The basis for adjudication of disputes over liability for shareholders of the company who abuse their shareholder rights to harm the interests of the company or other shareholders

Source: Jurisprudence 45 Degrees

The basis for adjudication of disputes over liability for shareholders of the company who abuse their shareholder rights to harm the interests of the company or other shareholders

When exercising shareholder rights in accordance with laws, administrative regulations and the articles of association, shareholders shall not use their rights to harm the interests of the company or other shareholders. Where a shareholder of a company abuses his rights as a shareholder and causes losses to the company or other shareholders, he shall be liable for compensation in accordance with law. This article comprehensively sorts out the adjudication basis for disputes over liability for shareholders who abuse their shareholder rights to damage the interests of the company or other shareholders, for readers' collection and future reference.

◇ Basic Laws

Company Law of the People's Republic of China (Revised on December 29, 2023) (Excerpt)

Article 21 The shareholders of the company shall abide by the laws, administrative regulations and the articles of association of the company, exercise their rights as shareholders in accordance with the law, and shall not abuse their rights to harm the interests of the company or other shareholders.

If a shareholder of a company abuses his rights as a shareholder and causes losses to the company or other shareholders, he shall be liable for compensation.

Paragraphs 3 and 4 of Article 89 Where the controlling shareholder of the company abuses the rights of shareholders and seriously harms the interests of the company or other shareholders, the other shareholders have the right to request the company to acquire their equity at a reasonable price.

The equity of the Company acquired by the Company due to the circumstances specified in paragraphs 1 and 3 of this Article shall be transferred or cancelled in accordance with the law within six months.

Article 189 Where directors or senior managers have any of the circumstances provided for in the preceding article, the shareholders of a limited liability company or shareholders of a company limited by shares who hold more than 1% of the company's shares individually or collectively for more than 180 consecutive days may request the board of supervisors in writing to file a lawsuit with the people's court; If a supervisor falls under the circumstances specified in the preceding article, the aforesaid shareholder may request the board of directors in writing to file a lawsuit in the people's court.

If the board of supervisors or the board of directors refuses to file a lawsuit after receiving the written request of the shareholders specified in the preceding paragraph, or fails to file a lawsuit within 30 days from the date of receipt of the request, or if the situation is urgent and the company's interests will be irreparably harmed if the lawsuit is not filed immediately, the shareholders provided for in the preceding paragraph have the right to directly file a lawsuit in the people's court in their own name for the interests of the company.

Where others infringe upon the lawful rights and interests of the company and cause losses to the company, the shareholders provided for in the first paragraph of this article may file a lawsuit in the people's court in accordance with the provisions of the preceding two paragraphs.

Where the directors, supervisors or senior management of a wholly-owned subsidiary of the Company have any of the circumstances provided for in the preceding paragraph, or if others infringe upon the lawful rights and interests of the wholly-owned subsidiary of the Company and cause losses, the shareholders of a limited liability company or a shareholder of a company limited by shares holding more than 1% of the shares of the Company individually or collectively for more than 180 consecutive days may, in accordance with the provisions of the preceding three paragraphs, request the board of supervisors or the board of directors of the wholly-owned subsidiary to file a lawsuit in the people's court or directly file a lawsuit in their own name with the people's court.

Civil Code of the People's Republic of China (effective as of January 1, 2021) (excerpt)

Article 83, Paragraph 1: Investors of for-profit legal persons must not abuse the rights of investors to harm the interests of legal persons or other investors; Where the rights of investors are abused and losses are caused to legal persons or other investors, civil liability shall be borne in accordance with law.

Article 132:Civil entities must not abuse civil rights to harm the national interest, the societal public interest, or the lawful rights and interests of others.

Securities Law of the People's Republic of China (Revised on December 28, 2019) (Excerpt)

Article 90 The board of directors of a listed company, its independent directors, shareholders holding more than 1% of the voting shares, or an investor protection institution established in accordance with laws, administrative regulations or the provisions of the securities regulatory authority under the State Council (hereinafter referred to as the investor protection institution) may, as a solicitor, publicly request the shareholders of the listed company to entrust them to attend the general meeting of shareholders on their behalf and exercise their shareholder rights such as the right to make proposals and votes on their behalf.

Where the rights of shareholders are solicited in accordance with the provisions of the preceding paragraph, the solicitor shall disclose the solicitation documents, and the listed company shall cooperate.

It is forbidden to publicly solicit shareholder rights by means of compensation or disguised compensation.

Where the public solicitation of shareholders' rights violates laws, administrative regulations or the relevant provisions of the securities regulatory authority of the State Council, causing losses to the listed company or its shareholders, it shall be liable for compensation in accordance with law.

Law of the People's Republic of China on State-owned Assets of Enterprises (effective as of May 1, 2009) (excerpt)

Article 14 Institutions performing the duties of investors shall perform their duties as investors in accordance with laws, administrative regulations and the articles of association of enterprises, protect the rights and interests of investors, and prevent the loss of state-owned assets.

