Can The Shareholders' Committee Remove The Executive Director Without Any Reason?

According to the court, the defendant's articles of association stipulate that the shareholders' Association is the power organ of the company and has the right to elect and replace the executive director. The company shall have one executive director, the legal representative of the company, and elected by the shareholders' meeting for a term of three years. The third person Shimou was elected as the defendant's executive director and legal representative to the dispute resolution in January 8, 2007. He never convened and chaired regular or temporary shareholders' meetings in accordance with the articles of association. His wife seldom went to the defendant's office after his wife died.

Dispute focus

There are two controversies in this case: first, whether the defendant's shareholders' committee has the right to appoint or remove the executive director; and two, whether or not the executive director can be discharged without any reason before the term of office of the executive director is expired.

Court decision

The court of first instance decision: first, the defendant shall apply to the company registration authority for registration of the company to change its executive director and legal representative from a third person to Shen's company within ten days from the date of its entry into force. At the same time, he will apply for registration and registration to the company registration authority by his shareholders' amendment to the Shanghai Y metal products Co., Ltd. in October 17, 2009. Two, third, Shimou should assume the assistance and responsibility of the executive director and legal representative of the Shanghai Y metal products Co., Ltd. as a defendant in the process of registration and registration of the above changes in the process of applying for the registration and registration of the Shanghai metal products Co., Ltd.

Shimou refused to accept the appeal. After hearing, the court of second instance dismissed the appeal and upheld the original judgment.

Case analysis

The articles of association of the defendant stipulate that the shareholders' Association shall not remove their duties without reason before the expiration of the term of office of the board of directors. How to understand the above changes, whether the company has the right to appoint or remove executive directors at any time or even without cause is a common problem in judicial practice, and is also the core of controversy in this case.

First, whether the defendant's shareholders' meeting has the right to appoint or remove the executive director at any time. The company law of the continental law system holds that there is a commission relationship between directors and companies. Directors are the company's directors and directors have appointed relations with the company because of the selection of shareholders' meetings. Since the two party is entrusted or appointed, the relationship can be terminated at any time as a party to a commission or appointment relationship.

In addition, the existing company law of China only stipulates that shareholders will have the right to elect and replace directors who are not represented by staff representatives, but has no special provisions on whether they have the right to appoint or remove the executive directors. However, this law also stipulates that the shareholders' association may exercise other functions and powers stipulated in the articles of association according to law, and the articles of association of the defendant clearly stipulate that "the shareholders' Association is the power organ of the company and has the right to elect and replace the executive director". The defendant's shareholders' meeting shall have the right to appoint and remove the Executive director according to law.

Second, can the defendant's shareholders' office cancel the executive director without reason? In the articles of association of the defendant, the provisions of the shareholders' meeting shall not be relieved without reason after the expiration of the term of office of the executive director, which is exactly the same as the forty-seventh article of the revised Company Law: "the shareholders' meeting shall not be relieved without any reason" before the expiration of the director's term of office, but the present company law has deleted the clause.

The above amendments to the law show that the shareholders' Association has the right to change or remove its duties without any cause or director (including executive director) without fault. That is to say, the incumbent directors, including executive directors, no longer have the vested right to guarantee their term of office expired, and their term of office can be cancelled by the appropriate vote of the shareholders. It is only the defendant's constitution that the executive director is the legal representative of the company. "The shareholders' meeting shall not be relieved of their duties without reason before the expiration of their term of office". It is stated that it must not be released without reason.

Third, whether the third people have fulfilled their duties in the case. Whether or not the third party has "existed" depends on whether it fully fulfil its diligence and loyalty obligations. When managing the company's business, the executive director shall, without reservation, work hard for the best interests of the company. When the interests of the company are in conflict with the overall interests of the company, the company shall perform its duties diligently and faithfully with the company's interests first.

The third person has become the defendant's executive director and has passed the resolution. Even in the case of repeated requests from the plaintiff, he has never convened a regular and temporary meeting of shareholders' meetings. His actions are hard to say "diligence". In addition, the third people's handling of his wife's funeral is natural and indeed requires a lot of energy, but third people live in the important posts of the defendant's executive director and legal representative. He must faithfully and diligently perform his duties according to law. When the interests of his family and company are conflicting and difficult to achieve both, the company's interests should be the first. In summary, the third party not only violated the relevant provisions of the defendant's original articles on the performance requirements of the executive director, but also did not properly fulfill the loyalty and diligence obligations under the existing company law.