An offline event with a group of foreign diplomats on Huawei
Prof. Wang Jun on Huawei's Ownership & Governance Structure
On Feb. 1, your Pekingnologist published Who Really Owns Huawei? A response to Professors Balding and Clarke, a translation of 华为的股权与治理结构 (Mandarin) by 王军 Wang Jun, an associate professor with the China University of Political Science and Law, without his knowledge.
Christopher Balding, then an associate professor with the Fulbright University Vietnam, apparently responded to the newsletter on his personal website soon afterward, which your Pekingnologist promptly published on Pekingnology.
One foreign diplomat reached out to your Pekingnologist who then reached out to Prof. Wang, ultimately leading to a two-hour offline event on Thursday, May 13, in Beijing with a group of foreign diplomats.
The event featured Wang responding to the diplomats’ questions gathered beforehand, based on his independent research upon open-sourced information. Your Pekingnologist largely acted as a translator and interpreter. Both took part in a personal capacity, not representing anybody else including Huawei, which did not participate or contribute to the event.
The event was held in a third-party commercial site - the rent paid by a foreign embassy - under Chatham House Rules, and it was agreed that the content of the event would be published here but the other participants would only be identified as “a group of foreign diplomats.”
To fully comply with the agreed terms, your Pekingnologist didn’t make any audio or video recordings, which made the accurate documentation of live questions and answers difficult. So this newsletter will only publish Prof. Wang’s prepared answers - which he delivered in English at the event - with minor editing. To ensure there is no misrepresentation, a draft of this newsletter was circulated before publication and received no objection from the foreign diplomats.
To make the reading and potential sharing easier, the following PDFs have been prepared by your Pekingnologist and uploaded to Google Drive:
1) An updated translation of Prof. Wang’s Mandarin paper which is largely the same as the Feb.1 newsletter Huawei’s Ownership and Governance Structure
2) Prof. Wang’s prepared PowerPoint slides shown at the event
3) Prof. Wang’s prepared response (including footnotes) to the diplomats’ questions gathered beforehand, which is translated by your Pekingnologist and detailed below (without footnotes).
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Let your Pekingnologist thank everyone especially those taking upon them to organize the event. It is his personal opinion that many more good-faith, substantive, and straightforward exchanges between Chinese and foreigners are called for in these increasingly polarizing times and he is open to similar occasions in the future.
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Huawei’s Ownership and Governance Structure
——Wang Jun’s Presentation to A Group of Foreign Diplomats
大家好!我本人的主要研究领域是企业和企业法,尤其对个案研究具有兴趣。我之所以觉得华为值得认真研究,不仅是因为它是非常成功的一个企业,还因为,华为的发展历程反映了中国“改革开放”以来的制度变迁。例如:华为的职工持股就是很有代表性的。另外,华为的经验对我们反思和改进中国公司法也有极高的价值。
Hi everybody! My name is Wang Jun. My main academic interest focus on enterprises and company law. I am particularly interested in case studies. Why I study Huawei’s ownership structure? It is not only because Huawei is a very successful company, but also because Huawei's development history reflects the institutional evolution in China since the "reform and opening up". For example, Huawei's employee shareholding is very representative. Another reason is that China’s Company Law could also learn many lessons from Huawei’s experience.
职工持股在中国企业中是一个比较常见的现象。大致可以分为三类:
Employee shareholding is a relatively common phenomenon in Chinese companies. I put them into three categories.
(1)1990年代,许多国营企业、集体企业,在中央政府的号令下改造成为股份有限公司或者有限责任公司。原有职工持有股份是十分常见的。这类企业的职工持股,按照当时的政府规范意见,如果持股员工超过50人的,通常都需要以职工持股会、工会为持股主体。现在,在最高法院的案件数据库中,可以找到很多与职工股有关的诉讼纠纷案件。在以下的讨论中,我会援引一些案件来说明问题。
(1) In the 1990s, many state-owned enterprises (SOEs) and collective-owned enterprises (COEs) were transformed into joint-stock limited companies or limited liability companies under the order of the central government. It is very common for the employees to hold shares. The Chinese government's regulations at that time usually require that, if there were more than 50 employees holding shares, the employee shareholding association or trade unions should be used as the shareholding vehicle. Nowadays, many cases of litigation disputes related to employee shares can be found in the judicial case database. In the following discussion, I will cite some cases to illustrate the issue.
