Briefcase on Corporation Law III

Jilin Electronic Group Company v East Group CompanyAOA v Promoters Agreement

Establishment of the company (issue biz license)

Pre-incorporation Period

Duration of operation of the Company

Promoters Agreement and Contract Law Prevail

AOA and Company Law prevail

Status: promoters Status: shareholders

Contractual Relationship(parties of the Contract shall

agree on every party’s rights, obligations and

liabilities)

Relationship governed by Company Law

(shareholders’ rights, obligations and liabilities

shall comply with the Company Law)

Contractual DisputeDispute concerning

shareholders or Company

Articles of Association v. Promoters Agreement

Case Summary Jilin Electronic Group Comp

any (hereinafter referred to as “Jilin Company”) together with East Group Company, Longda Real Estate Development Company and Jiahe Trading Company signed a Promoters Agreement for the purpose of establishing Haitong Hi-tech Company.

Jilin Electronic Group Company

Longda Real Estate Company

Jiahe Trading Company

East Group Company

HaitongHI-tech

Company

Case Summary

All the Parties hereby agreed on the following clauses: The newly established company is a stock company. The form of investment and the ratio of capital

contribution: (i) Jilin Electronic shall make capital contribution in the

form of equities and land-use right, accounting for 51% of the registered capital .

(ii) East Group Company shall make capital contribution in the form of equities and ownership of machineries and equipments, accounting for 40% of the registered capital. (iii) The other two companies contribute 9% of the registered capital.

Case Summary

However, East Group Company did not transfer the equity to the newly established hi-tech company. Jilin Company sued group Company. Jilin Company claimed that East Group Company did not fully make capital contribution which impacted on the daily sound operation of the company and bring about huge losses to Jinlin Company.

Jilin Company asked the court to terminate the Promoters Agreement.

Case Summary

East Group Company defended that The hi-tech company has already been set up.

The Promoters Agreement has been performed as agreed upon.

Where the Promoters Agreement has been performed as agreed upon, this agreement has been terminated.

The court shall not enforce Jilin Company’s claim.

Questions

Upon the establishment of the Company, which agreement shall bind on the shareholders of the new company, the Promoters Agreement or the Articles of Association of the Company?

Shall the court enforce Jilin Company’s claim? What advice would you like to give to help Jilin

Company seek remedy?

AOA v Promoters Agreement

Promoters Agreement Company limited by shares: mandatory \ compulsory

(essential\necessary) Limited Liability Company: (i) Chinese-Foreign Company or Wholly Foreign-owned

Company: mandatory \ compulsory (ii) Other Limited Liability Company: optional AOA All companies: mandatory\compulsory

Establishment of the company (issue biz license)

Pre-incorporation Period

Duration of operation of the Company

Promoters Agreement and Contract Law Prevail

AOA and Company Law prevail

Status: promoters Status: shareholders

Contractual Relationship(parties of the Contract shall

agree on every party’s rights, obligations and

liabilities)

Relationship governed by Company Law

(shareholders’ rights, obligations and liabilities

shall comply with the Company Law)

Contractual DisputeDispute concerning

shareholders or Company

Articles of Association v. Promoters Agreement