Institutions performing the duties of investors shall safeguard the rights enjoyed by enterprises as market entities in accordance with law, and shall not interfere with the business activities of enterprises except for performing their duties as investors in accordance with law.

◇ Administrative regulations

Regulations of the People's Republic of China on the Supervision and Administration of Securities Companies (Revised on July 29, 2014, Decree No. 653 of the State Council of the People's Republic of China) (Excerpt)

Article 3 The shareholders and actual controllers of a securities company shall not abuse their rights to occupy the assets of the securities company or its customers, thereby harming the legitimate rights and interests of the securities company or its customers.

◇ Normative documents of the State Council

Guiding Opinions of the General Office of the State Council on Further Improving the Corporate Governance Structure of State-owned Enterprises (April 24, 2017, Guo Ban Fa [2017] No. 36) (excerpt)

3. The investor institution shall exercise the rights of shareholders and perform the obligations of shareholders in accordance with the provisions of laws and regulations and the articles of association, and the relevant regulatory content shall be incorporated into the articles of association of the company in accordance with the law. In accordance with the requirements of focusing on the management of capital, the investor institution should change its work functions, improve its working methods, strengthen the management of the company's articles of association, clean up the relevant rules and normative documents, study and propose a list of approval items for the investor institution, establish a compliance review mechanism for major decisions of the board of directors, formulate specific measures such as the construction of the board of supervisors and the pursuit of responsibility, and formulate the management measures for the preferred shares of state-owned capital and the special management units of the state in a timely manner.

Notice of the State Council on Forwarding the Opinions of the China Securities Regulatory Commission on Improving the Quality of Listed Companies (October 19, 2005, Guo Fa [2005] No.34) (excerpt)

(8) Earnestly safeguard the independence of listed companies. Listed companies must be independent in their institutions and businesses, and be completely separated from their shareholders, especially their controlling shareholders, in terms of personnel, assets, and finance. The controlling shareholder shall exercise the rights of the investor in accordance with the law, and shall not infringe upon the property rights of the legal person formed by the capital contribution of all shareholders enjoyed by the listed company. The controlling shareholder or actual controller shall not use the right of control to violate the standard operating procedures of the listed company, interfere in the internal management of the listed company, interfere in the business decision-making of the listed company, and harm the legitimate rights and interests of the listed company and other shareholders.

(10) It is strictly forbidden to embezzle the funds of listed companies. The controlling shareholder or actual controller shall not embezzle the funds of the listed company in the name of borrowing money from the listed company, providing guarantees by the listed company, repaying debts, making advances, etc. With regard to the funds that have already been embezzled, the controlling shareholders, especially the state-owned controlling shareholders or actual controllers, should speed up the repayment by means of cash repayment, dividends, shares, and assets in light of different circumstances, and must complete the repayment by the end of 2006.

(11) Resolutely curb illegal external guarantees. Listed companies should clarify the examination and approval authority for external guarantees in accordance with relevant laws and regulations, and strictly implement the review procedures for external guarantees. No person of a listed company may provide a guarantee in the name of the listed company without the approval or authorization of the board of directors or the general meeting of shareholders in violation of the provisions of the articles of association. Listed companies should conscientiously fulfill their information disclosure obligations on external guarantees, strictly control the risks of external guarantees, and take effective measures to resolve the risks of illegal guarantees and serial guarantees.

(20) Regulate the conduct of the controlling shareholders or actual controllers of listed companies. The relevant parties should urge the controlling shareholder or actual controller to speed up the repayment of the funds embezzled by the listed company, and if the state-owned controlling shareholder fails to pay off the funds within the time limit or there is a new problem of misappropriation of the listed company's funds, the relevant responsible person and the person directly responsible shall be given disciplinary sanctions, up to and including removal from office; If a non-state-owned controlling shareholder or actual controller fails to pay off the funds within the time limit or if there is a new problem of embezzlement of the listed company's funds, the relevant departments shall impose necessary restrictions on its financing activities in accordance with the law. It is necessary to investigate and deal with the acts of shareholders and actual controllers of listed companies in using unfair related-party transactions to encroach on the interests of listed companies and hollow out listed companies in accordance with the law. Intensify the investigation of the responsibility of the controlling shareholder or actual controller who infringes on the interests of a listed company, and pursue criminal responsibility in accordance with the law if a crime is constituted.

◇ Judicial interpretation

Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Provisions of the Civil Code of the People's Republic of China (effective as of March 1, 2022, Fa Shi [2022] No. 6) (excerpt)

Article 3: People's courts may make determinations on factors such as the object, purpose, time, and method of exercising the rights, and the extent to which the interests of the parties are imbalanced, as provided for in the abuse of civil rights as provided for in article 132 of the Civil Code.

Where the actor exercises civil rights with the primary purpose of harming the national interest, the societal public interest, or the lawful rights and interests of others, the people's court shall find that it constitutes an abuse of civil rights.

Where an abuse of civil rights is constituted, the people's court shall find that the abuse does not take legal effect. Where harm is caused by abuse of civil rights, it is to be handled in accordance with Part VII of the Civil Code and other relevant provisions.

Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (IV) (amended on December 23, 2020, Fa Shi [2020] No. 18) (excerpt)

Article 15 Where a shareholder fails to submit a resolution of the shareholders' meeting or the general meeting of shareholders that clearly states a specific distribution plan, and requests the company to distribute profits, the people's court shall reject the litigation claim, except where the abuse of shareholders' rights in violation of the law causes the company not to distribute profits and causes losses to other shareholders.

Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Enterprise Bankruptcy Law of the People's Republic of China (II) (amended on December 23, 2020, Fa Shi [2020] No. 18) (excerpt)

Article 46, Paragraph 2 Where the shareholders of the debtor claim that the following debts are offset with the debts owed by the debtor to them, and the debtor's administrator raises an objection, the people's court shall support it:

(2) Debts owed to the debtor by the debtor's shareholders who abuse their shareholder rights or are affiliated with the company and harm the interests of the company.

◇ Departmental regulations

Measures for the Administration of Consumer Financial Companies (effective as of April 18, 2024, Decree No. 4 of 2024 of the State Administration of Financial Supervision and Administration) (excerpt)

Article 25, Paragraph 1, Paragraphs 4 and 6 In addition to performing their shareholder obligations in accordance with relevant laws, regulations and regulatory provisions, shareholders of a consumer finance company shall also assume the following shareholder obligations:

(4) Major shareholders shall not abuse their shareholder rights to interfere with the decision-making power and management power of the board of directors and senior management, and shall not interfere with the operation and management of the consumer finance company beyond the board of directors and senior management, or damage the legitimate rights and interests of the consumer finance company and other shareholders;

(6) Shareholders and their actual controllers shall safeguard the independent legal person status and operational autonomy of the consumer finance company, and shall not abuse the rights of shareholders to harm the legitimate rights and interests of the consumer finance company, other shareholders and stakeholders.

Provisions on the Administration of Insurance Asset Management Companies (effective as of September 1, 2022, Decree No. 2 [2022] of the China Banking and Insurance Regulatory Commission) (excerpt)

Article 37 The shareholders of an insurance asset management company shall perform their statutory obligations and exercise their rights as shareholders of the insurance asset management company in accordance with the law. Shareholders of an insurance asset management company and its actual controller shall not engage in any of the following acts:

(1) False capital contributions, evasion, or disguised withdrawal of capital contributions;

(2) Possessing or transferring the assets of the insurance asset management company in any form;

(3) Requesting the insurance asset management company to provide cooperation in asset management and other business activities, harming the legitimate rights and interests of investors and other parties;

(4) Concealing the relationship through any means, concealing or falsely providing information on related parties;

(5) Engaging in improper transactions with assets managed by insurance asset management companies, requiring insurance asset management companies to use the assets under management to seek benefits for themselves or others;

(6) Other acts that harm the lawful rights and interests of investors, insurance asset management companies and other stakeholders by taking advantage of their position as shareholders;

(7) Other acts prohibited by relevant state laws, regulations, and regulatory agencies.

Administrative Measures for Information Disclosure of Unlisted Public Companies (Amended on October 30, 2021, Decree No. 191 of the China Securities Regulatory Commission) (Excerpt)

Paragraph 1 of Article 37 The shareholders and actual controllers of a listed company shall not abuse their shareholder rights or dominant position to instruct the listed company not to perform its information disclosure obligations in accordance with the provisions or disclose information with false records, misleading statements or material omissions, and shall not require the listed company to provide them with inside information.

Administrative Measures for Information Disclosure of Listed Companies (effective as of May 1, 2021, Decree No. 182 of the China Securities Regulatory Commission) (excerpt)

Paragraph 3 of Article 39 The shareholders and actual controllers of a listed company shall not abuse their shareholder rights or dominant position, and shall not require the listed company to provide them with inside information.

Provisions on the Administration of Equity of Securities Companies (Amended on March 18, 2021, Decree No. 183 of the China Securities Regulatory Commission) (Excerpt)

Article 4, Paragraph 1 Shareholders of securities companies shall abide by laws and regulations, the regulations of the China Securities Regulatory Commission (hereinafter referred to as the China Securities Regulatory Commission) and the articles of association of the company, uphold the long-term investment philosophy, exercise their shareholder rights and fulfill their obligations in accordance with the law.

Article 25 Shareholders of a securities company shall not pledge the equity of the securities company they hold during the equity lock-up period. After the expiration of the equity lock-up period, the proportion of equity held by shareholders of a securities company pledged by them shall not exceed 50% of the equity ratio of the securities company.

If a shareholder pledges the equity of the securities company he holds, he or she shall not harm the interests of other shareholders and the securities company, shall not agree that the pledgee or other third party shall exercise the rights of shareholders such as voting rights, and shall not transfer the control of the equity of the securities company in disguise.

The provisions of the first paragraph of this article shall not apply to shareholders of listed securities companies and securities companies listed on the share transfer system holding less than 5% of the equity.

