquidation has been carried out, the people's court shall not accept such case.

Article 61 — Simultaneous Filing of Dissolution Action and Application for Liquidation

Where a shareholder simultaneously files a dissolution action and applies to the people's court for liquidation of the company, the dissolution action shall be reviewed in accordance with the preceding Article; the liquidation application shall not be accepted by the people's court, but the shareholder shall be advised that, after the people's court renders a dissolution judgment, the liquidation obligors shall organize the liquidation themselves or the shareholder may separately apply to the people's court for liquidation of the company, in accordance with Articles 232 and 233 of the Company Law and Article 67 of this Interpretation.

Article 62 — Preservation in Dissolution Actions

Where a shareholder applies for property preservation or evidence preservation when filing a dissolution action, the people's court may grant such application provided that the shareholder provides security and the preservation does not affect the company's normal operations.

Article 63 — Parties in Dissolution Actions

Where a shareholder files a dissolution action, the company shall be named as the defendant. Where a shareholder also files a lawsuit against other shareholders as co-defendants, the people's court shall advise the plaintiff to redesignate the other shareholders as third parties; where the plaintiff insists on not making such change, the people's court shall dismiss the plaintiff's claims against the other shareholders.

The plaintiff filing a dissolution action shall notify the other shareholders, or the people's court shall notify them to participate in the litigation. Where other shareholders or interested parties apply to participate in the litigation as co-plaintiffs or third parties, the people's court shall grant such application.

Article 64 — Emphasis on Mediation

The people's court shall emphasize mediation when adjudicating dissolution actions. Where the parties negotiate and agree that the company shall continue to exist through means such as the company's repurchase of equity, equity transfer to other shareholders or third parties, or capital reduction, and such arrangement does not violate mandatory provisions of laws or administrative regulations, the people's court shall support such arrangement. Where the parties cannot reach an agreement for the company to continue to exist, the people's court shall render a timely judgment.

Where the people's court mediates an arrangement for the company to repurchase the plaintiff's equity, the company shall transfer or cancel the equity within six months from the date the mediation document takes effect. Before the equity is transferred or cancelled, the plaintiff shall not assert the company's repurchase of its equity against the company's creditors.

Article 65 — Res Judicata of Dissolution Judgments

A judgment rendered by the people's court in a dissolution action shall have binding effect on all shareholders of the company.

After the people's court dismisses a dissolution claim, where the shareholder who filed the original action or another shareholder files another dissolution action based on the same facts and grounds, the people's court shall not accept such case.

Article 66 — Acceptance of Judicial Liquidation Cases

Where one of the following circumstances exists, and creditors, shareholders, and the authorities or company registration authorities that made the decision to revoke the business license, order closure, or revoke the company, or other interested parties apply to the people's court to designate a liquidation committee to carry out the liquidation, the people's court shall accept such application:

1. The liquidation obligors have failed to establish a liquidation committee to carry out the liquidation within the prescribed period;

2. A liquidation committee has been established but has failed to carry out the liquidation within a reasonable period without legitimate reason.

Where directors fail to fulfill their liquidation obligations and fail to lawfully form a liquidation committee to carry out the liquidation themselves, and directly apply to the people's court to designate a liquidation committee to carry out the liquidation, the people's court shall not accept such application.

Article 67 — Composition of the Liquidation Committee

Where the people's court accepts a company liquidation case, it shall promptly designate relevant persons to form the liquidation committee. Members of the liquidation committee may be selected from the following persons or institutions:

1. The company's directors, shareholders, supervisors, and senior management personnel;

2. Lawfully established law firms, accounting firms, bankruptcy liquidation offices, and other professional intermediary institutions;

3. Persons with relevant professional knowledge and practicing qualifications from lawfully established law firms, accounting firms, bankruptcy liquidation offices, and other professional intermediary institutions.

Article 68 — Replacement of Liquidation Committee Members

Where a member of the liquidation committee designated by the people's court has one of the following circumstances, the people's court may replace such member upon application by an interested party or ex officio:

1. The member has engaged in conduct that violates laws or administrative regulations and is not suitable to continue serving as a member of the liquidation committee;

2. The member has lost the capacity to practice or civil capacity;

3. The member has engaged in conduct that seriously harms the interests of the company or creditors.

Article 69 — Litigation Status of the Company During Liquidation

After the company commences liquidation and before the completion of deregistration, civil litigation involving the company shall be conducted in the name of the company, and the head of the liquidation committee shall represent the company in the litigation; where the liquidation committee has not yet been established, the former legal representative shall represent the company in the litigation.

