Partnership Guide | Author: Lawyer Li Li
This is the text of Lawyer Li Li’s blog and Partnership Guide public account 738
As both a shareholder and a business manager, the agreed income is labor remuneration or shareholder dividends?
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I have written specifically about the multiple legal identities of company shareholders and executives in my past articles. In reality, many shareholders and executives have no understanding of this complicated state before filing a lawsuit. Many people do not realize the complex legal relationships brought about by these multiple identities. The reason for the multiple legal identities of
company shareholders and executives is that in many cases it is necessary to apply two different departmental laws, Company Law and Labor Law , and these two different departmental laws are not used for legislative purposes. It is logically different from legislation.
Take company shareholders as an example.
In a large number of limited liability companies, company shareholders often have multiple identities. They are not only shareholders as investors, but also senior executives of the company (legal representatives, directors, managers, financial directors, etc.) Managers), in addition, they may also have established a labor contract relationship with the company, and have social security benefits in the company.
If the problem is limited to this, it may not be too complicated. However, in reality, the internal governance of these companies is often not so qualified. Although these shareholders are actually performing the duties of certain executives of the company, they have not established a compliance contract with the company, and there is no dedicated Executive employment agreements and even labor contracts may not be signed correctly. What's even more confusing is that all of this is done in words, without even a shareholders' meeting resolution to discuss and determine these things.
These multiple identities can be as many as shareholders, legal representatives, executive directors and general managers all rolled into one.
From a legal perspective, the relationship between executives and the company is understood to be a trust relationship, while the relationship between employees and the company is understood to be a labor relationship.
The reason why this issue becomes complicated is because our country’s labor law does not exclude executives from labor relations. Therefore, in reality, in most small, medium and micro companies, it is rare to see independent executives, that is to say, executives without labor relations. In larger companies with many shareholders and complexity, independent executives are more common. However, by the way, the "independent director" often heard in listed companies does not refer to labor relations, but means that he does not hold other positions in the listed company except as a director and is not related to the listed company where he is employed. There are no directors between the Company and its major shareholders who may hinder their independent and objective judgment. This has nothing to do with the topic we are talking about today.
With such complex multiple identities, there comes the issue of distinction between responsibilities and interests. Let’s talk about benefits first today. Depending on the identity based on which the money was taken, the legal nature may be different, the applicable laws may be different, and the resulting legal judgments may also be different.
Some major shareholders of who absolutely control , because they do not distinguish between public and private affairs, allocate the company's funds to other entities at will. In many cases, they do not intentionally infringe the company's interests. Some major shareholders arbitrarily transfer more funds into the company than out. There are many more, but there are cases where it is considered a crime of misappropriation of company funds. It's about not having a clear legal distinction in your mind between your company and yourself. The same is true for the multiple identities of senior executives. They cannot be messed up. If they are messed up, it may not cause trouble, but it is easy to cause troubles and disputes.
二
In 2018, Zhu sued the court, requiring the company to pay a performance bonus of tentatively estimated at 5.4495 million.
Zhu’s identity is multiple and has historical changes.
When Zhu joined the company in August 2014, he served as director, general manager and investment director. At this time, Zhu was a senior executive of the company and had a labor relationship with the company. His positions were general manager and investment director.
After October 22, 2015, Zhu became an anonymous shareholder of and . Strictly speaking according to the law, he was called the actual investor in the proxy shareholding agreement. On October 22, 2015, company shareholders Kang, Company A, and Chen 2 signed the Equity Transfer Agreement. Company A transferred its 25% equity in the target company to Chen 2 for a price of 2.5 million yuan; Kang transferred the equity to Chen 2. The 10% equity held in the target company was transferred to Chen 2 for a price of 1 million yuan. The industrial and commercial registration was changed to Kang and Chen 2, respectively accounting for 65% and 35% of the investment. Chen 2 received the company's equity and became a shareholder of the company. Chen 2 is Zhu’s father-in-law, and both parties admit that Chen 2 holds shares on Zhu’s behalf.
Zhu sued for a performance bonus of 5.4495 million yuan, based on a meeting minutes on October 15, 2015.