Measures for the Supervision and Administration of Distribution Agencies of Publicly Offered Securities Investment Funds (effective as of October 1, 2020, Decree No. 175 of the China Securities Regulatory Commission) (excerpt)

Paragraph 2 of Article 13 Where a shareholder pledges the equity of an independent fund distribution agency held by him, it shall not stipulate that the pledgee or other third party shall exercise shareholder rights such as voting rights, nor shall it transfer control over the equity of the independent fund distribution agency in disguise. Shareholders who hold more than 5% of the equity of an independent fund distribution agency shall not pledge more than 50% of the equity ratio of the independent fund distribution agency.

Administrative Measures for the Acquisition of Unlisted Public Companies (Amended on March 20, 2020, Decree No. 166 of the China Securities Regulatory Commission) (Excerpt)

Article 7 The controlling shareholder or actual controller of the acquired company shall not abuse the rights of shareholders to harm the legitimate rights and interests of the acquired company or other shareholders.

If the controlling shareholder, actual controller of the target company and its affiliates have harmed the legitimate rights and interests of the target company and other shareholders, the said controlling shareholder or actual controller shall take the initiative to eliminate the damage before transferring the control of the target company; If the damage cannot be eliminated, arrangements shall be made for the income obtained from the transfer of the relevant shares to be used to eliminate all the damages, and sufficient and effective performance guarantees or arrangements shall be provided for the part that is insufficient to eliminate the damages, and shall be submitted to the general meeting of shareholders of the target company for deliberation and approval, and the controlling shareholders, actual controllers and related parties of the target company shall abstain from voting.

Administrative Measures for the Acquisition of Listed Companies (Amended on March 20, 2020, Decree No. 166 of the China Securities Regulatory Commission) (Excerpt)

Article 7 The controlling shareholder or actual controller of the acquired company shall not abuse the rights of shareholders to harm the legitimate rights and interests of the acquired company or other shareholders.

If the controlling shareholder, actual controller of the target company and its affiliates have harmed the legitimate rights and interests of the target company and other shareholders, the said controlling shareholder or actual controller shall take the initiative to eliminate the damage before transferring the control of the target company; If the damage cannot be eliminated, arrangements shall be made for the income from the transfer of the relevant shares to be used to eliminate all the damages, and sufficient and effective performance guarantees or arrangements shall be provided for the part that is insufficient to eliminate the damages, and the approval of the general meeting of shareholders of the acquired company shall be obtained in accordance with the articles of association of the company.

Interim Measures for the Administration of Equity in Trust Companies (effective as of March 1, 2020, Decree No. 4 [2020] of the China Banking and Insurance Regulatory Commission) (excerpt)

Article 26 The shareholders of a trust company shall abide by the laws, regulations, regulatory provisions and the articles of association, exercise their rights and perform their statutory obligations in accordance with the law.

Article 27 The major shareholders of a trust company shall not abuse their shareholder rights to interfere or use their influence to interfere with the decision-making power and management rights enjoyed by the board of directors and senior management in accordance with the articles of association of the company, and shall not directly interfere or use their influence to interfere in the operation and management of the trust company beyond the board of directors and senior management, transfer interests, or otherwise damage the legitimate rights and interests of the trust parties, trust companies and other shareholders.

Measures for the Supervision and Administration of Futures Companies (effective as of June 4, 2019, Decree No. 155 of the China Securities Regulatory Commission) (excerpt)

Article 22 Shareholders of futures companies shall uphold the long-term investment philosophy, exercise their shareholder rights and fulfill their obligations in accordance with the law, and urge futures companies to improve their governance structure, risk management and internal control systems to achieve sustainable and healthy development.

Measures for the Administration of Financial Assets Investment Companies (for Trial Implementation) (effective as of June 29, 2018, Decree No. 4 [2018] of the China Banking and Insurance Regulatory Commission) (excerpt)

Article 42 A financial assets investment company shall, in accordance with the requirements of laws and regulations, the articles of association of the company and the provisions of the contract, send personnel to participate in the shareholders' meeting, the board of directors and the board of supervisors of the enterprise, deliberate and revise the articles of association and the rules of procedure, clarify the decision-making procedures for major matters, exercise the rights of shareholders in accordance with the law, participate in corporate governance and major business decisions of the enterprise, and urge the shareholding enterprises to continuously improve their operation and management.

Article 43 A financial assets investment company shall exercise all shareholders' rights in accordance with the law, and take measures within the scope of laws, regulations and the articles of association of the company to stop acts that harm the rights and interests of shareholders. When an enterprise holding shares undergoes adverse changes due to factors such as management and environment, resulting in or may lead to a significant increase in the risk of shareholding, it shall take effective measures to protect its legitimate rights and interests in a timely manner.

Measures for the Administration of Equity of Insurance Companies (effective as of April 10, 2018, Decree [2018] No. 5 of the China Insurance Regulatory Commission) (excerpt)

Article 38 The shareholders of an insurance company shall, in accordance with the provisions of the Company Law of the People's Republic of China and the provisions of the articles of association of the insurance company, exercise their rights as shareholders and perform their obligations in accordance with the law.

