On 30 September 2025, the Supreme People’s Court (SPC) of China issued the Draft Judicial Interpretation on Several Issues Concerning the Application of the Company Law of the People’s Republic of China for public consultation. Notably, article 10, paragraph 2, explicitly prohibits the delegation or assumption of statutory powers between shareholders’ meetings and boards of directors.
The relevant provision states: “Where a shareholders’ meeting, in violation of the law, adopts a resolution delegating powers that are statutorily reserved for the shareholders’ meeting to the board of directors, or assuming powers that the law expressly assigns to the board, and a party applies to the court to invalidate such a resolution, the people’s court shall uphold the application.
“Likewise, where a shareholders’ meeting or a board of directors exceeds its statutory authority by adopting a resolution on matters that do not, by law, fall within the scope of company resolutions, the court shall also uphold an application to invalidate such a resolution.”
Ultra vires resolutions
Yi Xiangming
Partner
Zhong Lun Law Firm
In judicial practice, whether shareholders’ meetings may delegate their statutory powers to boards of directors has long been a subject of contention. In Yuan Min et al v Huang Qiren et al (2017), the SPC held that the statutory delineation of powers between shareholders’ meetings and boards of directors under the 2013 Company Law did not constitute mandatory provisions of an invalidating nature. As such, shareholders were deemed to have the autonomy to grant part of their authority over business strategies and investment plans to the board.
Conversely, in Gan 07 Min Zhong No. 18 (2024), the Ganzhou Intermediate People’s Court ruled that the Company Law and corporate charters should be regarded as mandatory provisions. Consequently, any resolution exceeding the statutory authority of the shareholders’ meeting was deemed invalid.
In Shaanxi Baoling Construction (Group) v Shaanxi Nonferrous Metals Construction (2020), the Shaanxi High People’s Court held that the shareholders’ meeting, as the supreme authority of the company, had the legal right to adopt a resolution dismissing the general manager.
However, in Su 03 Min Zhong No. 5818 (2024), the Xuzhou Intermediate People’s Court determined that the relationship between shareholders’ meetings, boards of directors and boards of supervisors should be one of checks and balances.
Board-centric governance
The new Company Law has two key objectives: to “strengthen the role of the board of directors in corporate governance”; and to optimise companies’ organisational structures. It introduces significant changes to the distribution of powers between shareholders’ meetings and boards of directors.
Yang Yue
Paralegal
Zhong Lun Law Firm
For shareholders’ meetings, two major powers have been removed: the authority to “determine the company’s business policies and investment plans”; and to “review and approve the company’s annual financial budget and final accounts”. For boards of directors, the revisions eliminate the requirement that “the board of directors is accountable to the shareholders’ meeting” and introduce new provisions allowing the board to “make decisions on issuing corporate bonds as authorised by the shareholders’ meeting”, and to exercise “other powers granted by the shareholders’ meeting”.
Through this dual adjustment, reducing the powers of shareholders’ meetings while expanding those of the board of directors, the new Company Law seeks to shift China’s corporate governance model from shareholder-centric to board-centric. It aims to establish a governance structure where the core powers of both bodies are non-transferable, with the board functioning as an equal counterpart to the shareholders’ meeting, each with distinct roles.
The cases of Gan 07 Min Zhong No. 18 (2024) and Su 03 Min Zhong No. 5818 (2024), decided after the implementation of the new Company Law, reflect these legislative changes and their impact on corporate governance. The draft judicial interpretation further reinforces this shift by explicitly stating that the provisions enumerating the powers of shareholders’ meetings and boards of directors in the new Company Law are mandatory provisions of an invalidating nature, meaning that any resolution violating these provisions is invalid.
However, if only the content of the ultra vires resolution violates the provisions of the company’s articles of association, it still constitutes grounds for the resolution to be revocable, rather than invalid.
Defining powers
The draft judicial interpretation does not provide specific clarification on what constitutes “powers that can only be exercised by the shareholders’ meeting”, and “powers that can only be exercised by the board of directors”, leaving the precise boundary of their respective powers undefined under article 10.
Based on article 66, paragraph 3 of the Company Law, which recognises the inherent rights enjoyed by shareholders due to their status, the “powers that can only be exercised by the shareholders’ meeting” should include the seven powers explicitly listed in article 59, paragraph 1 of the Company Law, excluding the issuance of corporate bonds, as well as “other powers stipulated in the company’s articles of association”. Additionally, statutory matters required by law, such as related-party guarantees or share repurchases, fall within the shareholders’ meeting’s powers.
For publicly listed companies, the division of powers can also be guided by article 46 of the Guidelines for Articles of Association of Listed Companies (2025). The China Securities Regulatory Commission notes in its commentary on this article that, unless otherwise stipulated, the powers of the shareholders’ meeting cannot be delegated to the board of directors or other bodies or individuals.
On the other hand, the “powers that can only be exercised by the board of directors” include the nine powers explicitly listed in article 67, paragraph 2 of the Company Law, as well as “other powers stipulated in the company’s articles of association or granted by the shareholders’ meeting”. Additionally, under article 122 of the Company Law, the powers of the board of directors in joint-stock companies also include the election of the chairperson and vice chairperson of the board.
Implications
Article 10 of the draft judicial interpretation explicitly states that the statutory powers of both the shareholders’ meeting and the board of directors are non-transferable. If enacted in its current form, this provision would offer clearer judicial guidelines and have a profound impact on corporate governance and control.
In disputes over corporate control, contests for board seats will become even more critical.
Yi Xiangming is a partner, and Yang Yue is a paralegal at Zhong Lun Law Firm
Zhong Lun Law Firm
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E-mail: yixiangming@zhonglun.com | yangyue11@zhonglun.com
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