Persons acting in concert, explained

Introduction:

Whether listing on the Main Board or being quoted on the New Third Board, persons acting in concert are always a matter the regulators review closely. In practice, where shareholding is dispersed, many investors or shareholders choose to act in concert, in order to ensure the stability of the company's shareholding structure, the effectiveness of decisions of the shareholders' meeting and of the board, or to achieve control of the company. What exactly is a person acting in concert, and what is the legal effect of the arrangement? This article will draw back the veil for readers step by step.

1. The concept of persons acting in concert, and their scope

1. The concept

The Measures for the Administration of the Takeover of Listed Companies issued by the CSRC (the Measures) make the concept clear: acting in concert means the act or fact of an investor, by agreement or other arrangement, together with other investors expanding the number of voting rights in the shares of a listed company that it is able to control. From that concept the following features appear:

(1) the basis of acting in concert is a concert party agreement signed, or another similar agreement;

(2) the persons acting in concert hold the same opinion when voting;

(3) the object of acting in concert is to expand the voting rights over the shares of the target company that they can control, that is, to consolidate their control of the target company.

Concerted action is usually achieved in the following ways: first, the investors or shareholders reach a common opinion before the shareholders' meeting or the board meeting is held, forming a common intention as to how to vote; second, the investors or shareholders entrust one of their number to exercise the voting rights; third, where the investors or shareholders cannot reach a common opinion, the opinion of one of them prevails.

2. The scope of persons acting in concert, and the presumptions

The Measures provide: investors who act in concert in the takeover of a listed company or in a related change of shareholding interests are one another's persons acting in concert. Where there is no contrary evidence, an investor in any of the following situations acts in concert:

(1) there is a relationship of equity control between the investors;

(2) the investors are controlled by the same subject;

(3) the principal members among the directors, supervisors or senior officers of one investor also serve as directors, supervisors or senior officers of another investor;

(4) one investor holds shares in another and is able to exert a material influence on the major decisions of the company in which it holds shares;

(5) a legal person other than a bank, another organisation or a natural person provides financing arrangements for an investor to acquire the relevant shares;

(6) there is between the investors a partnership, cooperation, joint venture or other relationship of economic interest;

(7) a natural person holding 30 per cent or more of the shares of an investor holds shares of the same listed company as the investor;

(8) the directors, supervisors and senior officers serving with an investor hold shares of the same listed company as the investor;

(9) the close relatives of a natural person holding 30 per cent or more of the shares of an investor, and of the directors, supervisors and senior officers serving with the investor, being parents, spouse, children and their spouses, the parents of the spouse, brothers and sisters and their spouses, and the brothers and sisters of the spouse and their spouses, hold shares of the same listed company as the investor;

(10) the directors, supervisors and senior officers serving with a listed company, and the relatives described in the preceding item, hold shares of the company at the same time, or hold shares of the company at the same time as an enterprise directly or indirectly controlled by themselves or by the relatives described in the preceding item;

(11) the directors, supervisors, senior officers and employees of a listed company hold shares of the company together with a legal person or other organisation they control or entrust;

(12) there is between the investors another relationship of association.

In practice, on the basis of these presumptions the regulators require the intermediaries, in their comments, to state whether the persons concerned act in concert. Where an intermediary cannot find that they do, it must produce contrary evidence. Such evidence generally comprises:

(1) that votes cast in the past have on occasion differed, which shows that the persons concerned have not reached a common intention as to how to vote;

(2) that no concert party agreement or other similar agreement was signed, so that there is no legal basis for acting in concert.

2. The shareholding arrangements of persons acting in concert

1. Aggregating the shares held

Under the Measures, persons acting in concert shall aggregate the shares they hold. In calculating the shares it holds, an investor shall include both the shares registered in its own name and the shares registered in the name of a person acting in concert with it.