Article 45 If the controlling shareholder of an insurance company exercises the rights and obligations of a shareholder to an insurance company, it shall comply with the provisions of the China Insurance Regulatory Commission on controlling shareholders.

If an insurance group (holding) company exercises the rights and obligations of shareholders against its holding insurance company, it shall comply with the provisions of the China Insurance Regulatory Commission on insurance group (holding) companies.

Article 49 Where a shareholder of an insurance company pledges the equity of the insurance company held by him, he shall not harm the interests of other shareholders or the insurance company.

Shareholders of insurance companies shall not use the form of equity pledge to hold the equity of the insurance company on behalf of others, hold shares in violation of regulations, or transfer equity in disguise.

When a shareholder of an insurance company pledges equity, it shall not agree with the pledgee that the equity of the insurance company pledged when the debtor fails to perform the due debts shall be owned by the creditor, and shall not stipulate that the pledgee or its affiliates shall exercise shareholder rights such as voting rights, nor shall they transfer the control of the equity of the insurance company by other means such as the transfer of equity income rights.

Interim Measures for the Administration of Equity of Commercial Banks (effective as of January 5, 2018, Decree No. 1 [2018] of the China Banking Regulatory Commission) (excerpt)

Article 7 Shareholders of a commercial bank shall abide by laws, regulations, regulatory provisions and the articles of association, exercise their rights as shareholders and perform their statutory obligations in accordance with the law.

Commercial banks should strengthen the management of equity affairs and improve the corporate governance structure.

The China Banking Regulatory Commission (CBRC) and its dispatched agencies shall supervise the equity of commercial banks in accordance with the law, and investigate and deal with relevant violations of laws and regulations by commercial banks, their shareholders and other units and personnel.

Article 18 The principal shareholders of a commercial bank shall exercise the rights of investors and perform their obligations as investors in strict accordance with the laws, regulations, regulatory provisions and the articles of association of the company, and shall not abuse their rights as shareholders to interfere or use their influence to interfere with the decision-making power and management rights enjoyed by the board of directors and senior management in accordance with the articles of association, and shall not directly interfere or use their influence to interfere in the operation and management of commercial banks beyond the board of directors and senior management, transfer interests, or otherwise damage the legitimate rights and interests of depositors, commercial banks and other shareholders.

Article 23 Where a shareholder of a commercial bank pledges the equity of a commercial bank held by him, he shall abide by the laws and regulations and the relevant provisions of the CBRC on the pledge of equity of a commercial bank, and shall not harm the interests of other shareholders and the commercial bank.

Measures for the Administration of Controlling Shareholders of Insurance Companies (effective as of October 1, 2012, Decree No. 1 of 2012 of the China Insurance Regulatory Commission) (excerpt)

Article 5 The controlling shareholder of an insurance company shall exercise its control over the insurance company in good faith, exercise effective supervision over the insurance company in accordance with the law, prevent the business risks of the insurance company, and shall not use the right of control to damage the legitimate rights and interests of the insurance company, the policyholder, the insured and the beneficiary.

Article 8 The controlling shareholder of an insurance company shall support the insurance company in establishing an independent, sound and sound corporate governance structure, safeguard the independent operation of the insurance company, and shall not unduly restrict or exert other improper influence on the exercise of the functions and powers of the board of directors, the board of supervisors and the management of the insurance company.

Article 9 The controlling shareholder of an insurance company shall not instruct the directors, supervisors, senior managers and other personnel of the insurance company to make decisions or acts that harm the legitimate rights and interests of the insurance company, other shareholders of the insurance company, policyholders, insureds and beneficiaries.

Article 11 The controlling shareholder of an insurance company shall safeguard the financial and asset independence of the insurance company, and shall not illegally interfere with the financial accounting, fund mobilization, asset management and expense management of the insurance company, and shall not occupy the funds of the insurance company through loans, guarantees, etc.

◇ Departmental normative documents

Guiding Opinions of the State Administration of Financial Supervision and Administration on Promoting the Standardized and Healthy Development of Financial Companies of Enterprise Groups and Improving the Quality and Efficiency of Supervision (April 29, 2024, Jin Gui [2024] No. 7) (excerpt)

(7) Strengthen shareholder equity management. Enterprise groups should correctly understand the functional positioning of financial companies, maintain the status of financial companies as independent legal persons, and establish a scientific business evaluation mechanism. It is strictly forbidden for enterprise groups to abuse shareholder rights, interfere in the operation and management of financial companies beyond their authority, misappropriate funds of financial companies in violation of regulations, manipulate financial companies to pursue short-term interests, carry out improper financing in violation of regulations, entrust or indirectly entrust others to hold or manage the equity of financial companies, pledge equity or establish trusts in violation of regulations, and so forth.

