Beijing No.2 Middle School: small and medium-sized enterprises "love" secret Enterprises: I'm too difficult

China-News - Politics November 20, 2020, 5:49 pm Ling Zhen's avatar Ling Zhen

Small and medium-sized enterprises are an important force in China's national economic and social development, but why are they always prone to lawsuits?

On November 19, the second intermediate people's Court of Beijing gave a briefing on the cases of commercial disputes concluded in recent years.

Nearly 70% of commercial disputes involve small and medium-sized enterprises

According to a group of data reported by Beijing No.2 Central People's court, from 2017 to the third quarter of 2020, a total of 5201 commercial disputes involving external operation and internal governance of small and medium-sized enterprises were concluded, accounting for 68.57% of all types of commercial subject cases. In terms of time distribution, there are 798 in 2017, 1399 in 2018, 1617 in 2019 and 1387 in the first three quarters of 2020. It can be seen that the number of cases is large, the proportion is high and the growth rate is fast.

Why do disputes often occur in small and medium-sized enterprises?

According to the Circular of the second central people's Court of Beijing, the reasons for the commercial disputes caused by the external operation and internal governance of small and medium-sized enterprises are as follows:

1、 In foreign business, the identity or authorization of the subject is unclear, and there are omissions in the contracting process.

2、 In the process of performing the contract, although the main obligations can be fulfilled, there are irregular behaviors.

3、 Some small and medium-sized enterprises are indifferent to the legal consciousness. When signing a contract, they only reach an oral agreement. In the performance of the contract, negotiation, change, notice, order or collection of money are only made through oral means, and lack of evidence consciousness.

4、 In terms of internal governance, due to the small number of shareholders, close relationship between shareholders or one-sided pursuit of efficiency and other reasons, some small and medium-sized enterprises do not pay attention to the legitimacy requirements of decision-making procedures and the decision-making procedures are not standardized.

5、 Some shareholders of small and medium-sized enterprises have weak legal consciousness and lack of necessary understanding of the boundary between personal property and company property. Their behavior often leads to property confusion, which easily leads to the loss of independent personality of the company and makes shareholders bear joint and several liability for the company's debts.

6、 Due to the limited scale of small and medium-sized enterprises, the number of shareholders is generally small, and the equity is more likely to be concentrated in one or several shareholders. Controlling shareholders may infringe on the interests of small and medium-sized shareholders by virtue of their shareholding advantages. Many shareholders of small and medium-sized enterprises do not pay enough attention to the exit link of the company and fail to perform the liquidation obligations according to law, which damages the interests of creditors.

In view of the causes of the dispute, the judge suggested that

1、 Improve the legal risk prevention and control system of small and medium-sized enterprises

Small and medium-sized enterprises should face sound legal risk prevention and control system. First of all, enterprises should make contracts carefully and clarify the subject of contracts. Secondly, it is necessary to standardize the performance behavior, indicate the purpose of capital flow, timely reconciliation and settlement, and standardize the work of business handover. At the same time, for the breach of contract of the trading party, it is necessary to put forward written objection in time and actively stop loss.

2、 Improving internal governance to stimulate the power of company management

Small and medium-sized enterprises should abide by the provisions of the company law and the articles of association, and improve the internal governance of the company. First of all, the company's decision-making should be carried out in accordance with the requirements of due process and the procedures of convening, notifying and voting the meeting. Secondly, the boundary between shareholder property and company property should be clear. Thirdly, the controlling shareholders should not abuse the rights of shareholders and infringe on the interests of small shareholders. There are contradictions between shareholders, which should be solved through negotiation as far as possible. Finally, when the cause of liquidation occurs, shareholders should actively perform the liquidation obligations according to law, make the company exit healthily and orderly, and protect the legitimate rights and interests of creditors.

3、 Actively take legal measures to safeguard the legitimate rights and interests of the company

Small and medium-sized enterprises should further improve their legal awareness, pay attention to properly retain evidence, including contracts, transaction vouchers, correspondence, etc. involved in external operation, various records and various notification documents involved in internal governance. In addition, when the legitimate rights and interests are infringed, small and medium-sized enterprises should timely send a reminder letter to interrupt the prescription, or timely file a lawsuit or arbitration to actively protect their rights.

Source: People's court news media general office

Author: Meng Xiangyu

Editor: Shi Zijing

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