In equity design practice, there is often the saying " Equity Nine Lifelines ". For entrepreneurs who have not systematically learned the company law , they will feel "unclear" and strive to learn. But I don’t know that these lifelines have not distinguished between listed companies and listed companies and ordinary companies for , and cannot distinguish the situation, so I misinterpreted it.
This article will give you detailed annotations on absolute control line, relative control line, and security control line , so that everyone knows the reason and why.
absolute control line - 67%
[Explanation] Some major matters such as changes in the company's capital, regarding the company's capital increase and decrease, modification of the company's articles of association/discretion, merger, and change of main business projects, etc., require more than 2/3 of the votes to support it.
[Legal basis] "Company Law of the People's Republic of China "
Article 43 The shareholders' meeting made resolutions to amend the company's articles of association, increase or decrease the registered capital, and resolutions to merge, split, dissolve or change the company's form must be passed by shareholders representing more than two-thirds of the voting rights. Article 103, Paragraph 2 of the shareholders' meeting shall make resolutions to amend the company's articles of association, increase or decrease the registered capital, and to merge, split, dissolve or change the company's form, which shall be passed by more than two-thirds of the voting rights held by the shareholders attending the meeting.
[Tip]
1. Absolute control applies to both the shareholders' meeting of a limited liability company and the shareholders' meeting of a joint-stock company. Compared with the two, the shareholders' meeting requires that more than two-thirds of the voting rights attending the meeting be passed, and does not require that shareholders of a joint-stock company must account for more than two-thirds of the proportion.
2. Two-thirds contain the number of itself, that is, the absolute control line is 67% and more than two-thirds can also be 66.7%, 66.67%, etc.
3. The company's articles of association may stipulate whether the shareholders' meeting exercises voting rights in accordance with the capital contribution ratio. If the agreement is No, the 67% absolute control line will lose its corresponding meaning.
relative control line - 51%
[Explanation] Decision on some simple matters, hiring independent directors, electing directors, chairman, hiring deliberation agencies, hiring accounting firms, and hiring/dismissing general managers. If the company wants to go public and after 2-3 dilutions, you can also control the company.
[Legal basis] "Company Law of the People's Republic of China"
Article 103 Paragraph 2 of the first half of the shareholders' meeting must be passed by more than half of the voting rights held by the shareholders attending the meeting.
[Tip]
1. The Company Law only has more than half of the voting clauses in the joint-stock company. In other words, for a limited liability company, the Company Law does not clearly stipulate the procedures for ordinary resolution of shareholders' meetings, but allows shareholders to determine through the articles of association on their own.
2. When a limited liability company agrees freely, it is necessary to grasp the difference between "more than half" and "more than half" and "more than half". More than half does not contain 50%, and the latter two contain 50%. The agreement of "more than half" and "more than half" must be avoided in the charter, otherwise it may cause contradictions in the shareholders' meeting resolutions.
3. At the same time, when making a free agreement, it is necessary to clearly state whether it is "more than half of the number of shareholders" or "more than half of the voting rights held by shareholders". There is no need to explain too much about the two different situations of .
Security Control Line - 34%
[Explanation] Shareholders hold more than 1/3 of their shares, and their shares do not have conflicts with him. It is called veto control, with veto power .
[Legal basis] same as the legal basis of "Absolute Control Line".
[Tip]
1. Compared with the absolute control line, more than two-thirds of the voting rights passes on matters regarding the life and death of a company. Then if one of the shareholders holds more than one-third of the equity, the other party cannot reach more than two-thirds of the voting rights, then those life and death matters cannot be passed, thus controlling the life line, which is therefore expressed as security control.
2. However, the so-called veto is only a matter of life and death, and other matters that only require more than half of them to be passed cannot be rejected.
3. Similarly, 33.4%, 33.34% etc. can be used as "safety control lines".
3listed company tender offer acquisition line - 30%
[Explanation] If the acquirer holds shares in a listed company that reaches 30% of the company's issued shares and continues to increase his holdings, he shall adopt the offer method and issue a full offer or partial offer.
