In China, the blurred line between void and unratified or voidable resolutions can render corporate decisions unenforceable, leading to knock-on effects. Because the China Company Act and adjudicative guidelines lack supplemental invalidity rules, there has been a morass with inconsistency and ambiguity between void resolution and other validity defects in judicial precedents. There are nonetheless clear rules that resolutions may be void if they exceed board or shareholder authority, abuse control to harm the company or other shareholders, violate public policy or morality, or breach applicable law. Such resolutions can invalidate third-party transactions and prompt litigation, including disputes over unlawfully expelling a shareholder or removing an officer.

In this CBL explainer, we’ll examine the line between void resolutions and other validity defects, helping corporate decision-makers spot void resolution risks and offering compliance strategies.

Contents

• Void Resolution Ambiguity & Legal Grounds
• Which Resolutions are Void?

Void Resolution Ambiguity & Legal Grounds

The law on what resolutions are void is ambiguous, but can be understood somewhat clearly if we look at how judges think about the rules. In general, Chinese doctrine interprets the broad statutory rules on void resolutions by asking if the facts of the case fit into one of three categories implied by the statute. As a nexus of agreements, a company relies on board and shareholder resolutions to express corporate intent and take action. The validity of company resolutions directly affects internal governance stability, protection of shareholders’ interests, and stability of transactions with third parties. The 2018 China Company Act § 22 treats substantively illegal resolutions as void, and procedurally unlawful resolutions not in compliance with the Articles as voidable, creating a bifurcated classification for defective resolutions.[1]

As case law developed, unratified resolutions were recognized as a separate defect category; China Company Act Adjudicative Guidelines #4 (China Supreme Court) (the China Company Act Adjudicative Guidelines #4) then operationalized the three classifications by specifying when such resolutions are invalid,[3] and the 2023 China Company Act later incorporated and codified that classification.[2]

The three classifications do not explicitly define the boundary between void resolutions and other validity defects. Because the China Company Act and its Adjudicative Guidelines #4 define void resolutions in broad, abstract terms, courts have applied the void resolution rules inconsistently.[3]  In many cases, courts in China have treated such resolutions as valid internal company affairs because the rules on voidness are difficult to interpret and enforce, allowing many resolutions with illegal terms to escape invalidation. In the cases, judicial grounds for declaring company resolutions void fall into three main categories:

(1) A resolution is void when it contravenes mandatory law, including unlawful profit distributions that breach the China Company Act rules permitting distributions only after losses are covered and statutory reserves are set aside, usurpation of shareholder powers, including deprivation of statutory dividend or voting rights, and capitalization rule violations such as capital reductions adopted without statutory procedure, or sham capitalization.

(2) A shareholder abuses voting rights to the detriment of others. This occurs when a controlling shareholder uses majority voting power to pass resolutions that harm the company, minority shareholders, or creditors, including transfers of key company assets, equity transfers below market value, or excessive dividends that leave the company unable to pay its debts.

(3) Ultra Vires Acts. This usually arises when the board resolves on matters reserved to shareholders, such as amending the Articles or reducing or increasing capital; by contrast, shareholder resolutions within board authority are rarely invalidated, and case law in China remains divided on whether resolutions exceeding authority under the Articles are void or voidable.

Which Resolutions are Void?

The legal doctrine for declaring resolutions void is extremely abstract and not sufficient for business decision making. Some of the rules are nonetheless concrete, and several cases have emerged in China that provide concrete examples of which resolutions are void and why. Overall, four types of resolutions have been clearly declared void in the courts: ultra vires resolutions, shareholder-rights abuse, acts contrary to public policy and morality, or violations of applicable law.

1. Resolutions exceeding authority are void. In China, corporate governance is grounded in the division of powers among governing bodies. The shareholders meeting, board of directors, and audit committee are a corporation’s three resolution making bodies, providing checks and balances through separation of powers. The 2023 China Company Act removed the 2018 rule, making the board of directors accountable to the shareholders meeting and shifting some matters from shareholder authority to board authority.[2] This change was intended to enhance board authority and director independence, moving away from the 2018 Company Act’s shareholder-centric model.