2. The report on a change of interests

Under the Measures, where an investor and the persons acting in concert with it come to hold 5 per cent of the issued shares of a listed company, whether through trading on a stock exchange or by transfer by agreement, they shall, within three days of the date of that fact, prepare a report on the change of interests and submit a written report to the CSRC and the stock exchange, notify the listed company and make a public announcement. Thereafter, each time the proportion of the issued shares of the listed company held by that investor and its concert parties increases or decreases by 5 per cent, they shall report and announce it as required.

The author considers that the reason the CSRC requires an investor and its concert parties to submit a report on a change of interests is this: once the shares held by an investor and its concert parties amount to control of the company, or are enough to have a material effect on it, a change in interests, and in particular a large-scale reduction of shareholding, will directly change control of the company. That will necessarily have a considerable effect on the company's major decisions and its management, and so on the interests of other investors. The company should therefore disclose such matters truthfully and promptly, so that other investors may keep abreast of its position in time and make suitable investment decisions.

3. Persons acting in concert and joint actual controllers

Persons acting in concert are not the same as joint actual controllers. Under article 3 of the Opinion on the Understanding and Application of "No Change in the Actual Controller" in the Measures for the Administration of Initial Public Offering and Listing of Shares — Securities and Futures Law Opinion No. 1: where several persons jointly hold control of a company, the situation should generally be made clear in the articles of association, an agreement or another arrangement, and the articles, agreement and arrangement must be lawful and effective, with clear rights and obligations and definite responsibilities; the situation must have existed stably and effectively within the last three years and for the foreseeable period after the initial offering, and there must have been no major change among the several persons holding control of the company jointly.

From that concept it can be seen that joint actual controllers and persons acting in concert are connected to some degree, but that does not mean the two are the same concept. Joint actual controllers have the following features: a series of documents or agreements are signed making the joint control clear; and those documents or arrangements enable the several persons to control the company's equity and the decisions of its shareholders' meeting or board of directors. Joint actual control therefore stresses not only "joint" but also "control". Persons acting in concert stress only that several investors have reached a "concerted action", and that concerted action does not mean that their shares or equity, aggregated, amount to joint actual control. In practice, however, most concert party agreements are signed in order to achieve and exercise control of the company, so as to maximise the benefit of acting in concert.

4. The concert party agreement

1. The controversy over its legal effect

The concert party agreement is somewhat controversial in judicial practice: under the Company Law a shareholder has a statutory right to vote on the company's major decisions. From the ways of achieving concerted action described above it can be seen that a concert party agreement in essence deprives some shareholders of their voting rights, or sacrifices the voting wishes of some shareholders, so that the final votes of several investors coincide. This too is the greatest controversy over the legal effect of a concert party agreement.

2. How its effect has been determined in judicial practice

Despite the controversy over its legal effect, the effect of a concert party agreement has been upheld in judicial practice. In the action brought by Zhang Guoqing and Zhou Zhengkang against Jiangxi Huadian Electric Power Co., Ltd (Huadian) to set aside a company resolution, for instance, both the court of first instance and the court of appeal upheld the effect of the concert party agreement.

On 29 December 2009 Zhang Guoqing signed a share subscription agreement and an option grant agreement with Huadian, with Hu Da, its largest shareholder and legal representative. The option grant agreement provided that Huadian would issue equity to Zhang Guoqing by private placement, and that before Huadian's shares were listed for trading Zhang Guoqing undertook that the votes attaching to the Huadian shares he held would be cast consistently with those of Hu Da. The agreements were signed and sealed by the three parties and approved by a resolution of the board. Huadian's shares were not thereafter listed for trading. On 20 August 2015 Huadian held a shareholders' meeting on a capital increase and expansion, at which the shareholders present voted on the various proposals; Zhang Guoqing voted against them and Hu Da in favour. In the end Huadian, relying on the share subscription agreement and the option grant agreement, changed Zhang Guoqing's opposing vote into a vote in favour. Zhang Guoqing therefore sued in the Yushui District People's Court of Xinyu City, Jiangxi Province, to set aside the resolution of the shareholders' meeting. The Yushui District People's Court dismissed his claim. Zhang Guoqing appealed, and the Intermediate People's Court of Xinyu City, Jiangxi Province, gave judgment dismissing the appeal and upholding the original judgment. The Xinyu Intermediate Court held that the clause in the option grant agreement was a voting agreement, also called a concert party agreement; that its content did not contravene any prohibitory provision of law, that it had been approved by a resolution of the board, and that it did not harm the lawful rights and interests of the company or of other shareholders; and that being lawful and effective in content, it was recognised.

