Introduction to the Resolution to the “Two Boards” Issue in China Listed Companies

(By Yu Zhiyuan) Recently, the author was interviewed by the media on the issue of the “two boards” of Jiulongshan, a Chinese listed company. The author would like to analyze the basic legal principles concerned in the “board battle” in this particular case.

I. The ummary of the Issue

Shanghai Jiulongshan Travelling Co. Inc. (hereinafter “Jiulongshan”) is a listed company, and recently, its original biggest shareholder (represented by Mr. Li Qin Fu, chief of the company board) transferred approximately 29.9% of the company’s share options to HNA Property (hereinafter “HNA”). As a result of that transaction, HNA became the biggest shareholder and company registration with the Ministry of Industry and Commerce was amended to reflect those changes. However, HNA has not completed its payments in consideration of the stock transfer. On 21st December 2012, HNA called an impromptu shareholders’ meeting as the company’s biggest shareholder. At the meeting, it passed on the suggestion to recall Mr. Li Qin Fu to act as head of the board of the company, and thereafter voted in new board members. Beijing Kang Da Law Firm filed a brief to affirm the legal effectiveness of the decision and the voting. In reply to Kang Da’s brief, Jiulongshan held its own board meeting on 25th December 2012, at which most board members claimed that HNA lacked the ability to hold its own impromptu shareholders’ meeting. In addition, the board made an announcement, supported by the legal opinions of Shanghai-based Yan Yi Ming Law Firm, that any decisions made by the temporary shareholders at their previous meeting on 21st December 2012 were invalid.

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New Chinese Laws & Regulations of April, 2012 (2)

V.               The State Administration for Industry and Commerce (the “SAIC”) will Relax and Adjust the Regulations Concerning the Registration, Business Scope and Other Matters of Private Industrial and Commercial Households in Mainland of Hong Kong, Macau and Taiwan Residents

The SAIC has issued the Notice on Provisions Concerning Further Relax the Business Scope, Employees and Business Square of Hong Kong, Macau and Taiwan Residents’ Individual Industrial and Commercial Household ( the “Notice”) and the Opinions on the Administration of Taiwan Resident’s Application for Individual Industrial and Commercial Household in Part of Provinces in Mainland ( the “Opinions”), which relax and adjust the regulations concerning the registration, business scope and other matters of individual industrial and commercial household of Hong Kong, Macau and Taiwan Resident. In accordance with the new policy, from 1st January, 2012, the Taiwan residents can apply for registration of individual industrial and commercial households in Beijing, Shanghai, Jiangsu, Zhejiang, Hubei, Guangdong, Chongqing and Sichuan, and the local administration for industry and commerce in counties, autonomous counties, cities not divided into districts and municipal cities will, without examination and approval by authorization, directly register such applications. In addition, from 1st April, 2012, the business scope that Hong Kong, Macau and Taiwan residents’ individual industrial and commercial household can apply will be enlarged, and the employees and business square will be relaxed.

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