(2)1990年代,类似华为这样的私人投资设立的企业,为了实施员工激励或者内部筹集资金,采取了职工持股计划。在深圳证券交易所上市的房地产企业万科,有一部分职工集体股是通过工会持有的。“企业股”产生的资产和衍生财富,也是由万科工会管理,并随后转让给深圳市万科企业股资产管理中心,并规定将该笔资产仅用于社会公益事业。 在1990年代,以企业工会或者职工持股会持有职工股的著名企业,还有:中国平安、海尔集团、联想集团。
(2) In the 1990s, companies like Huawei that were set up by private investment adopted employee share ownership. Their main purposes were to implement employee incentives schemes or raise funds internally. Vanke, Ping An Insurance Group, Haier Group, and Lenovo Group, these famous companies all had their employee shareholding schemes in the 1990s by their trade unions or the employee shareholding associations.
(3)21世纪以来,国有控股的企业和民营企业中发展职工持股的也很常见。但是,通过工会代持股份的比较少了。因为,代持职工股毕竟与工会的主要职能是不符合的。通过有限合伙企业作为职工持股平台的比较常见。例如:蚂蚁金服就采用了多层级的有限合伙企业作为(实控人、高管、员工)持股平台。
(3) In this century, it is still common for SOEs and POEs to adopt employee shareholdings. However, there are fewer cases where shares are held on behalf of employees through trade unions. This is because, after all, being a shareholding vehicle is not the main function of trade unions. It is now more common to use a limited partnership as a platform or vehicle for employee shareholding. For example, the Ant Group uses multi-tiered limited partnerships as a shareholding platform (for actual owners, high-level executives, and employees).
Let us discuss these questions one by one.
Question 1
If, hypothetically, Huawei be dissolved who would get to claim its assets? The trade union committee? The ACFTU? Or will all assets be liquidated and equally divided between all employees of Huawei at the time of dissolution, i.e. all those who would have been shareholders at that point in time?
以下根据可检索的公开资料、司法判决和中国法律法规推论分析。
The following is an analysis based on public information, judicial decisions, and Chinese laws and regulations.
中国《公司法》第186条规定,公司解散清算时,其资产首先要偿还各种债务,有剩余财产的话,按照出资比例分配给股东。具体来说,公司首先要偿还的债务,包括:清算费用、职工的工资、社会保险费用和法定补偿金,所欠税款,公司债务。偿还全部债务后的“剩余财产”,按照出资比例分配给股东。
Article 186 of China’s Company Law says: in the liquidation of a company, after paying off the liquidation expenses, the workers’ salaries, social insurance premiums and the statutory compensations, the taxes and the debts of the company, the liquidation group shall distribute the remaining property, in proportion to the shareholders' capital contribution.
所以,一个人或者机构必须具有股东资格,才可以分配剩余财产。
Therefore, a person or organization must be a shareholder in order to have residual assets distributed to them.
假设深圳市华为控股有限责任公司(“华为控股”)解散,其资产首先要偿还上述各种债务。“剩余财产”按照股东出资比例分配。华为控股目前登记的名义股东是:任正非(持股约1%)和工会委员会(TUC)(持股约99%)。因此,TUC应当分取剩余财产的99%。
Assuming that Shenzhen Huawei Holdings Co., Ltd ("Huawei Holding") is dissolved, its assets are first required to pay off the various debts mentioned above. The "residual property" is distributed in proportion to the shareholders' capital contribution. The nominal shareholders currently registered in Huawei Holding are Ren Zhengfei (holding approximately 1%) and the Trade Union Committee (TUC) (holding approximately 99%). Therefore, the TUC should receive 99% of the residual property.
问题是:TUC应当如何处置这部分财产?
The question is: What should the TUC do with this property?
(1)TUC的法律地位
(1) the Legal status of TUC
华为控股实施员工持股的法律依据主要是:深圳市政府的地方法规(《深圳市公司内部员工持股规定》,2001年1月生效,简称“2001深圳市规定”)。根据该规定,公司在实施员工持股时,可以由工会社团法人作为员工股的“持股主体”(第10条)。工会是“名义持有”员工的股权(第10条),是“代表”员工行使股权的机构(第13条)。
The main legal basis for Huawei to implement employee shareholding is the Shenzhen government's local regulations (the "Shenzhen Regulations on Employee Shareholding within Companies", effective since January 2001, hereinafter the "2001 Shenzhen Regulation"). According to this regulation, when a company implements employee shareholding, it is allowed that legal persons as trade-union associations – that’s one term made up by five words, legal persons as trade-union associations 工会社团法人- to be the body of shareholding of employee shares (its Article 10). The union is the "nominee holder" of employee shares, (according to Article 10), and is the body that "represents" the employees in exercising their shares (Article 13).
