Recently, our firm received a judgment from the Shanghai First Intermediate People’s Court, ruling in favor of our client in the second instance of a case involving the removal of a legal representative’s registration. The case concluded with the dismissal of the plaintiff’s claims in the first instance and the upholding of the original judgment in the second instance.

The plaintiff in this case was the chairman and legal representative of the defendant company. His employment relationship with the defendant was terminated in September 2017, and the defendant’s business license was revoked in April 2019.

Our client, the majority shareholder of the defendant company, discovered the court hearing notice by chance and consulted us. We determined that our client had a material interest in the case and applied to the first instance court to participate in the litigation as a third party.

During the trial, we learned that the plaintiff claimed to be merely a “nominal” legal representative who did not participate in any management activities, and thus sought to remove his name from the company’s legal representative registration. Additionally, despite knowing that the defendant had ceased operations, had no actual office, and had contact information for the shareholders and other directors, the plaintiff only provided the company’s registered address to the court, resulting in the court being unable to directly serve legal documents and having to resort to public notice.

During the first instance trial, we presented evidence proving that the plaintiff was not a “nominal” legal representative but had been elected as chairman by the shareholders’ meeting in accordance with the company’s articles of association and had legally assumed the role of legal representative. During his tenure, the plaintiff had actual control over the company, managed important documents such as the business license and company seal, and was responsible for financial and investment activities. He also held positions as a director and financial officer at our client’s company.

We argued the following points:

1.The plaintiff had resigned from his employment position but not from his role as chairman. Even if he had resigned as chairman, a new chairman would need to be elected by the shareholders’ meeting or board of directors before he could step down, and until then, he was legally obligated to fulfill his duties.

2.The defendant had ceased operations for an extended period, and its business license had been revoked. Under such circumstances, the business license should be confiscated according to law, and the company registration authority could not issue a new license under the Company Law. Therefore, the plaintiff’s request to remove his registration was contrary to the law and objectively lacked the conditions for such a change. Many similar cases in judicial practice support this view (we submitted a case law retrieval report to the court).

3.The revocation of a business license is an administrative penalty that deprives the company of its right to operate. The company can only proceed with liquidation, dissolution, and eventual deregistration. The defendant had already established a liquidation team and resolved to dissolve after completing the liquidation process. Under these circumstances, re-electing a chairman or changing the legal representative would serve no practical purpose.

Both the first and second instance courts adopted our arguments and issued the aforementioned judgment.