Article 70 — Notification of Creditors

For creditors that are already known or should be known, the liquidation committee shall use written or other appropriate means of notification; for other creditors, the liquidation committee may, based on the scale and geographic scope of the company's operations, make announcements through influential newspapers, information networks, or the National Enterprise Credit Information Publicity System at the national or provincial level where the company is registered.

Where the liquidation committee fails to fulfill its notification or announcement obligations in accordance with the preceding paragraph, resulting in creditors' failure to file claims in a timely manner and thus failing to receive payment, and creditors request the members of the liquidation committee to bear compensation liability for the losses caused thereby, the people's court shall support such request in accordance with law.

Article 71 — Verification of Claims

When a company is being liquidated, the capital contributions not yet paid by shareholders, including overdue unpaid contributions and subscribed contributions whose payment deadline has not yet arrived, shall all be treated as liquidation assets.

Where creditors or shareholders have objections to the claims verified by the liquidation committee, they may request the liquidation committee to re-verify. Where the liquidation committee refuses to re-verify or the creditor still has objections to the re-verified claims, and the creditor or shareholder files a lawsuit against the company as defendant with the people's court, the people's court shall accept such case.

Article 72 — Supplementary Filing of Claims and Shareholder Liability

Where a creditor fails to file a claim within the prescribed period and files a supplementary claim before the conclusion of the company's liquidation procedures, the liquidation committee shall register such claim. The conclusion of the company's liquidation procedures refers to the confirmation of the liquidation report by the shareholders' meeting or the people's court.

Claims supplementarily filed by creditors may be satisfied from the company's undistributed assets in accordance with law. Where the company's undistributed assets are insufficient to fully satisfy the claims, and the creditor requests the shareholders to satisfy the claims within the scope of the residual assets received by the shareholders, the people's court shall support such request; where a shareholder asserts that it should not bear liability on the ground that the creditor's failure to file the claim within the prescribed period was due to the creditor's gross negligence, the people's court shall not support such defense.

Where a creditor or the liquidation committee applies to the people's court for bankruptcy liquidation on the ground that the company's undistributed assets and the residual assets already received by shareholders are insufficient to fully satisfy the supplementarily filed claims, the people's court shall not accept such application.

Article 73 — Confirmation of the Liquidation Plan

Where the people's court organizes the liquidation, the liquidation plan shall be confirmed by the people's court. The liquidation committee shall not execute a liquidation plan that has not been confirmed.

Where the liquidation committee executes a liquidation plan that has not been confirmed, causing losses to the company or creditors, and the company, shareholders, directors, other interested parties of the company, or creditors request the members of the liquidation committee to bear compensation liability for damages, the people's court shall support such request.

Article 74 — Interface Between Judicial Liquidation and Bankruptcy

Where the people's court organizes the liquidation, and the liquidation committee, in the course of sorting out the company's assets and preparing the balance sheet and asset inventory, discovers that the company's assets are insufficient to pay its debts, the liquidation committee shall negotiate with the creditors to formulate a debt repayment plan, and shall handle the matter in accordance with the following circumstances:

1. Where the debt repayment plan is confirmed by all creditors and approved by the people's court, the liquidation committee shall apply to the people's court for a ruling to terminate the liquidation procedures after repaying the debts in accordance with the repayment plan;

2. Where the creditors do not confirm the debt repayment plan or the people's court does not approve it, the liquidation committee shall apply to the people's court for bankruptcy liquidation in accordance with law.

Article 75 — Liability of Liquidation Obligors

Where a director maliciously disposes of the company's assets, or fails to establish a liquidation committee within the statutory period and commence liquidation, resulting in the depreciation, damage, or loss of the company's assets, and creditors assert that the director shall bear compensation liability for the company's debts within the scope of the losses caused, the people's court shall support such request.

Where a director fails to fulfill the liquidation obligations, resulting in the company's inability to carry out liquidation due to the loss of major assets, accounting books, important documents, and other materials, and creditors assert that the director shall bear compensation liability for the company's debts, the people's court shall support such request, unless the director proves that the company had no assets available for liquidation before the grounds for dissolution arose.

Article 76 — Liability of Liquidation Committee Members

Where members of the liquidation committee maliciously dispose of the company's assets, or deceive the company registration authority into deregistering the company by submitting a false liquidation report without following the legally required liquidation procedures, and creditors request the members to bear compensation liability for damages, the people's court shall support such request.

Article 77 — Jurisdiction over Dissolution and Liquidation Cases

Dissolution actions and company liquidation cases shall be under the jurisdiction of the people's court at the location of the company's domicile. The company's domicile refers to the location of the company's principal office; where the location of the company's principal office is not clear, the case shall be under the jurisdiction of the people's court at the company's place of registration.