基于这些规定可知:华为TUC是华为控股的“名义股东”,是“代表”员工持股的机构。因此,TUC与出资入股的员工之间是信托关系。TUC是受托人(trustee),出资员工是委托人(trustor)和受益人(beneficiaries)。
Based on these provisions, it is clear that Huawei TUC is the "nominee shareholder" of Huawei Holding, and is the body that "represents" the employees' shareholding. Therefore, the relationship between TUC and the employees who have contributed capital to buy the shares is a trust relationship: the TUC is the trustee, the employees are the trustors and beneficiaries.
此类代持股关系应该认定为信托关系的学术见解参见:张双根,《论隐名出资——对公司法解释(三)相关规定的批判与发展》,《法学家》2014年第2期,第66、71页。
There is legal scholarship on why shareholding like this should be designated as a trust. For example, Page 66 and 71 of the 2nd Issue in 2014 of 法学家 The Jurist, an academic journal.
(2)TUC作为受托人的义务
(2) TUC's obligations as a trustee
TUC作为受托人,应当依照它与持股员工之间的委托协议,在终止信托关系时,向委托人(持股员工)返还财产。即便委托协议约定不明,按照法律关于委托和信托的规定,TUC也有义务在关系终止时向委托人返还财产。
TUC, as a trustee, shall return the property to the trustors and beneficiaries (who are shareholding employees) upon the termination of the trust relationship in accordance with the trust agreement between it and the shareholding employee. Even if the entrustment agreement is unclear, TUC is obliged to return the property to the principal upon termination of the relationship in accordance with the law on entrustment and trust.
本人目前没有接触到华为员工与公司之间的协议。但是,2012年华为的代表在美国国会接受质询,提交的证据中有华为虚拟受限股规章条款(Articles of Restricted Phantom Shares)。美国情报委员会2012年报告(pp.16-20)引用了规章的部分内容。这些内容反映了华为与持股员工之间的关系。规章将华为持股员工称为“受益人”:Active beneficiary is defined as an active employee who works at Shenzhen Huawei Investment and Holding Co, Ltd or any of its equity affiliates and participates in the Plan of the Union.
I currently have no access to the agreement between Huawei employees and the company. However, Huawei representatives were questioned in the U.S. Congress in 2012 and submitted evidence that included Articles of Restricted Phantom Shares.
In the Report by the Permanent Select Committee on Intelligence of the U.S. House of Representatives in October 2012, some articles were quoted in Pages 16-20. An article refers to Huawei's employees who hold shares as "beneficiaries".
《信托法》第27条:受托人不得将信托财产转为其固有财产。受托人将信托财产转为其固有财产的,必须恢复该信托财产的原状;造成信托财产损失的,应当承担赔偿责任。第54条:信托终止的,信托财产归属于信托文件规定的人;信托文件未规定的,按下列顺序确定归属:(一)受益人或者其继承人;(二)委托人或者其继承人。
Under China’s Trust Law, The trustee must not change the trust property into his inherent property. (Article 27) When the trust terminates, the trust property shall belong to the person prescribed in the trust documents; if there are no relevant provisions in the trust documents, the trust property shall belong to (in the following order): 1)The beneficiary or its heritor; 2)The trustor or its heritor. ( Article 54)
(3)TUC名下登记的股权的法律性质
(3) the Legal nature of the stocks registered under the name of TUC
根据工商登记,TUC持有华为控股99%股权。根据前面两点理由,它们属于TUC受托管理的财产(或者信托财产),与TUC自有财产(即工会资产)是有区别的。从工会资产管理规范和统计数据上也可以看出,工会代持的员工股不属于“工会资产”。
According to the industrial and commercial registration, TUC holds 99% of the equity of Huawei Holding. According to the previous two reasons, they are the trust property managed by TUC for employees, which is different from the TUC's own property (i.e. trade union assets). It is also clear from the norms and statistics of trade union assets management that the employee shares held by the trade union are not " trade union assets".