On October 15, 2015, Zhu and Kang signed meeting minutes. The main content is: "...the company's current equity structure is Kang 75% and Shanghai XX 25%. According to the latest equity transfer agreement, Kang and Shanghai XX Sign an equity transfer agreement and transfer 25% of the equity of Shanghai XX. At the same time, Kang will also transfer 26.25% of the company's shares to Zhu or his designated personnel, and 25% of the company's shares to Huang or his designated personnel. After the change is completed, the company's shares will be transferred. The equity structure was adjusted to Kang 48.75%, Zhu 26.25%, and Huang 25%. Starting from October 1, 2015, the company implemented a partner responsibility system. Kang and Zhu independently led a team to manage the primary and secondary markets. business. In the future, 30% of the performance compensation and management fees of all products issued by the company will belong to the management company, and 70% will belong to the management model allocated by the corresponding partners. Among the company's existing products, Zhu or Kang will serve as the fund. For the manager's products, the part of the income generated during the product's renewal period that belongs to the partners will be equally divided between the two. The company's future daily operating expenses and the salary costs of all personnel will be borne by the company, and the bonuses of all personnel will be allocated to each partner. ”
, as the defendant in the first instance of the case, that is, the company, put forward a series of defense reasons, one of which is that it claimed that the above meeting minutes were an agreement between the shareholders and not between the plaintiff and the shareholders. The agreement between the companies, and the minutes of the meeting stipulating the distribution of the company's future earnings, involve the actual rights and interests of another shareholder Huang. The minutes of the meeting should be invalid if they are not ratified by all shareholders and a formal shareholders' meeting resolution is issued.
The court of first instance found that the remuneration stipulated in the meeting minutes belonged to shareholders' distribution of the company's earnings and was not labor remuneration, so it rejected the plaintiff Zhu's claim.
The plaintiff in this case once served as the defendant's director, general manager and investment director, and was also an anonymous shareholder of the defendant. During the trial, the plaintiff claimed that according to the "Meeting Minutes" signed between it and Kang, "among the existing products, for which Zhu or Kang serves as the fund manager, the profits generated during the product's renewal period shall be distributed to the partners." The portion will be divided equally between the two people." The defendant should pay his fund performance bonus of RMB 5,449,500 from August 2014 to November 30, 2017. This court held that Kang was both the legal representative of the defendant and a shareholder of the defendant. On October 15, 2015, the plaintiff and Kang signed a "Meeting Minutes". The "Meeting Minutes" made corresponding agreements on the defendant's equity structure, business model, and future earnings. The "Meeting Minutes" were based on the status of shareholders. And signed. The plaintiff's claim for performance bonuses for fund products based on the provisions of the "Meeting Minutes" was insufficient and was not accepted by this court.
The key point of the first-instance determination is that Zhu is the dormant shareholder of the company. The second-instance judgment overturned the first-instance finding, and this is also the key point.
The court of second instance held that:
First of all, judging from the identities of both parties when they signed the "Meeting Minutes", Kang was the shareholder and legal representative of the company at the time, while Zhu only had the status of a worker (fund manager) at the time and had not yet obtained the company's status. Shareholder (hidden shareholder) identity. Even if Zhu later became an anonymous shareholder of the company, his labor relationship with the company did not end, and Zhu still had the status of an employee.
Secondly, judging from the nature of the above agreement, according to the structure of the "Meeting Minutes", it is divided into three parts. The first part is about the company's future equity structure and transfer matters, and the second part is about the company's future issuance and transfer. The agreement on how the performance remuneration and management fees collected by existing fund products should be distributed. The third part is the agreement on who will bear the company's operating expenses, all personnel salaries and bonuses. The second part is about the performance of existing fund products. The distribution of remuneration and management fees does not involve the company's shareholders' dividends, equity incentives and other matters related to shareholders' rights and interests in the sense of corporate law. Therefore, it should be considered that it is an agreement on labor remuneration during Zhu's tenure as a fund manager, rather than an agreement on shareholders' rights. The first instance found that all the agreements in the "Meeting Minutes" were shareholders' rights agreements based solely on Zhu's status as a shareholder. This was inappropriate, and this court corrected it.
In fact, among the two reasons given by the court of second instance, the first reason is a relatively hard one, because the time when the identity of the dormant shareholder was established objectively exists. The second reason is the interpretation of the content of the meeting minutes, which has certain subjective factors, implies discretion, and has certain uncertainties.
三
Looking back, why is there such a big controversy over the understanding of meeting minutes? Is it just because of Zhu’s multiple identities?
is not. The reason why
has disputes over the legal characterization of the content of the meeting minutes is not because of the multiple identities of the contracting parties, but because the contracting parties do not understand or ignore the legal management of multiple identities.
Assuming that when signing the meeting minutes, Zhu could understand that the performance bonus agreed in it was related to the labor relationship, then he could understand that the two parties to such an agreement should be himself and the company. If this could be realized, then Kang should be prompted to form a performance appraisal incentive agreement with himself in the name of the company at that time, preferably with the company's seal. If this is done, do we still need to trouble the court to determine whether the performance funds here are labor remuneration?
This is what I often tell my clients. Although uncertainty is dominant in this world, we should at least try not to add uncertainties that are detrimental to ourselves because of our own ignorance or mistakes.
The ancients said that if the name is not correct, the words will not be smooth. When participating in the operation of companies, partnerships, and businesses, you must always pay attention to your different legal identities and use different legal identities to deal with different affairs. Just like when you return home, you are a child in front of your father, and you are a child in front of your children. Same as parents.
