Zhou Changchun v. Zhuangshi China Investment Co., Li Shiwei, Peng Zhenjie, and Hunan Hanye Real Estate Development Co., Ltd.
The case confirms that where the company’s governing bodies are effectively unable to initiate litigation and internal channels are unavailable, a shareholder who has attempted required internal steps, or is in the statutory exception scenarios, may bring a representative action in the company’s name. Liability for breach by directors or managers is assessed with Article 149 and Article 151 of the Company Law as the legal framework for standing and procedural prerequisites.
Holding
The case confirms that where the company’s governing bodies are effectively unable to initiate litigation and internal channels are unavailable, a shareholder who has attempted required internal steps, or is in the statutory exception scenarios, may bring a representative action in the company’s name. Liability for breach by directors or managers is assessed with Article 149 and Article 151 of the Company Law as the legal framework for standing and procedural prerequisites.