(3.1)“工会资产”不包括以工会名义持有的员工股。
根据1997年《工会财产管理暂行办法》,工会资产大致分两类:一类是工会占有使用的实物资产;另一类是工会投资兴办的企事业单位的资产,即“工会企事业”资产。
Under China’s regulations, the "trade union assets" (defined in the Interim Measures for the Management of Trade Union Property 《工会财产管理暂行办法》) do not include employee shares held in the name of the union. The trade union assets defined in this regulation are divided into two categories: one is the physical assets possessed and used by the trade union; the other is the assets of the enterprises and institutions invested and established by the trade union, that is, the assets of "trade union enterprises and institutions." (“工会企事业”资产)
工会作为持股载体所持员工股,资本金来自员工投入,而非工会经费或财产,分红发放给员工而不是成为工会收入,因此员工股不属于工会以自有财产投资所形成的资产。工会兴办企业通常是为职工文化福利服务、创收或者安置富余人员(例如工人文化宫、俱乐部、体育场馆、疗养院、旅行社等),企业性质属于“社团集体所有制企业”。一个有限责任公司实施员工持股,且以工会为持股载体,不会导致该公司变成“集体所有制”的“工会企业”。华为工会所持员工股不属于“工会资产”。
For the employee shares held by trade unions as a shareholding vehicle, the capital comes from employees' investment, rather than trade union funds or property; dividends (from the employee shares) are issued to employees rather than becoming the income of the trade union, so employee shares are not "trade union assets" which would have to be formed by investments from the trade union using its own property and assets.
Usually, Chinese trade unions set up enterprises to provide cultural and welfare services for employees, generate income or place surplus staff (such as 工人文化宫 workers' cultural palaces, 俱 乐部 clubs, 体育场馆 stadiums, 疗养院 sanatoriums/hotels, 旅行社 travel agencies, etc.). The nature of this kind of enterprises is "enterprises collectively-owned by social organizations." (社团集体所有制企业) A Limited liability company implements employee shareholding, with the trade union as the shareholding vehicle, will not result in the LLC becoming a "collectively-owned" "trade union enterprise." Therefore, there is no legal basis in saying that the employee shares held by Huawei's TUC are "trade union assets."
(3.2)股权是否属于“工会资产”,关键是看工会有没有实际投资。
Whether the stocks belong to the "trade union assets", the key is to see if the trade union has actually injected capital into the enterprise.
在1993年的一个规范文件中,全国总工会和国家国资局指出:工会举办的企业中,由工会投入“工会资金和财产”而取得的股权,属于“工会资产”。这反映了1990年代初以来一直奉行的“谁投资、谁所有”的产权界定原则。
In 1993, a normative document released by the All-China Federation of Trade Unions (ACFTU) and the State Administration of State-owned Assets pointed out that: in the enterprises organized by trade unions, the equity held by the trade unions by investing its own funds or property belong to "trade union assets". This reflects the principle of "whoever invests, whoever owns" in defining property rights that have been in place since the early 1990s.
审判实践中,法院在判断股权是否归属工会时,也是看工会是不是实际出资者。在2009年北京市法院审理的一宗产权纠纷案件中,一、二审法院确认某工会拥有某家企业的全部股权。法院的关键依据和理由是,某工会在该企业成立时投入了全部注册资本。由此可见,判断股权是否属于工会,要看工会是不是真正的出资者。如果股权是员工投资形成的,工会只是一个持有员工股的“持股平台”,那么,工会对其名下登记的股权,是没有真正的所有权的。也就是说,工会代持的股权不属于“工会资产”。
In litigations, when judging whether the stocks belong to the trade union, Chinese courts also look at whether the trade union is the actual contributor (of capital). In a property rights dispute heard by a Beijing court in 2009, the courts confirmed that a trade union-owned all the equity in a company. The key basis and rationale of the court were that a trade union had invested all the registered capital in the company when it was established. From this, it is clear that whether the stocks belong to the trade union depends on whether the union is the real contributor. If the equity is formed by employee investment, the union is only a "shareholding platform" holding employee shares, then the trade union has no real ownership of the stocks registered under its name. In other words, the shares held by the trade union do not belong to the "trade union assets".