Basic-level people's courts shall have jurisdiction over dissolution actions and company liquidation cases involving companies whose registration was approved by company registration authorities at the county, county-level city, or district level; intermediate people's courts shall have jurisdiction over dissolution actions and company liquidation cases involving companies whose registration was approved by company registration authorities at the prefectural or prefectural-level city level or above.

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Part VII — Special Provisions for Listed Companies (10 Articles)

Article 78 — Validity of Material Asset Transaction Contracts Entered Into Without Authority

Where a listed company engages in a material asset transaction without a shareholders' meeting resolution as required by law, and the listed company asserts that such transaction has no effect on it, the people's court shall support such request, unless the counterparty acted in good faith. Whether the counterparty acted in good faith shall be determined by considering factors such as whether the counterparty conducted a necessary examination with the listed company regarding whether the transaction constitutes a material asset transaction, and whether the counterparty conducted a reasonable review of the shareholders' meeting resolution after the listed company informed it that the transaction is a material asset transaction.

Where a listed company provides guarantees to others within one year in an aggregate amount exceeding thirty percent of the company's total assets, the matter shall be handled in accordance with Article 9 of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the Security System Provisions of the Civil Code.

The term "material asset transaction" in this Article shall be determined comprehensively based on the Company Law, the Securities Law, and the Administrative Measures for Material Asset Reorganizations of Listed Companies and other relevant provisions. The term "listed company" in this Article includes companies controlled by the listed company.

Article 79 — Regulation of Anti-Takeover Measures

Where a listed company, in violation of mandatory provisions of laws or administrative regulations or in violation of public order and good morals, amends its articles of association through a shareholders' meeting resolution, and one of the following circumstances exists, and a party with the status of shareholder, director, supervisor, or having a direct interest in the case requests confirmation that such resolution is invalid, the people's court shall support such request:

1. Unduly restricting shareholders' rights to propose, vote, convene meetings, or other rights by imposing requirements on shareholding ratios or holding periods, or increasing shareholder obligations;

2. Imposing unfair or unreasonable restrictions on the qualifications for directors or senior management personnel of the listed company, obviously favoring or excluding specific persons from serving as directors or senior management personnel of the company;

3. Other circumstances that violate mandatory provisions of laws or administrative regulations or violate public order and good morals.

Article 80 — Validity of Shares Transferred in Violation of Regulations

Where a shareholder of a listed company transfers shares during a prohibited or restricted transfer period in violation of Article 160 of the Company Law, and a party asserts that the share transfer contract is invalid, the people's court shall support such request; where the transfer registration has already been processed, and a party requests the return of the shares, the people's court shall support such request. Where a party requests compensation for losses or the return of capital occupation costs, the matter shall be handled by reference to Article 24, Paragraph 2, Article 25, and other provisions of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code.

Where a share transfer contract is suspected of illegality and has not been dealt with, and may result in one or both parties obtaining improper benefits through illegal conduct, the people's court shall issue a judicial recommendation to the relevant authorities.

Article 81 — Treatment of Pledges of Listed Company Shares During Performance Commitment Periods

Where a listed company, in the course of a material asset reorganization, issues shares to the counterparty through a private placement for the purpose of acquiring equity in the company that is the subject of the reorganization, and agrees with the company that the listed company has the right to repurchase the shares from such counterparty when the company fails to meet the agreed performance targets or other conditions within a certain period, and the counterparty subsequently pledges such shares, and the pledgee requests to exercise the pledge right within the aforementioned agreed period, the people's court shall not support such request.

After the expiration of the aforementioned agreed period, where the company fails to meet the agreed performance targets or other conditions, and the listed company requests the pledgee to bear civil liability within the scope of the benefits obtained from the realization of the pledge right, the people's court shall support such request.

Article 82 — Validity of Market Value Adjustment Clauses

Where an investor enters into a valuation adjustment agreement with a listed company or its controlling shareholder or actual controller, stipulating that when the listed company fails to meet the agreed conditions of price-to-earnings ratio, price-to-book ratio, or other stock market value indicators within a certain period, the company or its controlling shareholder or actual controller shall repurchase the equity, bear monetary compensation obligations, or assume similar commitments, and a party asserts that such agreement is invalid, the people's court shall support such request.

Article 83 — Validity of Guaranteed Return Clauses in Private Placements

Where a listed company or its controlling shareholder, actual controller, or others promise or make a disguised promise of a guaranteed minimum return to specific investors participating in a private placement subscription, in violation of regulatory provisions, and a party requests confirmation that such clause is invalid, the people's court shall support such request; where a party requests confirmation that the entire contract is invalid and requests the return of shares, the people's court shall not support such request. Where the aforementioned clause is invalid and the party also requests compensation for losses or the return of capital occupation costs, the matter shall be handled by reference to Articles 24 and 25 of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code.