Interim Measures for the Administration of Equity Participation of State-Owned Enterprises (effective as of June 23, 2023, State-owned Assets Supervision and Administration Commission of the State Council State-owned Assets Supervision and Administration Commission Guo Zi Fa Reform Gui [2023] No. 41) (excerpt)

Article 3, Paragraph 1 The following principles shall be followed in the management of equity participation of state-owned enterprises:

(1) Compliance with laws and regulations. Strictly abide by laws and regulations and provisions on the supervision and administration of state-owned assets, standardize the development of shareholding operation and investment, strengthen the review of legal compliance, effectively exercise the rights of shareholders, fulfill the obligations of shareholders in accordance with the law, and safeguard the legitimate rights and interests of state-owned enterprises.

Measures for the Supervision of the Behavior of Major Shareholders of Banking and Insurance Institutions (for Trial Implementation) (effective as of September 30, 2021, China Banking and Insurance Regulatory Commission Yin Bao Jian Fa [2021] No. 43) (excerpt)

Article 12 The major shareholders of banking and insurance institutions shall perform their duties and responsibilities in accordance with laws, regulations, regulatory provisions and the articles of association of the company, legally and effectively participate in corporate governance, and abuse of shareholders' rights is strictly prohibited.

Article 14 The major shareholders of banking and insurance institutions shall properly exercise their shareholder rights through corporate governance procedures, safeguard the independent operation of banking and insurance institutions, and strictly prohibit improper interference or restriction on banking and insurance institutions in the following ways, except as otherwise provided by laws and regulations or approved by the CBIRC:

(1) Set up pre-approval procedures for the resolutions of the shareholders' (general meeting) and the board of directors;

(2) Interfering with the normal selection and appointment procedures of the staff of banking and insurance institutions, or directly appointing and removing staff members by bypassing the shareholders' (general meeting) and the board of directors;

(3) Interfering with the performance evaluation of directors, supervisors and other staff of banking and insurance institutions;

(4) Interfering with the decision-making procedures for the normal operation of banking and insurance institutions;

(5) Interfering in the financial and accounting activities of banking and insurance institutions, such as financial accounting, fund mobilization, asset management, and expense management;

(6) Issuing business plans or instructions to banking and insurance institutions;

(7) Requesting a banking institution to grant a loan or provide a guarantee;

(8) Requiring insurance institutions to carry out specific insurance business or use of funds;

(9) Interfering with the independent operation of banking and insurance institutions in other forms.

Article 27 The major shareholders of banking and insurance institutions shall conscientiously study and implement the relevant regulations and policies of the CBIRC, exercise strict self-restraint, practice the principle of good faith, exercise the rights of major shareholders in good faith, and shall not use the position of major shareholders to harm the legitimate rights and interests of banking and insurance institutions and other stakeholders.

Article 37 The major shareholders of banking and insurance institutions shall encourage and support all shareholders, especially small and medium-sized shareholders, to carry out proper communication and consultation on the exercise of shareholders' rights and other related matters, and coordinate and cooperate with small and medium-sized shareholders in exercising their legal rights such as the right to know or the right to question in accordance with the law.

Article 39 The major shareholders of a banking and insurance institution shall pay attention to the relevant circumstances of other shareholders exercising their rights and performing their obligations as shareholders, and shall promptly notify the banking and insurance institution if it is found that the interests of the banking and insurance institution or the legitimate rights and interests of other stakeholders have been harmed. Banking and insurance institutions shall take corresponding measures in a timely manner in accordance with the provisions of laws and regulations and the articles of association of the company, and report to the CBIRC or its dispatched agencies.

Article 43 Banking and insurance institutions are encouraged to formulate a list of the rights and obligations of major shareholders and a list of negative acts.

The list of rights and obligations shall clarify the rights of shareholders and the responsibilities and obligations that major shareholders should perform in accordance with law; The list of negative acts shall specify the violations that major shareholders are not allowed to use their position as shareholders to carry out, as well as the legal liabilities and regulatory penalties that they may face if there are violations.

Banking and insurance institutions shall, in accordance with laws, regulations and regulatory policies, promptly update the list of rights and obligations and the list of negative acts, make full use of the articles of association, supervise and guide major shareholders to exercise their shareholder rights in strict accordance with laws and regulations, and actively perform their responsibilities and obligations.

Article 47 Where a major shareholder of a banking and insurance institution abuses its rights as a shareholder and causes losses to the banking and insurance institution, the banking and insurance institution shall, in accordance with the provisions of Article 20 of the Company Law of the People's Republic of China, require the major shareholder to bear the liability for compensation. If the major shareholder refuses to cooperate in assuming the liability for compensation, the banking and insurance institution shall actively take relevant measures to safeguard its own rights and interests, and report the relevant situation to the CBIRC or its dispatched agency.

Corporate Governance Guidelines for Banking and Insurance Institutions (effective as of June 2, 2021, China Banking and Insurance Regulatory Commission Yin Bao Jian Fa [2021] No. 14) (excerpt)

Article 15 The shareholders of banking and insurance institutions shall exercise their rights as shareholders in accordance with the Company Law and other laws, regulations, regulatory provisions and the articles of association of the company.