(3.3)全国总工会事实上也不将基层工会代持的员工股统计为“工会资产”。
(3.3) The ACFTU does not in fact count the employee shares held by grassroots trade unions as "trade union assets".
从全国总工会发布的全国工会资产数据看,纳入统计的资产分为“工会行政性资产”和“工会企事业资产”两大类,“工会企事业资产”不可能包括基层工会作为持股载体所持有的员工股。
From the data of national trade union assets released by the ACFTU, the assets included in their statistics are divided into two categories: "administrative assets of trade unions" (工会行政性资产) and "assets of trade union enterprises and institutions" (工会企事业资产), and "assets of trade union enterprises and institutions " cannot/do not include the employee shares held by the grassroots-level unions as a shareholding vehicle
根据总工会的数据,2017年度,全国县以上工会企事业单位资产总额519.18亿元,总收入148.95亿元。而华为2017年度的总资产和销售收入都远远超过上述统计数字,分别为是5052.25亿元和6036.21亿元(华为控股2017年报第7页)。可见,全国总工会事实上也没有将华为工会持有的员工股(以及其他类似企业的员工股)纳入工会资产范围。
In the "Report on the Supervision and Management of National Trade Union Assets in 2017," (on China Trade Union Finance and Accounting, Page 6, Issue No. 5, 2018) by Li Qingtang, a senior official of the ACFTU, it is disclosed that in FY2017, the total assets of trade union enterprises and institutions above the county level nationwide amounted to 51.918 billion yuan, with total revenue of 14.895 billion yuan. And Huawei's total assets and sales revenue in FY2017 far exceeded the above statistics, which is 505.225 billion yuan and 603.621 billion yuan, respectively. (Huawei Holding 2017 Annual Report, p. 7). It can be concluded that the ACFTU did not in fact include the employee shares held by the grassroots-level trade union at Huawei (as well as other similar companies) in the scope of trade union assets.
(4)TUC解散的话,其名下股权如何处理?
What happens to the shares in the name of the TUC if it is dissolved?
华为控股解散的话,华为TUC也应当解散或撤销。《工会财产管理暂行办法》第18条规定,“工会组织撤销,其财产交上级工会”。TUC所持员工股不属于“工会资产”,因此,假如TUC解散、撤销,员工股是不需要移交给上级工会的。
If Huawei Holdings is dissolved, Huawei TUC should also be dissolved or terminated. Article 18 of the Provisional Measures for the Administration of Trade Union Property provides that "if a trade union organization is dissolved, its property shall be handed over to the higher-level trade union." Employee shares held by the TUC are not "trade union assets," so if the TUC is dissolved, the employee shares do not need to be handed over to the higher-level trade union.
那么,TUC名下股权(或者基于股权而分配的企业剩余财产)应该如何处理?根据前面3点的分析,TUC名下股权(或者剩余财产),应当按照持股员工的虚拟股持股比例分配给员工。 So, what should be done with the shares (or residual property) in the name of the TUC? According to the analysis done above, the shares (or residual property) in the name of the TUC should be distributed to the employees in proportion to their virtual shareholding.
现有的诉讼案例中,我们没有找到与上述假设情况完全相同的案件。不过,有一个类似的案件:作为企业工会下设机构的职工持股会解散后,原职工股并未被移交给上级工会。相反,职工请求将自己登记为公司股东,最终得到法院支持。
Among the existing litigation cases, we have not found any case with the same hypothetical situation as above. However, there is a similar case: after the dissolution of the employee shareholding association, which was a subordinate body of the company’s trade union, the former employee’s shares were not transferred to the higher-level trade union. Instead, the employees requested to register themselves as shareholders of the company, which was eventually upheld by the court.
(5)TUC擅自转让名下股权,有什么法律后果?
(5) What are the legal consequences of an unauthorized transfer of shares in the name of the TUC?
员工股尽管登记在TUC名下,但根据当前法律,TUC没有自由处分权。首先,根据“2001深圳市规定”,TUC是代持股权的“持股主体”,只是名义股东,真正的出资人是持股员工。工会既然不是名下股权的真正所有者,它就无权自由处分这些股权。
Although the employee shares were registered in TUC's name, TUC does not have the right to freely dispose of them under current law. First of all, according to the "2001 Shenzhen regulation", TUC is the "shareholding vehicle" of the employee shares, i.e. only the nominee shareholder. The real contributor of capital is the shareholding employees. Since the trade union is not the real owner of the shares in its name, it has no right to freely dispose of these shares.