Against that legislative background and intent, the 2023 China Company Act requires the board of directors, within two days of receiving a proposal, to notify other shareholders and submit it to the shareholders meeting for deliberation unless the proposal violates law, the Articles, or falls outside the shareholders meeting’s powers.[2] This provision explicitly states that the shareholders meeting may not vote on a board resolution outside its powers, thereby establishing the legislative rule that company resolution-making bodies must not exceed their authority.

The China Company Act is intended to define the statutory powers and duties of shareholders meetings and boards of directors, and 2023 § 115(b) expressly bars shareholders meetings from voting on matters outside their authority. Although the provision applies only to corporations and does not expressly void unauthorized resolutions, within the broader statutory framework, such resolutions may still violate § 115(b) and therefore may be void under § 25 because the substance of the resolution violates applicable law.

Moreover, § 10(b) of the Draft Adjudicative Guidelines to the 2023 China Company Act states that if a shareholders meeting unlawfully delegates exclusive powers to the board or unlawfully exercises those powers itself, or if the shareholders meeting or board exceeds its authority by resolving matters outside company resolution, a petition to void the resolution shall be granted; importantly, the provision does not distinguish between authority limits set by law and those set by the Articles.[4]

The cases hold that board or shareholder resolutions are void when they exceed their authority. In Guangdong Appeal 14-cv-1350 (2020), the Meizhou Lower Appeals Court voided a shareholder resolution. The court said:

“It exceeded the shareholders meeting’s authority under the China Company Act and violated the fairness principle under the China Contracts Act. The China Company Act and Meizhou Hua’ao Automobile Sales LLC’s Articles provide that the shareholders meeting may only determine the company’s management policies, i.e., whether the company management should be delegated.

By contrast, the Operating Agreement’s terms, performance or termination, and breach liability must be resolved by the parties through negotiation; if negotiation fails, the parties must seek enforcement of their rights rather than decide those matters by shareholder resolution. Resolving contractual matters by shareholder resolution may impair the parties’ right to negotiate on equal footing. Accordingly, the shareholder resolution at issue is invalid.”[5]

In Guizhou High Court Civil Appeal No.1 (2015), the Guizhou Province Upper Appeals Court likewise voided the shareholder resolution for violating the China Company Act and the company’s Articles. The court said:

“Although the shareholders meeting is the company’s highest authority, it remains bound by the China Company Act and the company’s Articles. Only the board of directors may appoint or remove the statutory representative and president. By using a shareholder resolution to remove Hu Qiuyun as statutory representative and president of Guizhou Xunjiu LLC, the three appellants violated the Act and the Articles and exceeded the shareholders meeting’s authority. Therefore, the April 20, 2014, shareholder resolution is void.”[6]

As the court decision shows, significant legal expertise is needed to make decisions that may involve void resolutions. If you need help with this issue, CBL can help you find a qualified, affordable lawyer to assess abuse and help keep company resolutions valid.

2. 2. Resolutions abusing shareholder rights and harming the company or other shareholders are void. China Company Act § 21 expressly forbids shareholders from abusing their rights against the company or other shareholders. Accordingly, any resolution violating § 21 is void.[2]

§ 6 of the Draft Judicial Adjudicative Guidelines #4 to the 2018 China Company Act is intended to treat void resolutions as those abusing shareholder rights and harming the company, other shareholders, or creditors.[7] Further, § 6(b) covered excessive dividends and material related-party transactions causing such harm. Although the draft was not officially adopted in case law, it still reflects the China Supreme Court’s inclination and has been applied in specific judicial precedents.

Finally, under judicial precedent and except as otherwise provided in the Draft Judicial Adjudicative Guidelines, resolutions may be void for abusing shareholder rights where shareholders’ statutory rights, including dividend rights, are infringed, other shareholders are expelled without legal ground, or capital-increase resolutions strip certain minority shareholders of preemptive rights.