Article 16, Paragraph 1, Item 8 In addition to performing their obligations as shareholders in accordance with the Company Law and other laws, regulations and regulatory provisions, shareholders of banking and insurance institutions shall also undertake the following obligations:

(8) Shareholders and their controlling shareholders and actual controllers shall not abuse their shareholder rights or take advantage of their affiliations to harm the legitimate rights and interests of banking and insurance institutions, other shareholders and stakeholders, shall not interfere with the decision-making power and management rights enjoyed by the board of directors and senior management in accordance with the articles of association, and shall not directly interfere in the operation and management of banking and insurance institutions beyond the board of directors and senior management.

Code of Governance for Listed Companies (Revised on September 30, 2018, Announcement [2018] No. 29 of the China Securities Regulatory Commission) (excerpt)

Article 4 The shareholders, actual controllers, directors, supervisors and senior managers of a listed company shall exercise their rights and perform their obligations in accordance with laws, administrative regulations, departmental rules, normative documents (hereinafter collectively referred to as laws and regulations) and self-discipline rules, so as to safeguard the interests of the listed company. Directors, supervisors, and senior managers shall continue to learn, continuously improve their ability to perform their duties, and perform their duties faithfully, diligently, and prudently.

Article 7 (1) Shareholders enjoy rights and assume obligations in accordance with laws and regulations and the articles of association of the company.

Article 63 The controlling shareholder and actual controller shall have a fiduciary duty to the listed company and other shareholders. The controlling shareholder shall exercise its shareholder rights and perform its obligations in accordance with the law with respect to the listed company under its control. Controlling shareholders and actual controllers shall not use their control to harm the legitimate rights and interests of listed companies and other shareholders, and shall not use their controlling position over listed companies to seek illegal benefits.

Article 64 Where a controlling shareholder nominates a candidate for director or supervisor of a listed company, it shall follow the conditions and procedures prescribed by laws, regulations and the articles of association of the company. The controlling shareholder shall not set up approval procedures for the results of the personnel election of the general meeting of shareholders and the resolution of the board of directors on the appointment of personnel.

Article 65 Major decisions of a listed company shall be made by the general meeting of shareholders and the board of directors in accordance with law. The controlling shareholder, actual controller and its affiliates shall not interfere with the normal decision-making procedures of the listed company in violation of laws, regulations and the articles of association of the company, and damage the legitimate rights and interests of the listed company and other shareholders.

Guiding Opinions of the People's Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission on Strengthening the Supervision of Non-financial Enterprises Investment in Financial Institutions (April 27, 2018, Yin Fa [2018] No. 107) (excerpt)

(12) Prevent abuse of control

Enterprises shall exercise their shareholder rights in accordance with laws, regulations and regulatory provisions, and participate in corporate governance by sending shareholder representatives with the quality and ability to perform their duties, and shall not directly or indirectly arbitrage, misappropriate or squeeze out the funds of financial institutions and their customers. Financial institutions should insist on operating independently and without undue interference. Creditors and employees of financial institutions are encouraged to supervise and report improper interference with enterprises.

Guidelines for the Management and Supervision of Consolidated Statements of Commercial Banks (effective as of July 1, 2015, China Banking Regulatory Commission Yin Jian Fa [2014] No. 54) (excerpt)

Article 26 A commercial bank shall ensure the independence of the corporate governance of its subsidiaries. Subsidiaries should make independent business decisions through their own corporate governance systems within the unified policy and institutional framework of the banking group.

Commercial banks shall not abuse their shareholder rights or exert influence on their subsidiaries in other improper ways, forcing them to deviate from the normal corporate governance and decision-making mechanisms.

Notice of the General Office of the China Banking Regulatory Commission on Issues Concerning the Off-site Supervision of Village and Township Banks (June 6, 2012, Yin Jian Fa [2012] No.178) (excerpt)

5. Efforts should be made to strengthen the supervision of the main initiating banks in fulfilling their shareholder responsibilities to ensure the independence of village and township banks

Village and township banks have the status of independent legal persons and are equal market entities with the main initiating bank. Regulatory authorities at all levels shall supervise and urge the main initiating bank to follow the principle of "clear responsibilities, lawful procedures, and standardized conduct", and in accordance with the provisions of the Company Law and the articles of association, to appoint shareholder representatives with strong operation and management ability and rich experience to perform shareholder duties through the shareholders' meeting and board of directors of the village or township bank, and shall not use the village or township bank as a channel for the transfer of personnel of the main sponsoring bank, shall not turn the village or township bank into a branch, and shall not directly interfere in the operation of the village or township bank beyond the shareholder representatives. It is not allowed to directly exercise shareholder rights beyond the general meeting of shareholders and the board of directors, so as to effectively ensure the operational autonomy of village and township banks and safeguard the interests of small and medium-sized shareholders.