[Legal basis] " Securities Law of the People's Republic of China "
Article 88 Paragraph 1 If an investor holds or holds 30% of the issued shares of a listed company through securities exchanges through agreements or other arrangements, and continues to make an acquisition, he shall issue an offer to all shareholders of the listed company to acquire all or part of the shares of the listed company in accordance with the law.
[Tip]
1. Obviously, this line applies to the equity acquisition of listed companies under the specific conditions of , and does not apply to limited liability companies and unlisted joint-stock companies.
2. There are two ways to acquire listed companies: agreement acquisition and tender offer, the latter is more market-oriented. Compared with agreement acquisitions, tender offer acquisitions have to go through more steps, the operating procedures are more complicated, and the acquisition cost of the acquirer is higher.
3. If the term of the acquisition offer expires and the number of shares held by the acquirer in the acquired listed company reaches more than 75% of the total number of shares issued by the company, the shares of the listed company shall be delisted on the stock exchange.
major peer competition warning line - 20%
[Legal basis] None!
[Tip]
1. This line has no legal basis and has little practical significance.
2. Interbank competition means that the business engaged in by a listed company is the same or similar to the business engaged in by other enterprises controlled by its controlling shareholder or actual controller or controlling shareholder, and the two parties constitute or may constitute a direct or indirect competitive relationship.
2. Chinese scholars generally believe that an affiliated enterprise refers specifically to any enterprise that a joint-stock company can control or exerts a significant impact on its business decisions through more than 20% equity or major creditor relationships. Therefore, 20% will appear as a warning line for major competition among peers.
temporary meeting rights—10%
[Explanation] Inquiry/investigation/prosecution/liquidation/dissolution of the company.
[Legal basis] If the second half of the "Company Law of the People's Republic of China"
Article 39 The second half of the second paragraph represents more than one-tenth of the shareholders who have voting rights, more than one-third of the directors, the supervisory board or the supervisors of a company that does not have a supervisory board propose to convene an extraordinary meeting, an extraordinary meeting shall be convened.
Article 40 Paragraph 3 If the board of directors or executive directors are unable to perform or fail to perform their duties of convening shareholders' meetings, the supervisory board or the supervisor of a company without a supervisory board shall convene and preside over the meetings; if the supervisory board or supervisor does not convene and preside over the meetings, shareholders representing more than one-tenth of the voting rights may convene and preside over the meetings on their own.
Article 100 Item 3 The general meeting of shareholders shall hold an annual meeting once a year. If any of the following circumstances occurs, an extraordinary general meeting of shareholders shall be held within two months: (3) When shareholders who hold more than 10% of the company's shares individually or in total request.
Article 110 First half of the second paragraph Shareholders representing more than one-tenth of the voting rights, more than one-third of the directors or the board of supervisors may propose to hold an extraordinary meeting of the board of directors.
" 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)"
Article 1, paragraph 1, shareholders who hold more than 10% of the voting rights of all shareholders of the company individually or in total, file a lawsuit for dissolution of the company in one of the following reasons and comply with Article 182 of the Company Law, the people's court shall accept it.
[Tip]
1, Articles 39 and 40 apply to limited liability companies. Shareholders with more than one tenth of the voting rights may propose to convene an extraordinary meeting of the shareholders' meeting. When neither the directors nor the supervisor perform their duties of convening the shareholders' meeting, they may convene and preside over the meeting on their own. Similarly, if the limited liability company does not agree to exercise the voting rights according to the investment ratio, the 10% temporary meeting rights line is meaningless at all.
2. Articles 100 and 110 apply to joint stock companies. Because of the special nature of the joint stock company, 10% of the temporary meeting rights line is mandatory. In other words, shareholders who hold more than 10% of the shares of can request to convene an extraordinary general meeting of shareholders and propose to convene an extraordinary meeting of the board of directors .
3. Article 1 of the Judicial Interpretation 2 of the Company Law applies to all types of companies, that is, The right to dissolve the litigation of more than 10% of the voting shareholders in the case of a company deadlock.
major equity change warning line - 5%
[Explanation] Securities Law stipulates that it reaches 5% or more, and the equity change letter must be disclosed.