From this case it can be seen that in judicial practice the effect of a concert party agreement or clause is recognised where it was signed on the true intention of both parties. The reason is that, although a shareholder's voting right is a statutory right under the Company Law, a citizen is entitled to deal with the rights he holds as he wishes, and that dealing includes using them and giving them up. Of course, the use and the abandonment of a citizen's rights here may not offend public order and good morals, nor harm the lawful rights and interests of the state or of third parties.

A word at the end: this article is only a preliminary analysis of persons acting in concert. The concept of acting in concert is a deep one, and the degree and focus of the CSRC's supervision of persons acting in concert may also change. Minton's lawyers will keep tracking and studying it. By Fang Fang, lawyer.

Introduction:

Whether listing on the Main Board or being quoted on the New Third Board, persons acting in concert are always a matter the regulators review closely. In practice, where shareholding is dispersed, many investors or shareholders choose to act in concert, in order to ensure the stability of the company's shareholding structure, the effectiveness of decisions of the shareholders' meeting and of the board, or to achieve control of the company. What exactly is a person acting in concert, and what is the legal effect of the arrangement? This article will draw back the veil for readers step by step.

1. The concept of persons acting in concert, and their scope

1. The concept

The Measures for the Administration of the Takeover of Listed Companies issued by the CSRC (the Measures) make the concept clear: acting in concert means the act or fact of an investor, by agreement or other arrangement, together with other investors expanding the number of voting rights in the shares of a listed company that it is able to control.

From that concept the following features appear:

(1) the basis of acting in concert is a concert party agreement signed, or another similar agreement;

(2) the persons acting in concert hold the same opinion when voting;

(3) the object of acting in concert is to expand the voting rights over the shares of the target company that they can control, that is, to consolidate their control of the target company.

Concerted action is usually achieved in the following ways: first, the investors or shareholders reach a common opinion before the shareholders' meeting or the board meeting is held, forming a common intention as to how to vote; second, the investors or shareholders entrust one of their number to exercise the voting rights; third, where the investors or shareholders cannot reach a common opinion, the opinion of one of them prevails.

2. The scope of persons acting in concert, and the presumptions

The Measures provide: investors who act in concert in the takeover of a listed company or in a related change of shareholding interests are one another's persons acting in concert. Where there is no contrary evidence, an investor in any of the following situations acts in concert:

(1) there is a relationship of equity control between the investors;

(2) the investors are controlled by the same subject;

(3) the principal members among the directors, supervisors or senior officers of one investor also serve as directors, supervisors or senior officers of another investor;

(4) one investor holds shares in another and is able to exert a material influence on the major decisions of the company in which it holds shares;

(5) a legal person other than a bank, another organisation or a natural person provides financing arrangements for an investor to acquire the relevant shares;

(6) there is between the investors a partnership, cooperation, joint venture or other relationship of economic interest;

(7) a natural person holding 30 per cent or more of the shares of an investor holds shares of the same listed company as the investor;

(8) the directors, supervisors and senior officers serving with an investor hold shares of the same listed company as the investor;

(9) the close relatives of a natural person holding 30 per cent or more of the shares of an investor, and of the directors, supervisors and senior officers serving with the investor, being parents, spouse, children and their spouses, the parents of the spouse, brothers and sisters and their spouses, and the brothers and sisters of the spouse and their spouses, hold shares of the same listed company as the investor;

(10) the directors, supervisors and senior officers serving with a listed company, and the relatives described in the preceding item, hold shares of the company at the same time, or hold shares of the company at the same time as an enterprise directly or indirectly controlled by themselves or by the relatives described in the preceding item;

(11) the directors, supervisors, senior officers and employees of a listed company hold shares of the company together with a legal person or other organisation they control or entrust;

(12) there is between the investors another relationship of association.

