Case Background
Our firm represented a Hong Kong investor (Plaintiff) petitioning for the judicial dissolution of a furniture company (HD Company), an EJV formed with a mainland enterprise. Established in 2011, the company descended into deadlock due to management conflicts:
- HK party held 88.89% equity, served as Chairman.
- Mainland party held 11.11% equity, served as General Manager.
- Three board meetings failed to pass resolutions (2012-2013).
- Operations suspended for nearly a year; HK party advanced RMB 620,000 for employee salaries.
Case Difficulties
1. Procedural Barriers
- Mainland party argued: EJV dissolution required board resolution + administrative approval.
- HK party needed to prove: Board mechanism had completely failed.
2. Deadlock Recognition Hurdles
- Unfulfilled Meeting Minutesfrom local government coordination (re: audit/equity transfer).
- General Manager refused to hand over company seal (HK party reissued via public notice).
3. Risk of Escalating Losses
- Continuous depreciation of idle equipment.
- Multiple pending debt lawsuits.
Our Service Highlights
1. Procedural Legitimacy Breakthrough
- Invoked Article 183 Company Law: Shareholders can directly petition for dissolution upon board deadlock.
- Rebutted applicability of Article 90 EJV Law Implementing Regulations(requires a functioning board).
2. Continuous Loss Demonstration
- Judgment for salary advances ((2013) Tong Zhong Shang Wai Chu Zi No. X).
- Equipment idleness assessment report.
- List of pending debt lawsuits.
3. Seal Validity Confirmation
- Public notice declaring original seal void (Haimen Daily, Sept. 8, 2012).
- Judicial recognition of new seal’s validity.
Case Outcome
1. Final Dissolution Order
- Court ordered immediate dissolution of HD Company.
2. Optimized Procedural Costs
- RMB 100 case acceptance fee borne by the company.
3. Landmark Standards Set
- Created the “Direct Judicial Dissolution Path for Sino-Foreign EJV Deadlock”.
- Clarified “Loss of Personal Harmony” (deadlock) as the core dissolution criterion.
4. Industry Impact
- Provided a judicial remedy template for foreign investor exit.
- Prompts inclusion of deadlock resolution clauses in JV agreements.
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