What is the meaning of the cumulative voting system of shareholders in the Company Law?

Hello. The cumulative voting system is a voting system for the general meeting of shareholders of a listed company in the election of directors.

When two or more directors are elected at a general meeting, each share held by the shareholders shall have voting rights equal to the total number of directors to be elected, or if there are three directors to be elected, the voting rights will be tripled. Shareholders can vote for one person with all their voting rights, or they can vote for several people individually.

The purpose is to prevent major shareholders from taking advantage of their voting rights to manipulate the election of directors and to prevent major shareholders from monopolizing the election of all directors.

Theoretically, the cumulative voting system is conducive to increasing the voice of minority shareholders, provided that minority shareholders hold or hold a certain number of voting rights in aggregate. If the number of shares held by minority shareholders is too low, the difference between the shareholding ratio and that of large shareholders is too large, or if they cannot act effectively in concert, it will be difficult for the cumulative voting system to fully play its role.

The purpose of this is to prevent major shareholders from taking advantage of their voting rights to manipulate the election of directors and to correct the shortcomings of the "one share, one vote" voting system. Under this voting system, the number of votes of each share representative in the election of directors is not one, but the number of directors to be elected. The total number of voting rights held by Fortune Winner shareholders in the election of directors is equal to the product of the number of shares they hold and the number of directors to be elected.

When voting, shareholders can concentrate their voting rights on one or several director candidates, and through this partial centralized voting method, small and medium-sized shareholders can elect directors who represent their own interests, and avoid major shareholders monopolizing the election of all directors.

In the case of cumulative voting, the number of voting rights of shareholders is calculated according to the product of the number of ** held by shareholders and the number of directors or supervisors elected, rather than directly calculated according to the number of ** held by shareholders. To put it simply, the number of voting rights of shareholders is equal to the number of ** held by shareholders multiplied by the number of directors or supervisors elected.

Legal basis: Company Law of the People's Republic of China Article 100 Judgment 6 The general meeting of shareholders to elect directors and supervisors may implement a cumulative voting system in accordance with the provisions of the articles of association or the resolution of the general meeting of shareholders. The term "cumulative voting system" as used in this Law means that when the general meeting of shareholders elects directors or supervisors, each share has the same voting rights as the number of directors or supervisors to be elected, and the voting rights owned by shareholders can be used in a centralized manner.

In the case of cumulative voting, the number of voting rights of shareholders is calculated according to the product of the number of ** held by the shareholders and the number of directors or supervisors elected, rather than directly according to the number of ** held by the shareholders. To put it simply, the number of voting rights of shareholders is equal to the number of ** held by shareholders multiplied by the number of directors or supervisors elected by Shiling.

Legal basis: Article 100 of the Company Law of the People's Republic of China Article 100 The general meeting of shareholders electing directors and supervisors may implement the cumulative voting system in accordance with the provisions of the articles of association or the resolution of the general meeting of shareholders. The term "cumulative voting system" as used in this Law refers to the fact that when a general meeting of shareholders elects directors or supervisors, each share has the same voting rights as the number of directors or supervisors to be elected, and the voting rights owned by shareholders can be used in a centralized manner.

Article 43 of the Company Law stipulates that shareholders shall exercise their voting rights in accordance with the proportion of capital contribution at the shareholders' meeting, unless otherwise provided in the articles of association. The Company Law does not make it clear whether the "capital contribution ratio" is a percentage of the "registered capital" (subscribed capital contribution) or a percentage of the "paid-in capital". In the Modern Company Law (2nd Edition), it is written:

Legislators were faced with a dilemma when it came to amending the article:

First of all, if the legislator requires shareholders to exercise their voting rights in proportion to the paid-in capital contribution, they will encounter the embarrassment of some shareholders in the company who have not actually paid the capital contribution. As a result, all shareholders are not entitled to exercise their voting rights at the shareholders' meeting, and it appears that shareholder resolutions cannot be made.

Second, it would be unfair for the legislator to require shareholders to exercise their voting rights in proportion to their subscribed capital contributions. It is assumed that shareholders A and B jointly set up a company. Shareholder A subscribed 60% (RMB 600,000) of the capital contribution, but not a penny of the capital contribution subscribed by shareholder B is 40% (RMB 400,000), and the capital contribution is paid in full and in a timely manner.

If the legislator requires shareholders to exercise their voting rights in proportion to the subscribed capital contribution, then the voting rights of shareholder A at the shareholders' meeting are 60%, and the voting rights of shareholder B at the shareholders' meeting are only 40%, which is obviously contrary to the simple corporate ethics that the capital contribution is proportional to the rights. "The next question is that since there is a proportion of paid-in capital contribution and a proportion of subscribed capital contribution under the installment payment system, the author believes that there should be two situations when solving this problem:

1) In the case that one or more shareholders actually pay the capital contribution, the shareholders shall exercise their voting rights in proportion to the actual capital contribution. Such an interpretation is consistent with the notion of fairness in which rights and obligations are compatible.

2) In the case that all shareholders have not actually paid their capital contributions, shareholders shall exercise their voting rights in proportion to their subscribed capital contributions. Such an interpretation not only ensures that the resolution of the shareholders' meeting is made, but also meets the expectations of the shareholders at the time of the establishment of the company. ”。

Company Law of the People's Republic of China Article 74 In any of the following circumstances, the shareholders who voted against the resolution of the shareholders' meeting may request the company to acquire their equity in accordance with a reasonable **:

1) The company has not distributed profits to shareholders for five consecutive years, and the company has made profits for five consecutive years and meets the conditions for distributing profits stipulated in this Law;

2) The merger, division or transfer of the main property of the company;

3) The business period specified in the articles of association of the company expires or other reasons for dissolution specified in the articles of association arise, and the shareholders' meeting passes a resolution to amend the articles of association to make the company exist.

If the shareholder and the company cannot reach an equity acquisition agreement within 60 days from the date of the resolution of the shareholders' meeting, the shareholder may file a lawsuit with the people's court within 90 days from the date of the resolution of the shareholders' meeting.