In practice, on the basis of these presumptions the regulators require the intermediaries, in their comments, to state whether the persons concerned act in concert. Where an intermediary cannot find that they do, it must produce contrary evidence. Such evidence generally comprises:

(1) that votes cast in the past have on occasion differed, which shows that the persons concerned have not reached a common intention as to how to vote;

(2) that no concert party agreement or other similar agreement was signed, so that there is no legal basis for acting in concert.

2. The shareholding arrangements of persons acting in concert

1. Aggregating the shares held

Under the Measures, persons acting in concert shall aggregate the shares they hold. In calculating the shares it holds, an investor shall include both the shares registered in its own name and the shares registered in the name of a person acting in concert with it.

2. The report on a change of interests

Under the Measures, where an investor and the persons acting in concert with it come to hold 5 per cent of the issued shares of a listed company, whether through trading on a stock exchange or by transfer by agreement, they shall, within three days of the date of that fact, prepare a report on the change of interests and submit a written report to the CSRC and the stock exchange, notify the listed company and make a public announcement. Thereafter, each time the proportion of the issued shares of the listed company held by that investor and its concert parties increases or decreases by 5 per cent, they shall report and announce it as required.

The author considers that the reason the CSRC requires an investor and its concert parties to submit a report on a change of interests is this: once the shares held by an investor and its concert parties amount to control of the company, or are enough to have a material effect on it, a change in interests, and in particular a large-scale reduction of shareholding, will directly change control of the company. That will necessarily have a considerable effect on the company's major decisions and its management, and so on the interests of other investors. The company should therefore disclose such matters truthfully and promptly, so that other investors may keep abreast of its position in time and make suitable investment decisions.

3. Persons acting in concert and joint actual controllers

Persons acting in concert are not the same as joint actual controllers. Under article 3 of the Opinion on the Understanding and Application of "No Change in the Actual Controller" in the Measures for the Administration of Initial Public Offering and Listing of Shares — Securities and Futures Law Opinion No. 1: where several persons jointly hold control of a company, the situation should generally be made clear in the articles of association, an agreement or another arrangement, and the articles, agreement and arrangement must be lawful and effective, with clear rights and obligations and definite responsibilities; the situation must have existed stably and effectively within the last three years and for the foreseeable period after the initial offering, and there must have been no major change among the several persons holding control of the company jointly.

From that concept it can be seen that joint actual controllers and persons acting in concert are connected to some degree, but that does not mean the two are the same concept. Joint actual controllers have the following features: a series of documents or agreements are signed making the joint control clear; and those documents or arrangements enable the several persons to control the company's equity and the decisions of its shareholders' meeting or board of directors. Joint actual control therefore stresses not only "joint" but also "control". Persons acting in concert stress only that several investors have reached a "concerted action", and that concerted action does not mean that their shares or equity, aggregated, amount to joint actual control. In practice, however, most concert party agreements are signed in order to achieve and exercise control of the company, so as to maximise the benefit of acting in concert.

4. The concert party agreement

1. The controversy over its legal effect

The concert party agreement is somewhat controversial in judicial practice: under the Company Law a shareholder has a statutory right to vote on the company's major decisions. From the ways of achieving concerted action described above it can be seen that a concert party agreement in essence deprives some shareholders of their voting rights, or sacrifices the voting wishes of some shareholders, so that the final votes of several investors coincide. This too is the greatest controversy over the legal effect of a concert party agreement.