Measures for Property Acceptance and Inspection (effective as of January 1, 2011, Ministry of Housing and Urban-Rural Development Jianfang [2010] No. 165) (excerpt)

Article 37 The construction unit shall not abuse the rights of shareholders by virtue of its affiliation, exempt itself from its own responsibilities in the property undertaking inspection, increase the liability of the property service enterprise, and damage the rights and interests of the property buyer.

Code of Governance for Securities Investment Fund Management Companies (for Trial Implementation) (effective as of June 15, 2006, China Securities Regulatory Commission Zheng Jian Ji Jin Zi [2006] No. 122) (excerpt)

Article 12 The shareholders of the company shall meet the qualifications stipulated by laws, administrative regulations and the China Securities Regulatory Commission, and exercise their rights and perform their obligations in accordance with the provisions of laws, administrative regulations, the China Securities Regulatory Commission and the articles of association of the company.

Article 14 Shareholders shall strictly perform their capital contribution obligations in accordance with the law, and shall not make false capital contributions, evade or disguise capital contributions in any way, and shall not possess or transfer the company's assets in any form.

Article 15 Shareholders shall not require the company to provide financing or guarantee for them or carry out improper related party transactions, and the company shall not directly or indirectly provide financing or guarantee for shareholders.

Article 16 Shareholders shall directly hold the equity of the company, and shall not hold the equity for other institutions and individuals, and shall not entrust other institutions and individuals to hold the equity of the company on their behalf.

Article 17 Shareholders shall respect the independence of the company, and there is no subordinate relationship between the company and its business departments and shareholders, actual controllers and their subordinate departments. Shareholders and their actual controllers shall not directly appoint or remove the senior management of the company beyond the shareholders' meeting and the board of directors; It is not allowed to interfere with the company's investment, research, transactions and other specific affairs, as well as the selection and employment of the company's employees in violation of the company's articles of association.

All employees of the company except directors and supervisors are not allowed to work part-time in shareholder units.

Article 18 The company shall submit the relevant technical support, service, cooperation and other agreements signed with shareholders to the China Securities Regulatory Commission and relevant dispatched agencies, and the company shall not sign any agreement that affects the independence of the company's operation.

Article 19 The company shall, in accordance with the principle of protecting the interests of fund share holders, formulate a system for information transmission and confidentiality within the scope permitted by laws, administrative regulations and the regulations of the China Securities Regulatory Commission.

Shareholders shall not directly or indirectly require the company's directors, managers and employees of the company to provide non-public information and materials on fund investment, research, etc.

Shareholders shall not use the non-public information obtained by providing technical support or exercising the right to know for the benefit of any person, and shall not disclose such non-public information to any third party.

Article 20 Shareholders shall pay attention to the operation and financial status of the company, and the articles of association of the company shall make specific provisions on the way in which shareholders exercise their right to know in accordance with the law.

Shareholders who inspect the company's financial status shall submit a written request to the company, stating the purpose. If the company has a reasonable basis to believe that the above-mentioned acts of shareholders have improper purposes and may harm the legitimate rights and interests of fund unit holders and the company, it may refuse.

Article 21 Shareholders shall carefully deliberate and sign the shareholders' agreement, the articles of association and other legal documents, and conscientiously perform their obligations in accordance with the agreement.

The content and formulation procedures of shareholders' agreements, articles of association and other legal documents shall comply with laws, administrative regulations and the relevant provisions of the China Securities Regulatory Commission.

Article 22 Shareholders shall perform their fiduciary obligations to the company and other shareholders, and shall immediately notify the company and other shareholders in writing in case of any of the following circumstances:

(1) Change of name and domicile;

(2) The people's court has taken property preservation or enforcement measures against the equity of the company it holds;

(3) Decide to transfer the company's equity;

(4) Merger, division or restructuring of major assets and debts;

(5) Being ordered to suspend business for rectification, designating trusteeship, taking over or revoking regulatory measures or entering bankruptcy liquidation procedures;

(6) Being investigated by a regulatory agency or judicial organ;

(7) Other matters that may lead to the transfer of the company's equity or seriously affect the company's operation.

Article 23 Shareholders may, within the scope permitted by laws, administrative regulations and regulations of the China Securities Regulatory Commission, make special arrangements for the exercise of some of their rights, and may stipulate the following contents through the articles of association:

(1) The period during which the shareholder holds the company's equity;

(2) Without the consent of other shareholders, shareholders shall not pledge their equity holdings;

(3) If a shareholder pledges the equity held by the shareholder, and the shareholder's equity is subject to property preservation or enforcement measures taken by the people's court, the shareholder shall not exercise the right of first refusal to purchase the equity of other shareholders of the company.

Article 24 Shareholders shall submit the agreements they have signed involving equity and the operation and management of the company to the China Securities Regulatory Commission and relevant dispatched agencies, and shareholders shall not privately dispose of their rights and obligations in the company.

Article 28 Shareholders and the company shall, in accordance with laws, administrative regulations and the provisions of the China Securities Regulatory Commission, provide relevant materials truthfully, accurately, completely and in compliance with the regulations, and fulfill the obligation of information disclosure.

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