其次,根据最高法院的司法解释,名义股东擅自转让其名下股权的话,属于“无权处分”,实际出资人有权主张转让无效,除非受让人是一个“善意第三人”(即对代持关系完全不知情的人)。就华为的情况来说,TUC是代持员工股的平台,这是华为大力宣传、几乎尽人皆知的事情,就算TUC擅自转让名下股权,任何受让人都无法说自己对TUC的代持股平台地位一无所知。
Secondly, according to the judicial interpretation of the Supreme Court, if the nominee shareholders transfer their shares without authorization, it is an "Unauthorized Disposal,” and the actual contributors have the right to claim that the transfer is illegal or invalid unless the transferee is a “good faith person” who is completely unaware of the shareholding relationship. In the case of Huawei, TUC is a vehicle for holding employee shares, which has been strongly publicized by Huawei and almost everyone knows about it. Even if TUC transferred the shares under its name without authorization, any transferee can not say that they did not know about the status of TUC, which is just a vehicle for holding shares.
举两个案例说明该规则的适用情况。
Here are two cases as examples.
案例1:(未经职工股实际出资人同意,工会不得任意转让名下代持股份)1991年,李女士作为广东东莞的一家公司(东岳公司)的技术顾问,认购职工股30万元。股权由东岳公司工会代为持有,工会登记为名义股东(名下代持数十名职工股东的股权)。2007年,已经退休的李女士要求东岳公司同意其向他人转让股权,但发现:此前工会已经将其名下股权都转让给了公司的董事长(罗先生)和高管。2008年,一审法院判决:工会未经李女士同意擅自转让名下股权,是无效的,罗先生不是善意受让人;因此,李女士是30万元股权的实际出资人,罗先生并不是真正的股东,而是代持股权的名义股东(这意味着,李女士仍然有权获得分红,公司清算时可以获得剩余财产分配)。一审判决后,罗先生不服提起上诉、再审,广东省高院2017年终审判决:维持一审判决。
Case 1: In 1991, Ms. Li, as a technical advisor to a company in Dongguan, Guangdong (Dongyue Company), subscribed for 300,000 yuan of employee shares. In 2007, Ms. Li, who had already retired, asked Dongyue company for its consent to transfer her shares to others but found that the trade union had previously transferred all her shares to the company's chairman (Mr. Luo) and other executives.
In 2008, the court for the first instance held that the trade union had transferred its shares without Ms. Li's consent, the transfer of the shareholding in its name without Ms. Li's consent was invalid, and Mr. Luo was not a good-faith transferee; therefore, Ms. Li was the actual contributor of the 300,000 yuan shareholding and Mr. Luo could not a be real shareholder. (, but just a nominee shareholder on her behalf (which meant that Ms. Li was still entitled to receive dividends and the distribution of the remaining property when the company was liquidated). After the first decision, Mr. Luo appealed and the case was tried for the second instance, and the Guangdong Provincial High Court upheld the first decision in 2017.
This case tells us: Without the consent of the actual contributor of the employee shares, the trade union cannot freely transfer the shares under its name.
案例2:(工会合规回购职工股之后,代持关系即解除;工会成为实际股东,有权自由转让其名下股份)2001年,武汉的两家国营食品厂合并改组为一家冷储物流有限责任公司(简称“X公司”)。当时,原国营企业的837名职工参加了持股计划,全部员工股由X公司工会代为持有。X公司成立时有两个股东:一个是武汉市政府控股的某集团公司(持股51%);另一个是X公司工会(持股49%)。X公司持股员工通过工会下设的“职工持股会”行使权益。职工持股会又设“会员代表大会”,由职工代表组成,有权决定职工股的重大事项。
Case 2: (this case tells us: After the trade union bought back employee shares through legal procedure, the entrustment relationship was dissolved; the trade union became the actual shareholder and had the right to freely transfer its shares.)
