case: commercial law

7/28/2019 CASE: COMMERCIAL LAW

http://slidepdf.com/reader/full/case-commercial-law 1/22

SILVIA MARIA

GONZALEZExchange student

University of Deusto



The case

LLC (Festivals Company) need to give the travelagency 500.0000 as a company’s securitydeposit.

A company made some efforts to obtain thepermission of holding one travel festival, but inaccordance with the agreement, it needs toprovide the presiding travel agency 500000 RMBas security deposit for such activity. Thechairman and legal representative Mr. Ma

directed the company’s financing staff to pay500000 Yuan as a company's security deposit forthe above to mentioned travel festival of thetravel agency. Then Mr. Ma asked the travelagency to pay such amount to C Co under the

name of returning deposit. Later on, because of the transfer of share Mr Ma stee ed down.



Not until in audit has B co known thewhereabouts of its 500.000 RMB. Therefore, Bprosecuted Mr. Ma by reason of damaging thecompany's right and benefit by director andasked him to bear the burden of compensation.it also asked A co. and Co. to take severablecompensation liability. It is investigated that inthe early stage of B Company’s establishment,Mr. Ma was the chairman and legalrepresentative of A Co, then he was appointedto be the subsidiary of A Co, its chairman and

legal representative- Mr. Hu was appointed by A Co, and Mr. Hu was the director of B Comeanwhile.



1. Is Mr. Ma, A Co and C Co all shouldbe sever ably liable to repay themoney? How shall the court makethe judgment?

Question



According with the law of commercial law. Paragraph .3

Articles 113 “The directors shall be responsible forresolutions adopted by the board of directors.Where a resolution of the board violates anynational statutes, administrative regulations orthe articles of association, and causes thecompany to incur serious loss, those directorsparticipating in the adoption of the resolution

are liable to the company for damages.Provided, however, if a director is proven tohave dissented at the vote adopting suchresolution and such dissension was noted in theminutes, then the director may be exempt fromliability. ”



So in this case, the director of thecompany took a decision without ask the shareholders. He is theresponsible to damage the right’s of the company.



The chairman Mr. Ma in the company A was the legal responsible and legalrepresentative of the B and C ( as afilial)company but later he choose MrHu such as a director of the Bcompany.



According with the article 41 that said: Article 41 (Right of convening shareholders

meeting by shareholders) “Where a limited liability company has a board of directors, its shareholders meeting shall be convened by the board of directors and presided over by the chairman of the board.Where the chairman of the board is unableto or does not perform his function, themeeting shall be presided over by a vice-chairman . Where the vice-chairman is unable to

or does not perform his function, the meeting shall be presided over by a director jointly nominated by more than half of the directors representing more than one-tenth of the voting rights.



Where a limited liability company does not

form a board of directors, the shareholdersmeetings shall be convened and presidedover by the executive director .Where the board of directors or executivedirector cannot or does not perform its function,the shareholders meeting shall be convened andpresided over by the board of supervisors or thesupervisor in the absence of a board of supervisors. Where the board of supervisors orsupervisor cannot or does not perform itsfunction, the meeting shall be convened andpresided over by shareholders



This paragraph can explain us thatthe chairman of the company hastaken the decisions in a wrong way,and put Mr. Hu as a director withouttalk with anybody and without beinga vice-chairman. So he has to be the

responsible of his acts.



Where the chairman of the board is unableto or does not perform his function, themeeting shall be presided over by a vice-

chairman. Where the vice-chairman is unable to or does not perform his function, the meeting shall be presided over by a director jointly nominated by more than half of the directors representing more than one-tenth of the voting rights.



Where a limited liability company does notform a board of directors, the shareholders

meetings shall be convened and presidedover by the executive director .This paragraph can explain us that thechairman of the company has taken the

decisions in a wrong way, and put Mr. Huas a director without talk with anybodyand without being a vice-chairman. So hehas to be the responsible of his acts. On

the other side we do not know if there wasa board of directors. So maybe in that casehe choose the correct decision.



The article 38 said about that one of thefunctions of this law is: (3) To examine and approve reportsof the board of directors;



The founds…

Article 149The director and senior officer: (1) May not misappropriate company funds; (2) May not deposit company assets into an accountin his own name or in any other individual's name;

(3) may not loan company funds to other people orgive company assets as security for the debt of anyother individual without the approval of theshareholders meeting, general meeting of shareholders or the board of directors in violation of

the articles of association;



Article 150

“ If a director, supervisor or the senior

officer causes detriment to the company while performing his duties in violation of laws, administrative regulations or the articles of association, he shall be liable for the loss so caused”.



Article 152

Where a director or senior officer is involved in the circumstance as described in Article 150, the shareholders of a limited liability company or a

joint stock limited company that individually or jointly hold one percent (1%) of the total shares for consecutive 180 days may request in writing the board of supervisors or the supervisors of a limited liability company without a board of supervisors to file suit before a people’s court.Where a supervisor is involved in the circumstance as described in Article 150, aforesaid shareholders may request in writing the board of directors or the executive director of a limited liability company without a board of directors to file suit before a people’s court



Article 153Where a director or senior officer violateslaws, administrative registrations or thearticles of association, or infringes upon therights and interests of the shareholders, theshareholders may file suit before a people’scourt.

How the court should solve the case? We cancheck the legal liability. First of all the directorshould return the money because he could beaccused of fraud. He could not took anydecision without to consult and ask theshareholders. In the second place he shouldnot named the Mr Hu the manager of the Bcompany without ask again and arrange a

meeting.



Article 206

Where the company engages in any business activities unrelated to the liquidation, it shall be warned by the company registration authority and its income derived therefrom shall be confiscated.



Article 209

Where the company registration authority grants registration to an application which fails to meet the requirements prescribed herein or, refuses to grant registration to an application which meets the requirements prescribed herein,

administrative penalty shall be imposed on the supervisor directly in charge and the other person(s) directly responsible in accordance with the law.



Article 215

Where a company violates of this Law, and

is therefore liable for civil damages as wellas for an administrative fine or criminalfine, and its assets are not sufficient tocover both, its assets shall first be used tocover the civil liability for damages.



Article 216

Where any violation of this Law constitutes a crime, criminal liability shall be imposed in accordance with the law.

Article 205

Where a company fails to notify creditors through notice or public announcement in accordance here with while carrying out merger, division, reduction of registered capital, or liquidation, it shall be ordered by the company registration authority to make rectification, and the company shall be fined not less than RMB 10,000 but not more than RMB 100,000.



conclusion

The court should tell the manager toreturn the money and open an expedient.The quantity of the money its not enoughhigh to open a penal process. Maybe thecompany should dismiss him because hedid some fraud mistakes.

case: commercial law

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