2. How its effect has been determined in judicial practice

Despite the controversy over its legal effect, the effect of a concert party agreement has been upheld in judicial practice. In the action brought by Zhang Guoqing and Zhou Zhengkang against Jiangxi Huadian Electric Power Co., Ltd (Huadian) to set aside a company resolution, for instance, both the court of first instance and the court of appeal upheld the effect of the concert party agreement.

On 29 December 2009 Zhang Guoqing signed a share subscription agreement and an option grant agreement with Huadian, with Hu Da, its largest shareholder and legal representative. The option grant agreement provided that Huadian would issue equity to Zhang Guoqing by private placement, and that before Huadian's shares were listed for trading Zhang Guoqing undertook that the votes attaching to the Huadian shares he held would be cast consistently with those of Hu Da. The agreements were signed and sealed by the three parties and approved by a resolution of the board. Huadian's shares were not thereafter listed for trading. On 20 August 2015 Huadian held a shareholders' meeting on a capital increase and expansion, at which the shareholders present voted on the various proposals; Zhang Guoqing voted against them and Hu Da in favour. In the end Huadian, relying on the share subscription agreement and the option grant agreement, changed Zhang Guoqing's opposing vote into a vote in favour. Zhang Guoqing therefore sued in the Yushui District People's Court of Xinyu City, Jiangxi Province, to set aside the resolution of the shareholders' meeting. The Yushui District People's Court dismissed his claim. Zhang Guoqing appealed, and the Intermediate People's Court of Xinyu City, Jiangxi Province, gave judgment dismissing the appeal and upholding the original judgment. The Xinyu Intermediate Court held that the clause in the option grant agreement was a voting agreement, also called a concert party agreement; that its content did not contravene any prohibitory provision of law, that it had been approved by a resolution of the board, and that it did not harm the lawful rights and interests of the company or of other shareholders; and that being lawful and effective in content, it was recognised.

From this case it can be seen that in judicial practice the effect of a concert party agreement or clause is recognised where it was signed on the true intention of both parties. The reason is that, although a shareholder's voting right is a statutory right under the Company Law, a citizen is entitled to deal with the rights he holds as he wishes, and that dealing includes using them and giving them up. Of course, the use and the abandonment of a citizen's rights here may not offend public order and good morals, nor harm the lawful rights and interests of the state or of third parties.

A word at the end: this article is only a preliminary analysis of persons acting in concert. The concept of acting in concert is a deep one, and the degree and focus of the CSRC's supervision of persons acting in concert may also change. Minton's lawyers will keep tracking and studying it.

By Fang Fang, lawyer.

Introduction:

Whether listing on the Main Board or being quoted on the New Third Board, persons acting in concert are always a matter the regulators review closely. In practice, where shareholding is dispersed, many investors or shareholders choose to act in concert, in order to ensure the stability of the company's shareholding structure, the effectiveness of decisions of the shareholders' meeting and of the board, or to achieve control of the company. What exactly is a person acting in concert, and what is the legal effect of the arrangement? This article will draw back the veil for readers step by step.

1. The concept of persons acting in concert, and their scope

1. The concept

The Measures for the Administration of the Takeover of Listed Companies issued by the CSRC (the Measures) make the concept clear: acting in concert means the act or fact of an investor, by agreement or other arrangement, together with other investors expanding the number of voting rights in the shares of a listed company that it is able to control.

From that concept the following features appear:

(1) the basis of acting in concert is a concert party agreement signed, or another similar agreement;

(2) the persons acting in concert hold the same opinion when voting;

(3) the object of acting in concert is to expand the voting rights over the shares of the target company that they can control, that is, to consolidate their control of the target company.

Concerted action is usually achieved in the following ways: first, the investors or shareholders reach a common opinion before the shareholders' meeting or the board meeting is held, forming a common intention as to how to vote; second, the investors or shareholders entrust one of their number to exercise the voting rights; third, where the investors or shareholders cannot reach a common opinion, the opinion of one of them prevails.