In 2001, two state-owned food factories in Wuhan, Hubei Provence, merged and reorganized into cold storage and logistics limited liability company (called "Company X"). At that time, 837 employees of the former SOEs participated in the shareholding plan, and all employee shares were held by the trade union of Company X. Company X was established with two registered shareholders: a group company controlled by the Wuhan Municipal Government (which held 51% shareholding); and the trade union of Company X (which held 49% shareholding). The employees of Company X exercise their rights and interests through the " employee stockholders association " under the trade union. The Employee Stockholders Association also has a "Members’ Representative Assembly", which is composed of employee representatives and has the right to decide on important matters of the employee shares.
2003年2月,X公司召开职工持股会“会员代表大会”,作出了由工会回购职工股并解散职工持股会的决议。之后,X公司职工持股会的多数会员代表签署《股份转让协议书》。700余名职工自愿办理了回购结算手续。不同意回购的职工,公司将回购金额存入职工的个人账户。同年4月,X公司工会将回购回来的股权转让给第三人。2005年,职工持股会解散。
In February 2003, a "general meeting" of the Members’ Representative Assembly was held and made a resolution for the trade union to buy back the employee shares and dissolve the employee stockholders association. More than 700 employees voluntarily went through with the repurchase. For those employees who did not agree to the repurchase, the company deposited the repurchase amount into the employees' personal accounts. In April of the same year, the trade union of Company X transferred the repurchased shares to a third party. In 2005, the employee shareholder association was dissolved.
2016年,五名职工股东提起诉讼,请求法院认定X公司工会2003年转让股权无效。法院经多次审理后最终判决:工会回购职工股的决定经“会员代表大会”多数代表赞成通过,符合《职工持股会章程》,是有效决议。该决议对每一个持股员工都有约束力。所以,X公司工会回购职工股是合法的,对回购回来的股权拥有自由支配的权利,转让给第三人是有效的。
In 2016, the former five employee shareholders filed a lawsuit claimed the court to find that the transfer of equity by Company X trade union in 2003 was illegal and invalid. After several hearings, the court finally held that the decision of the trade union to buy back the employee shares was approved by a majority of the representatives at the "general meeting" and was in accordance with the Articles of Employee Shareholder Association, and was a valid resolution. The resolution was binding on every employee who held shares. Therefore, it is legal for the trade union of company X to buy back the employee shares, and it indeed had the right to freely dispose of the bought-back shares, and the transfer to a third party was valid.
根据这个判决可以推知:如果X公司工会没有通过合规程序回购职工股,进而解除代持关系,它是无权擅自将名下代持的职工股转让给第三人的。
Based on this decision, it can be inferred that if the trade union of Company X did not buy back the employee shares through the proper procedure and dissolve the entrustment relationship without due process, it had no right to transfer the employee shares held in its name to a third person without authorization.
(6)TUC的债权人可否对其名下股权强制执行?
Can the creditors of TUC enforce the shares in its name?
回答应当是否定的。首先,基于信托法的规定,信托财产不属于受托人的自有财产,适用破产隔离规则。其次,TUC代持员工股,是公开信息,TUC的债权人无理由声称自己是“善意第三人”,对该信息不知情。
The answer should be negative. Firstly, based on the Trust Law, the trust property is not the trustee's own property and the insolvency isolation rule applies. Secondly, TUC held employee shares on behalf of TUC, which is public information, and TUC's creditors have no reason to claim that they did not know the information.
Question 2
In the western conception of employee ownership when employees retire or quit, they either continue to own shares of the company as part of their retirement benefit or severance payment or receive some kind of a cash-out. Would this be true for Huawei employees?
Mr. Ren Zhengfei said many times that Huawei’s employee ownership plan had learned much experience from the Employee Stock Ownership Plan (ESOP) in the United States.
(1)What Is an ESOP?
Employee Stock Ownership Plan (ESOP)
An ESOP is an employee benefit plan that gives workers ownership interest in the company. Companies often use ESOPs as a corporate-finance strategy to align the interests of their employees with those of their shareholders. ESOPs are set up as trust funds.
The company may hold the provided shares in a trust until the employee retires or resigns from the company. Employees who resign or retire cannot take the shares of stock with them, only the cash payment. Fired employees often only qualify for the amount they have vested in the plan.
Employee-owned corporations are companies with majority holdings held by their own employees. Many of these companies only provide voting rights to particular shareholders. Companies may also give senior employees the benefit of more shares compared to new employees.