[Legal basis] "Securities Law of the People's Republic of China"
Article 67 Paragraph 1, Paragraph 2, Paragraph 8 of Paragraph 8 of Article 67 Major events that may have a significant impact on the stock trading price of listed companies and investors have not yet learned about it, the listed company shall immediately submit an interim report on the situation of the major event to the securities regulatory authority of the State Council and the stock exchange, and announce it, explaining the cause, current status and possible legal consequences of the incident.
The following situations are major events referred to in the preceding paragraph: (8) The shareholders or actual controllers who hold more than 5% of the company's shares have undergone major changes in their holdings or controlling the company.
Article 74 Paragraph 2 Insider information about securities transactions includes: (2) Shareholders who hold more than 5% of the company's shares and their directors, supervisors, and senior management personnel, the actual controllers of the company and their directors, supervisors, and senior management personnel. Article 86 When an investor holds or holds shares issued by a listed company with others through agreements or other arrangements to achieve 5% of the shares issued by a listed company, he shall make a written report to the securities regulatory authority of the State Council and the stock exchange within three days from the date of the occurrence of the fact, notify the listed company and make an announcement; within the above period, no more trading of the listed company's shares shall be allowed.
After an investor holds or holds shares issued by a listed company with others through agreements or other arrangements, every increase or decrease of the proportion of shares issued by the listed company they hold shall be reported and announced in accordance with the provisions of the preceding paragraph. The shares of the listed company shall not be traded or sold within the reporting period and within two days after the report and announcement are made.
[Tip] This line is only applicable to listed companies. From a rule perspective, holding shares below 5% has at least two benefits. One is that there is no lock-up period constraint, and the other is that there is no need to show up in public and there is no need to disclose the reduction.
temporary proposal rights - 3%
[Explanation] Shareholders who individually or in total hold more than 3% of the company's shares may submit temporary proposals and submit them in writing to the convener 10 days before the shareholders' meeting.
[Legal basis] "Company Law of the People's Republic of China"
Article 102 Paragraph 2 of shareholders who hold more than 3% of the company's shares individually or in total may submit an interim proposal ten days before the shareholders' meeting and submit it in writing to the board of directors; the board of directors shall notify other shareholders within two days after receiving the proposal and submit the interim proposal to the shareholders' meeting for deliberation. The content of the temporary proposal shall fall within the scope of the powers of the general meeting of shareholders, and shall have clear agenda and specific resolution matters.
[Tip] This line is only applicable to joint-stock companies. Due to their personal nature, limited liability companies do not have such complicated procedural regulations.
subrogative litigation right—1%
[Explanation] Also known as derivative litigation right, it can indirectly investigate and prosecute the right (investigation of the Supervisory Board or the Board of Directors).
[Legal basis] "Company Law of the People's Republic of China"
Article 151 If directors or senior management personnel are in the circumstances stipulated in Article 149 of this Law, shareholders of a limited liability company and shareholders who hold more than one percent of the company's shares individually or in total for more than 180 consecutive days may request the Supervisory Board or the supervisors of a limited liability company without a Supervisory Board to file a lawsuit with the People's Court in writing; if the supervisors are in the circumstances stipulated in Article 149 of this Law, the aforementioned shareholders may request the Board of Directors or the executive directors of a limited liability company without a Board of Directors to file a lawsuit with the People's Court in writing.
The supervisory board, the supervisor of a limited liability company that does not have a supervisory board, or the board of directors or executive directors refuse to file a lawsuit after receiving the written request from the shareholders specified in the preceding paragraph, or failing to file a lawsuit within 30 days from the date of receipt of the request, or if the situation is urgent and failure to file a lawsuit immediately will cause irreparable damage to the interests of the company, the shareholders specified in the preceding paragraph have the right to file a lawsuit directly in their own name to the people's court in the interests of the company.
[Tip]
1. This line is suitable for shareholders of joint-stock companies, and must also meet the condition of holding 180 days. Co., Ltd. has no restrictions on holding time and shareholding ratio.
2. The premise for the occurrence of litigation rights on behalf of others. In layman's terms, either directors and senior executives violate the law and regulations to harm the interests of the company, or supervisors violate the law and regulations to harm the interests of the company. If there are any problems, shareholders can directly file a lawsuit with the court in their own name "on behalf of the company".