Article 84 — Regulation of Financial Assistance by Listed Companies

Where a listed company, without following the corporate resolution procedures prescribed in Article 163, Paragraph 2 of the Company Law, provides gifts, loans, guarantees, or other forms of financial assistance for others to acquire shares of the company itself or its parent company, and the listed company asserts that such conduct has no effect on it, the people's court shall support such request.

Where a listed company provides gifts, loans, guarantees, or other forms of financial assistance for others to acquire shares of the company itself or its parent company, and although the corporate resolution procedures prescribed in Article 163, Paragraph 2 of the Company Law have been followed, such conduct violates the express provisions of regulatory rules designed to protect the legitimate interests of small and medium investors and maintain securities market order, and a party requests confirmation that such conduct is invalid, the people's court shall support such request.

Where the listed company's financial assistance has no effect on the company or is invalid, the legal consequences shall be handled in accordance with Articles 24 and 25 of the Supreme People's Court Interpretation on Certain Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code.

Article 85 — Return of Unlawful Compensation

Where a listed company's financial accounting reports contain false entries or conceal important facts, and the company requests directors or senior management personnel to return compensation obtained beyond a reasonable standard that does not correspond to their actual performance, including salaries, equity, and options, the people's court shall support such request in accordance with law.

Article 86 — Validity of Bondholder Meeting Resolutions

Where publicly issued corporate bonds are involved, and a bondholder requests the people's court to confirm that a bondholder meeting resolution is invalid, to rescind it, or to confirm that it is non-existent, the people's court shall accept such case in accordance with law. When adjudicating disputes concerning the validity of bondholder meeting resolutions, the people's court may apply by analogy the provisions of the Company Law concerning the invalidity, rescission, or non-existence of corporate resolutions to determine the validity of the bondholder meeting resolution.

Article 87 — Litigation Status of the Trustee Manager

Where the issuer of publicly issued corporate bonds fails to pay bond principal and interest as agreed or an event of default as stipulated in the bond offering documents occurs, and the trustee manager files, participates in civil litigation, or applies for bankruptcy reorganization or bankruptcy liquidation of the issuer in its own name on behalf of the bondholders, the people's court shall accept such case in accordance with law. Where other bondholders separately or jointly file, participate in civil litigation, or apply for bankruptcy reorganization or bankruptcy liquidation of the issuer, the people's court shall not accept such case.

Where the trustee manager is derelict in performing its duties or has a conflict of interest with the bondholders, and the bondholder meeting selects a representative or engages a new trustee manager to file, participate in civil litigation, or apply for bankruptcy reorganization or bankruptcy liquidation of the issuer on behalf of all bondholders, the people's court shall accept such case in accordance with law.

Where the trustee manager or representative amends or waives litigation claims, acknowledges the opposing party's litigation claims, reaches a mediation agreement with the opposing party, votes on a reorganization plan draft or settlement agreement in bankruptcy proceedings, or engages in other conduct that may diminish or forfeit the bondholders' interests, without a bondholder meeting resolution, and a bondholder requests confirmation that such conduct is invalid, the people's court shall support such request.

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Part VIII — Supplementary Provisions (3 Articles)

Article 88 — Application of Law to De Facto Directors and Shadow Directors

Where a controlling shareholder or actual controller who does not serve as a director of the company actually executes the company's affairs, and is responsible for losses caused to the company, shareholders, or creditors, the provisions of the Company Law concerning directors' liability may generally apply.

Where a controlling shareholder or actual controller of the company directs directors or senior management personnel to engage in conduct that harms the interests of the company or shareholders, and there is evidence proving that instructions were given regarding specific matters, the controlling shareholder or actual controller who gave the instructions and the directors or senior management personnel shall bear joint and several liability.

Article 89 — Definitions

The term "sole-shareholder company" as used in this Interpretation refers to a company with only one shareholder, including a sole-shareholder limited liability company and a sole-shareholder joint stock company.

The term "failure to fully fulfill the capital contribution obligation" as used in this Interpretation refers to a shareholder's failure to pay monetary capital contributions in accordance with the contribution deadline, amount, or other requirements specified in the articles of association, or where the actual value of the non-monetary property that has been contributed is significantly lower than the subscribed capital contribution amount.

The term "shareholder derivative action" as used in this Interpretation refers to a lawsuit filed by a shareholder in its own name with the people's court for the benefit of the company, in accordance with Article 189, Paragraphs 2, 3, and 4 of the Company Law.

Article 90 — Scope of Application

This Interpretation shall take effect on [date to be determined].

Upon the implementation of this Interpretation, the following judicial interpretations shall be simultaneously abolished: Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (I), Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (II), 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), Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (IV), and Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (V).