Zhiming lawyers' creative argument changes long-standing judicial practice

Villagers in Shenzhen now have a legal recourse for disputes with joint-stock cooperative companies

Led by our firm's director, lawyer Wang Tengfeng, with lawyers Cao Guanghui and intern lawyer Chu Shen handling the case, the dispute over the revocation of a company resolution between Mai Mouming and a Shenzhen joint-stock cooperative company was initially dismissed by the first-instance court. After our appeal, the Shenzhen Intermediate People's Court recently issued a second-instance ruling: revoking the first-instance ruling and ordering the original court to retry the case. Previously, courts in Shenzhen uniformly rejected or dismissed similar cases. This ruling has changed the judicial practice of Shenzhen courts regarding disputes between villagers and joint-stock cooperative companies, marking a historic turning point. This case has become a benchmark and milestone precedent for successfully seeking judicial relief in such cases in the future.

The Shenzhen joint-stock cooperative company was established through the restructuring of a village collective organization. Mai Mouming is a first-class cooperative shareholder (former villager) of the company. To benefit from the company's charter provision that "reserved shares are available for purchase by eligible shareholders in order of household registration time," Mai Mouming married Pan Mouxing in October 2016 and had a son. According to the company's charter, Mai's newborn son should have been recognized as having shareholder qualifications and the right to purchase reserved shares. However, the company suddenly changed course, arbitrarily adding conditions for shareholder subscription qualifications. In July 2017, under the guise of a board resolution, the company demanded that Mai provide a paternity test, or else his right to purchase reserved shares would be forfeited. Mai believed the board resolution was severely unfair and infringed on his legitimate shareholder rights. In April 2018, after the first-instance trial, the court dismissed the case on the grounds that the company was a village self-governing organization and the board's resolution fell within the scope of village self-governance, not within the court's civil litigation jurisdiction. Our shareholder's interests were thus halted at the very start of the rights protection process.

Before the second-instance appeal, our attorney conducted thorough preparations, exhausting the case retrieval system without finding any prior precedents favorable to us. Facing the adverse situation of the first-instance ruling, our attorney, after careful deliberation and research, shifted from mechanically applying the law and adopted creative argumentation. We drafted an innovative representation opinion, directly challenging the unreasonable ruling of the first-instance court and pointedly stating:

I. According to relevant legal provisions, the appellee is an enterprise legal person, not a villager self-governing organization.

Article 2 of the "Shenzhen Special Economic Zone Shareholding Cooperative Company Regulations" clearly stipulates: "The term 'shareholding cooperative company' as referred to in these Regulations means an enterprise legal person established in accordance with these Regulations, whose registered capital is composed of equal shares converted from collectively owned property of the community and may include a portion of raised shares, where shareholders enjoy rights and assume obligations in accordance with the company's articles, and the company bears liability for its debts with all its assets."

According to Article 111 of the Constitution: "Residents' committees or villagers' committees established in urban and rural areas based on residential districts are grassroots mass self-governing organizations." Article 2 of the "Organic Law of Villagers' Committees" states: "The villagers' committee is a grassroots mass self-governing organization for villagers to self-manage, self-educate, and self-serve." Article 2 of the "Organic Law of Residents' Committees" states: "The residents' committee is a grassroots mass self-governing organization for residents to self-manage, self-educate, and self-serve." It is clear that only villagers' committees and residents' committees are grassroots mass self-governing organizations.

II. Based on the practice of reform and opening up, the disputed resolution made by the appellee's board of directors does not involve villager self-governance at all.

Since the establishment of the Shenzhen Special Economic Zone, significant changes have occurred in the economic development, village construction, and living environment of the rural areas within the zone. To adapt to these changes, further develop the economy, improve the people's living standards, accelerate the socialist modernization of the zone, and achieve the strategic goal of building Shenzhen into an export-oriented, multifunctional international city, the Shenzhen Municipal Party Committee and Government have long implemented bold reforms in the management system of the rural areas within the zone. Article 4 of the "Interim Provisions on the Urbanization of Rural Areas in the Shenzhen Special Economic Zone," issued by the Shenzhen Municipal Party Committee and Government, clearly states: "The current management system of the rural areas within the zone shall be transformed in accordance with the principles of functional decomposition, classification and rationalization, phased implementation, and continuous improvement. That is, the two major functions of the original villagers' committee—developing the collective economy and organizing villager self-governance—shall be separated and assumed by the new collective economic organizations, residents' committees, and subdistrict offices, respectively."

The appellee is an urban collective economic organization established and improved on the basis of the original village collective enterprises, independently undertaking the function of developing the collective economy. Moreover, Article 18 of the "Shenzhen Special Economic Zone Joint Stock Cooperative Company Regulations" clearly stipulates that the company's fundraising targets include company employees other than the village's own villagers. If a joint-stock company can also engage in villager self-governance, wouldn't non-villagers be forced into self-governance?! Currently, the function of organizing villager self-governance by the original villagers' committee has been replaced by the residents' committee and the subdistrict office. The appellee only undertakes the function of developing the collective economy, and its actions do not involve the function of organizing villager self-governance at all.

In summary, times are always evolving, and the nature and functions of grassroots self-governing organizations and collective economic organizations have also undergone changes. In fact, as early as September 2004, Shenzhen's urbanization reform was fully completed. This young city turned a new page—Shenzhen became the first city in the country without rural administrative structures and rural management systems, and also the first city without villages. However, the trial court's judicial thinking has not been promptly updated, still viewing related issues from the perspective of villages and villagers. The Shenzhen Special Economic Zone is a pioneer of reform, and the court's judicial thinking should also break down barriers and bravely take the lead.

Nowadays, the legal provisions clearly distinguishing the completely different natures of grassroots self-governing organizations and collective economic organizations are clear and unambiguous, with their functional roles well-defined. The appellee's nature is by no means a villager self-governing organization but a typical corporate legal person. The trial court's determination that "it does not fall within the scope of civil litigation accepted by the people's courts according to law" is a clear error under the influence of outdated and lazy thinking in the application of law! The appellant earnestly requests the appellate court to discard the trial court's mechanical and rigid viewpoint and correct the trial court's error based on facts and law!

Ultimately, our lawyer's powerful and innovative reasoning and legal arguments won high recognition from the Shenzhen Intermediate People's Court. After careful and prudent deliberation, the appellate court decided to revoke the trial court's ruling and order the original court to retry the case. Lawyer Wang Tengfeng's artistic litigation method once again successfully resolved a difficult and complex case, creating another classic example for improving the judicial process and advancing the rule of law!