In accordance with Section 1, Article 144 of the 2020 Enterprise Law, a shareholder, as defined, encompasses an entity with the capacity to delegate, via written authorization, another individual to participate in the general shareholders’ meeting. Concurrently, the delegatee retains the prerogative to further delegate representation to another individual on behalf of the organizational shareholder.

The crux of the matter lies in the eventuality wherein the delegatee undertakes the re-delegation autonomously, as per the provisions of the Enterprise Law, without duly notifying the known organizational shareholder. Subsequently, upon discovery, if the organizational shareholder dissents from such re-delegation, what are the ensuing implications?

At present, the Enterprise Law solely delineates the allowance for re-delegation without elaborating on the aforementioned issue. Hence, recourse may be sought in the provisions concerning re-delegation, as stipulated in civil law. Specifically, pursuant to Section 1, Article 564 of the 2015 Civil Code, the party being delegated may effectuate re-delegation with the requisite consent from the delegator. Therefore, in instances where the delegatee of the organizational shareholder carries out re-delegation, written assent from the delegating organization is imperative. Absent such authorization for re-delegation from the organization, the re-delegation could potentially face the risk of the organization petitioning the Court or Arbitration to annul the resolutions of the general shareholders’ meeting upon failure to acknowledge the representative status of the re-delegated individual.

Recommendation: For entities convening the general shareholders’ meeting upon encountering this re-delegation issue, it is imperative to solicit evidence from participants substantiating authorization for re-delegation through either of the following modalities:

• Dual power of attorney documentation: Consent document endorsing re-delegation from the organization alongside the re-delegation power of attorney.
• Triple-party power of attorney documentation: inclusive of the organization, the delegatee, and the re-delegatee.