For example, in Anhui Hefei Civil Appeal No. 00036 (2014), the court held a shareholder resolution void under the China Company Act § 21. It said:

“The shareholders meeting approved substantial payments to shareholders as purported compensation without any factual basis or verifiable funding source; the payments complied neither with statutory dividend procedures nor with ordinary fringe benefit standards, and thus constituted a disguised distribution of company assets that prejudiced shareholders under § 21 and likely impaired creditors’ interests. Therefore, the resolution shall be deemed void.”[8]

Likewise, the court in Shanghai Case 0116-cv-14414 (2021) held void under the China Company Act § 21 a shareholder resolution approving expulsion of a member. It said: “The China Company Act limits expulsion to failure to contribute capital or total sham capitalization. While in this case, the shareholder had paid the share-transfer amount and satisfied neither ground, and neither the company nor the shareholder may create additional contractual grounds. Therefore, the resolution is void.”[9]

3. Resolutions contrary to public policy and morality are void. Though company resolutions are internal acts governed by the specific statute, the China Company Act, they generally qualify as civil acts, as shown by the 2023 Act’s three classifications of validity defects: unratified, voidable, or void, matching the China Civil Code’s classification of civil acts.[2] Accordingly, the Code’s general validity rules apply to company resolutions, but only where the China Company Act, as the specific statute, provides otherwise.[10]

China Civil Code § 153(a) voids civil acts violating mandatory law. China Company Act § 25 correspondingly voids company resolutions violating applicable law, mirroring that general rule.[10] By this logic, Civil Code § 153(b) also voids acts contrary to public policy and morality. Accordingly, under the relationship between the general and specific law, company resolutions violating public policy and morality may likewise be deemed void, consistent with the legislative intent of both statutes.

Specifically, a resolution violating public policy and morality is void, and voidness may be established in either of two ways:

• directly under § 153(b), because a company resolution is a legal act and is therefore void under § 153(b) if it violates public policy and morality;
• indirectly by first finding that the resolution violates public policy and morality under § 153(b) and then, under China Company Act § 25, applying the Code’s rule as applicable law to render the resolution void for violating applicable law.

Either approach can be used; both accord with the statutory framework and may be chosen case by case.

Further guidance on whether a matter falls within the doctrine of public policy and morality may be drawn from § 17 of the China Supreme Court Case Law on the Civil Code Contract Section,[11] which provides the definition. Courts determine whether a contract violates the doctrine by applying the Core Socialist Values and considering party intent and purpose, regulatory scrutiny, the prevalence of similar transactions, and social impact, while fully stating their reasons in decisions.

4. Resolutions are void when in violation of applicable law. This category is a catch-all provision for voidness covering resolutions that violate applicable law beyond the first three categories. China Company Act § 25 provides a substantive legality review of resolution terms.[1] The first three voidness categories expand on this rule, while this category is a catch-all for other illegality and completes the voidness framework.

In China, resolutions are often illegal because they break employment law. The China Employment Act and Employment Contracts Act require negotiation with the employee representative meeting or all employees before changing compensation, benefits, or company policy, and any such change made by board or shareholder resolution without prior negotiation violates mandatory employment law and is void.

For example, in Beijing Appeal 02-cv-9905, the Beijing No. 2 Lower Appeals Court held that the board resolution is void because of violating employment laws.[12] The court said:

“Although a board may appoint or dismiss executives under the China Company Act, Xiangyun Technology and Sui Yu maintained an ongoing employment relationship and were bound by employment laws, so changes to Sui Yu’s position or compensation required mutual agreement. Any unilateral action had to be lawful and reasonable.”

This demonstrates that board resolutions were therefore subject to employment laws, and therefore, under the China Company Act § 25, this resolution, violating applicable laws, was void.[1]

Any resolution violating mandatory laws on taxation, environmental protection, or market regulation is void in China. For example, a company resolution to evade taxes or avoid environmental penalties violates mandatory taxation and environmental protection laws, harms the national and public interest, and is void under applicable law.

