The Supreme People’s Court of the PRC issued the Several Provisions of the Supreme People’s Court on the Temporal Applicability of the Company Law of the PRC (Fashi [2024] NO. 7) recently, which formulates detailed provisions on the application and retrospective effect of the new Company Law. The said judicial interpretations and the new Company Law both came into effect on 1 July 2024. The detailed provisions of the judicial interpretation are as follows:

1. Basic Principle
   
   Based on the principle that laws do not apply retroactively, civil disputes arising from legal facts occurred after the implementation of the new Company Law shall be governed by the new Company Law, while civil disputes arising from legal facts occurred before the implementation of the new Company Law shall be governed by the laws and judicial interpretations in effect at that time.
   
   
2. Retrospective Rules
   
   

   2.1	Disputes arising before the implementation of the new Company law shall be governed by the new Company Law if the application of new Company Law is more conducive to achieving the legislative purpose of the law. For example: (1) The shareholders’ meeting was improperly convened and shareholders who were not notified to attend the meeting request the court to revoke the resolution within one year from the resolution date. (2) Shareholders’ meeting resolutions or board resolutions are confirmed by the court to be invalid, and disputes arise regarding the legal relationships formed by the company based on those resolutions. (3) Shareholders contributed with creditors rights, and disputes arise due to disagreements over the method of contribution. (4) Disputes arising from the transfer of equity by shareholders of a limited liability company to parties other than shareholders. (5) The company distributed profits to shareholders or reduced registered capital illegally, and disputes arise regarding compensation liability. (6) Profits distribution resolution has been made, but there are disputes over the time limit for profit distribution. (7) Shareholders have disputes on the corresponding reduction in capital contributions or the number of shares.
   2.2	If civil legal acts related to the company before the implementation of the new Company Law were deemed invalid based on the laws and judicial interpretations at that time but are considered valid under the new Company Law, the new Company Law shall apply in the following situations: (1) Effectiveness of an agreement where the company assumes joint liability for debts of the invested enterprise. (2) Effectiveness of company resolutions on using capital reserve funds to offset losses. (3) Effectiveness of resolutions on merge with companies with over 90% shareholding.
   2.3	Contracts related to the company were entered into before the implementation of the new Company Law and performance continues after its implementation. Disputes arising from pre-implementation performance shall be governed by the laws and judicial interpretations in effect at that time. For disputes arising from post-implementation performance, the new Company Law shall apply in the following situations: (1) Contract for holding shares of a listed company on behalf of others. (2) Contract for a controlling subsidiary of a listed company to acquire shares of that listed company. (3) Contract for a joint stock company to provide gifts, loans, guarantees, or other financial assistance to third parties for acquiring shares of the company itself or its parent company.
   2.4	For civil disputes arising from legal facts before the implementation of the new Company Law, if there was no provision in the laws or judicial interpretations at that time, the new Company Law shall apply in the following situations: (1) Shareholders transfer equities before expiration of contribution period, if the transferee fails to make the full contribution within the specified period, the determination of the responsibilities of the transferor and transferee. (2) Abuse of shareholder rights by controlling shareholders of limited liability companies which significantly harms the company or other shareholders’ interests, and other shareholders request the company to purchase their equities at a reasonable price. (3) Shareholders who vote against resolutions at shareholders’ meetings of a joint stock company request the company to purchase their shares at a reasonable price. (4) Determination of civil liabilities for controlling shareholders or actual controllers who do not serve as company directors but execute company affairs. (5) Determination of civil liabilities for controlling shareholders or actual controllers instructing directors or senior executives to engage in activities that harm the company or shareholders’ interests. (6) Other situations not obviously deviating from the reasonable expectations of relevant parties.
   2.5	For civil disputes arising from legal facts before the implementation of the new Company Law, if there were general provisions in the laws or judicial interpretations at that time, the new Company Law subsequently made specific provisions, the new Company Law shall apply in the following situations: (1) Disputes arising from restrictions on share transfer in the articles of association of a joint stock company. (2) Determination of compensation liabilities for prohibited acts by company supervisors, including embezzlement of company funds, illegal related-party transactions, improper acquisition of company business opportunities, and conducting restricted similar business. (3) Determination of compensation liabilities for improper acquisition of company business opportunities and conducting restricted similar business by company directors and senior management personnels. (4) Determination of the scope of related parties and the nature of related transactions.
   2.6	If the legal facts requiring liquidation occurred before the implementation of the new Company Law but within 15 days before the implementation date, the new Company Law shall apply. The deadline for the fulfilment of liquidation obligation shall restart from the implementation date of the new Company Law.

   
   
3. Rules for Retrial of Civil Cases with Final Judgements
   
   For retrial of civil cases with final judgement obtained before the implementation of the new Company Law, the provisions of the laws and judicial interpretations in effect at that time shall apply.
   

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