2. The scope of persons acting in concert, and the presumptions

The Measures provide: investors who act in concert in the takeover of a listed company or in a related change of shareholding interests are one another's persons acting in concert. Where there is no contrary evidence, an investor in any of the following situations acts in concert:

(1) there is a relationship of equity control between the investors;

(2) the investors are controlled by the same subject;

(3) the principal members among the directors, supervisors or senior officers of one investor also serve as directors, supervisors or senior officers of another investor;

(4) one investor holds shares in another and is able to exert a material influence on the major decisions of the company in which it holds shares;

(5) a legal person other than a bank, another organisation or a natural person provides financing arrangements for an investor to acquire the relevant shares;

(6) there is between the investors a partnership, cooperation, joint venture or other relationship of economic interest;

(7) a natural person holding 30 per cent or more of the shares of an investor holds shares of the same listed company as the investor;

(8) the directors, supervisors and senior officers serving with an investor hold shares of the same listed company as the investor;

(9) the close relatives of a natural person holding 30 per cent or more of the shares of an investor, and of the directors, supervisors and senior officers serving with the investor, being parents, spouse, children and their spouses, the parents of the spouse, brothers and sisters and their spouses, and the brothers and sisters of the spouse and their spouses, hold shares of the same listed company as the investor;

(10) the directors, supervisors and senior officers serving with a listed company, and the relatives described in the preceding item, hold shares of the company at the same time, or hold shares of the company at the same time as an enterprise directly or indirectly controlled by themselves or by the relatives described in the preceding item;

(11) the directors, supervisors, senior officers and employees of a listed company hold shares of the company together with a legal person or other organisation they control or entrust;

(12) there is between the investors another relationship of association.

In practice, on the basis of these presumptions the regulators require the intermediaries, in their comments, to state whether the persons concerned act in concert. Where an intermediary cannot find that they do, it must produce contrary evidence. Such evidence generally comprises:

(1) that votes cast in the past have on occasion differed, which shows that the persons concerned have not reached a common intention as to how to vote;

(2) that no concert party agreement or other similar agreement was signed, so that there is no legal basis for acting in concert.

2. The shareholding arrangements of persons acting in concert

1. Aggregating the shares held

Under the Measures, persons acting in concert shall aggregate the shares they hold. In calculating the shares it holds, an investor shall include both the shares registered in its own name and the shares registered in the name of a person acting in concert with it.

2. The report on a change of interests

Under the Measures, where an investor and the persons acting in concert with it come to hold 5 per cent of the issued shares of a listed company, whether through trading on a stock exchange or by transfer by agreement, they shall, within three days of the date of that fact, prepare a report on the change of interests and submit a written report to the CSRC and the stock exchange, notify the listed company and make a public announcement. Thereafter, each time the proportion of the issued shares of the listed company held by that investor and its concert parties increases or decreases by 5 per cent, they shall report and announce it as required.

The author considers that the reason the CSRC requires an investor and its concert parties to submit a report on a change of interests is this: once the shares held by an investor and its concert parties amount to control of the company, or are enough to have a material effect on it, a change in interests, and in particular a large-scale reduction of shareholding, will directly change control of the company. That will necessarily have a considerable effect on the company's major decisions and its management, and so on the interests of other investors. The company should therefore disclose such matters truthfully and promptly, so that other investors may keep abreast of its position in time and make suitable investment decisions.

3. Persons acting in concert and joint actual controllers

Persons acting in concert are not the same as joint actual controllers. Under article 3 of the Opinion on the Understanding and Application of "No Change in the Actual Controller" in the Measures for the Administration of Initial Public Offering and Listing of Shares — Securities and Futures Law Opinion No. 1: where several persons jointly hold control of a company, the situation should generally be made clear in the articles of association, an agreement or another arrangement, and the articles, agreement and arrangement must be lawful and effective, with clear rights and obligations and definite responsibilities; the situation must have existed stably and effectively within the last three years and for the foreseeable period after the initial offering, and there must have been no major change among the several persons holding control of the company jointly.

