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The Role of Representatives of Minority Shareholders in the System of Corporate Governance

In the Context of Corporate Governance in the US, EU and China


Wenjia Yan

Due to the global influence of the shareholder-centered model of the US, both China and the EU have taken more measures to protect minority shareholders. In this respect, the representation of minority shareholders on the board, in particular the system of cumulative voting which was originally designed by the US to protect minority shareholders, has become a frequently-discussed issue in China and the EU. This study of comparative law is based upon the comparison of the attitudes among the US, China and the EU towards cumulative voting. By analyzing some empirical investigations and massive literatures of American academics as the theoretical foundation, it tries to demonstrate whether the convergence of corporate governance towards the shareholder-centered model is inevitable.

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Third Chapter: New Form of Cumulative Voting in China


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Third Chapter:  New Form of Cumulative Voting in China

The Company Law of 2005 has adopted cumulative voting from the US through Article 106 to protect minority shareholders and promote their motivation for corporate control as well as guarding against their opportunism and possible harassment of the majority. On December 28, 2013, the Company Law 2005 was amended further by the sixth Session of the Standing Committee of the Twelfth National People’s Congress. Despite the provision of cumulative voting remaining, Article 106 has been changed into Article 105, adopting the permissive cumulative voting by stipulating: “When the shareholders’ assembly elects directors or supervisors, it may, according to the articles of association or resolution of the shareholders’ assembly, adopt a cumulative voting system. The term ‘cumulative voting system’ as mentioned in this Law refers to a system of voting by shareholders for the election of directors or supervisors at a session of the shareholders’ assembly in which the shareholder can multiply his voting rights by the number of candidates and direct them all towards one candidate, director or supervisor.”

Furthermore, in the Code – which is mandatory for all listed companies that have been melded into the listing rules of the two Stock Exchanges (Shanghai and Shenzhen Stock Exchange) and which serves as the major measuring standard for evaluating whether a listed company has a good corporate governance structure and whether major problems exist with the corporate governance structure of a listed company – the...

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