Conclusion

In China, corporate resolutions may be void if they exceed the board or shareholder meeting authority, facilitate shareholder abuse of rights, or violate applicable laws, public policy, or morality.

To prevent such risks, confirm that the board or shareholders meeting has authority over the resolution items at the outset. Resolutions must also be procedurally and substantively valid in China, especially to address voidness arising from shareholder abuse of rights. Procedurally, for example, send advance notice of meeting to eligible shareholders, protect voting rights, and comply with quorum and voting thresholds. Substantively, ensure all resolution items comply with applicable laws, public policy, and morality. After the resolution, retain documents and records for any later audit.

Preventing void resolutions in China may require procedural and substantive compliance and demand case-by-case analysis. CBL can connect you with professional, affordable lawyers to identify loopholes in your corporate decision-making process and offer compliance suggestions.

FURTHER READING

Get more insights on corporate governance in China.

• Managing China Company Governance Legal Risks
• Shareholder Oppression in China? Consider the Buyback Remedy
• Why Registered Capital in China is a Sham
• Audit Committee or Supervisors for a China Company?

FOOTNOTES

[1] 2018 China Company Act (中华人民共和国公司法), (China National Congress, Oct. 26, 2018) (in Mandarin)

[2] 2023 China Company Act (中华人民共和国公司法), (China National Congress, Dec. 29, 2023) (in Mandarin)

[3] China Company Act Adjudicative Guidelines #4 (最高人民法院关于适用〈中华人民共和国公司法〉若干问题的规定(四)), (China Supreme Court, Dec. 5, 2016) (in Mandarin)

[4] Draft Adjudicative Guidelines to the 2023 China Company Act (最高人民法院关于适用〈中华人民共和国公司法〉若干问题的解释（征求意见稿）向社会公开征求意见), (China Supreme Court, Sep. 30, 2025) (in Mandarin)

[5] Guangdong Appeal 14-cv-1350 (2020) (广东省梅州市中级人民法院，泉州华奥汽车销售服务有限公司与梅州华奥汽车销售服务有限公司、龙岩市雪峰汽车销售服务有限公司公司决议效力确认纠纷案), (Guangdong Meizhou Lower Appeals Court) (in Mandarin)

[6] Guizhou High Court Civil Appeal No.1 (2015) (沈寒松、羊永新、江建兴与贵州熏酒有限公司、胡秋云、胡佳杰公司决议效力确认纠纷案民事判决书), (Guizhou Province Upper Appeals Court, Apr. 9, 2015), (in Mandarin)

[7] Draft Judicial Adjudicative Guidelines #4 to the 2018 China Company Act (关于适用若干问题的规定 (四) 征求意见稿), (China Supreme Court, Apr. 12, 2016), (in Mandarin)

[8] Anhui Hefei Civil Appeal No. 00036 (2014) (谢安、刘家祥与安徽兴达化工有限责任公司公司决议效力确认纠纷二审民事判决书), (Anhui Hefei Lower Appeals Court), (Apr. 1, 2014), (in Mandarin)

[9] Shanghai Case 0116-cv-14414 (2021) (上源智慧水务(深圳)有限公司与上海上源泵业制造有限公司公司决议纠纷民事一审案件民事判决书), (Shanghai Jinshan District Court), (Feb. 28, 2022), (in Mandarin)

[10] China Civil Code (中华人民共和国民法典), (China National Congress, May. 28, 2020), (in Mandarin)

[11] Case Law on the Civil Code Contracts Section (最高人民法院关于适用《中华人民共和国民法典》合同编通则若干问题的解释), (China Supreme Court, May 23, 2025), (in Mandarin)

[12] Beijing Appeal 02-cv-9905 (北京天地祥云科技有限公司与隋煜劳动争议二审民事判决书), (Beijing No. 2 Lower Appeals Court, Aug. 10, 2021), (in Mandarin)