From that concept it can be seen that joint actual controllers and persons acting in concert are connected to some degree, but that does not mean the two are the same concept. Joint actual controllers have the following features: a series of documents or agreements are signed making the joint control clear; and those documents or arrangements enable the several persons to control the company's equity and the decisions of its shareholders' meeting or board of directors. Joint actual control therefore stresses not only "joint" but also "control". Persons acting in concert stress only that several investors have reached a "concerted action", and that concerted action does not mean that their shares or equity, aggregated, amount to joint actual control. In practice, however, most concert party agreements are signed in order to achieve and exercise control of the company, so as to maximise the benefit of acting in concert.

4. The concert party agreement

1. The controversy over its legal effect

The concert party agreement is somewhat controversial in judicial practice: under the Company Law a shareholder has a statutory right to vote on the company's major decisions. From the ways of achieving concerted action described above it can be seen that a concert party agreement in essence deprives some shareholders of their voting rights, or sacrifices the voting wishes of some shareholders, so that the final votes of several investors coincide. This too is the greatest controversy over the legal effect of a concert party agreement.

2. How its effect has been determined in judicial practice

Despite the controversy over its legal effect, the effect of a concert party agreement has been upheld in judicial practice. In the action brought by Zhang Guoqing and Zhou Zhengkang against Jiangxi Huadian Electric Power Co., Ltd (Huadian) to set aside a company resolution, for instance, both the court of first instance and the court of appeal upheld the effect of the concert party agreement.

On 29 December 2009 Zhang Guoqing signed a share subscription agreement and an option grant agreement with Huadian, with Hu Da, its largest shareholder and legal representative. The option grant agreement provided that Huadian would issue equity to Zhang Guoqing by private placement, and that before Huadian's shares were listed for trading Zhang Guoqing undertook that the votes attaching to the Huadian shares he held would be cast consistently with those of Hu Da. The agreements were signed and sealed by the three parties and approved by a resolution of the board. Huadian's shares were not thereafter listed for trading. On 20 August 2015 Huadian held a shareholders' meeting on a capital increase and expansion, at which the shareholders present voted on the various proposals; Zhang Guoqing voted against them and Hu Da in favour. In the end Huadian, relying on the share subscription agreement and the option grant agreement, changed Zhang Guoqing's opposing vote into a vote in favour. Zhang Guoqing therefore sued in the Yushui District People's Court of Xinyu City, Jiangxi Province, to set aside the resolution of the shareholders' meeting. The Yushui District People's Court dismissed his claim. Zhang Guoqing appealed, and the Intermediate People's Court of Xinyu City, Jiangxi Province, gave judgment dismissing the appeal and upholding the original judgment. The Xinyu Intermediate Court held that the clause in the option grant agreement was a voting agreement, also called a concert party agreement; that its content did not contravene any prohibitory provision of law, that it had been approved by a resolution of the board, and that it did not harm the lawful rights and interests of the company or of other shareholders; and that being lawful and effective in content, it was recognised.

From this case it can be seen that in judicial practice the effect of a concert party agreement or clause is recognised where it was signed on the true intention of both parties. The reason is that, although a shareholder's voting right is a statutory right under the Company Law, a citizen is entitled to deal with the rights he holds as he wishes, and that dealing includes using them and giving them up. Of course, the use and the abandonment of a citizen's rights here may not offend public order and good morals, nor harm the lawful rights and interests of the state or of third parties.

A word at the end: this article is only a preliminary analysis of persons acting in concert. The concept of acting in concert is a deep one, and the degree and focus of the CSRC's supervision of persons acting in concert may also change. Minton's lawyers will keep tracking and studying it.