(2)华为的情况与ESOP相似
(2) Huawei's situation is similar to an ESOP
本人没有看到员工股协议。但是,根据2019年4月29日,华为控股董事会秘书江西生的介绍,华为的员工虚拟股也是不可以相互转让的。在职的员工每年可以申请回购一部分。如果员工从华为离职,公司一般会回购员工股;如果满足一定条件(工作满8年且年龄过5岁),离开公司的员工可以继续持有员工虚拟股。
I have not seen the employee share agreement between Huawei employees and the company. However, according to Jiang Xisheng, secretary of the board of directors of Huawei Holding, on April 29, 2019, Huawei's employee virtual shares are also not transferable to each other. Employees in service can apply the company to buy back a portion of shares each year. If an employee leaves Huawei, the company will generally buy back the employee shares; if certain conditions are met (8 years of work and over 45 years of age), employees who leave the company can continue to hold virtual shares.
另外,在很多涉及华为员工的离婚诉讼中,经常涉及对员工所持有的华为员工股(或者其价值)的分割。在这些案件中,法院通常会要求华为公司提供案件所涉员工的持股数量和价值,并说明员工股的法律特征。判决书中显示的信息与2019年华为董秘江西生的介绍是一致的。
In addition, in many divorce lawsuits involving Huawei employees, the division of Huawei employee shares (or their value) held by the employee is often involved. In these cases, the courts usually asked Huawei to provide the number and value of the employee's holdings involved in the case and to describe the legal characteristics of the employee shares. The information shown in the cases is consistent with the presentation by Jiang Xisheng in 2019.
Question 3
According to company website info, 86 000 employees own 99% of Huawei Holding. According to the Huawei website, there are 170,000 employees globally. What would explain this discrepancy?
就我了解的情况来说,我认为,并不是全体华为员工每个人都认购了员工股。因为,(1)认购员工股是自愿的,而不是强制性的,有些员工可能不愿意加入持股计划;(2)从华为公开的宣传可知,华为员工股是对优秀员工的激励,所以不是任何员工都可以任意认购的。另外,根据“2001年深圳市规定”,我估计,外国员工是不能认股的,因为涉及外资进出中国国境,有外汇管理的限制。
As far as I understand the situation, I think that not all Huawei employees have subscribed to employee shares. Because, (1) the subscription of employee shares is voluntary, not mandatory, and a part of employees may not want to join the stock ownership plan; (2) from Huawei's public information, it is known that Huawei employee shares are an incentive for outstanding employees, so maybe not every employee can subscribe at will. In addition, according to the "2001 Shenzhen regulation", I estimate that foreign employees are not allowed to subscribe to the shares, because it involves foreign investment in and out of China and there are restrictions on the management of foreign exchanges.
Question 4
If a State-owned enterprise merges with Huawei or acquires a controlling stake (e.g. recent bailout of Suning), then fires all Huawei employees and rehires them back as employees of the new organization. Under the current company rules, no Huawei employee would receive shares, correct? Who will own Huawei Holdings assets?
一家国有公司兼并华为或者控股华为,目前看起来几乎没有任何可能,尤其是当前在国际社会高度关注华为所有权的时期。
A state-owned company merging with Huawei or holding Huawei seems almost impossible at the moment. Pushing for such a thing, especially in the current period when the international community is highly concerned about Huawei's ownership, I personally think it’s highly unlikely.
但是,如果我们仔细回顾一下历史就会发现:当发生极为特殊的危机时,政府向私营企业注入资本甚至收购私人企业(国有化),可能就会成为一种挽救危机的手段。例如:2008年金融危机爆发以后,美国政府对金融企业和一些非金融企业实施了积极的救助措施。美国财政部对频临倒闭的贷款担保公司房利美、房地美,分别注入1000亿美元资本,将两家公司国有化。保尔森领导下的财政部创设了“不良资产救助计划”。对一些系统重要性银行注入资本,改善它们的资产质量和偿付能力,恢复市场信心。中国政府也可能对一些陷入债务危机的金融机构实施接管。近期的例子有安邦保险集团、包商银行等。
However, if we take a closer look at history, we will see that when a very serious crisis occurs, the government's injection of capital into private companies or even the acquisition of private companies (nationalization) may become a means to save the crisis. For example, after the financial crisis in 2008, the U.S. government implemented aggressive bailout measures for financial and some non-financial enterprises. The U.S. Treasury Department injected $100 billion in capital into the failing loan guarantee companies Fannie Mae and Freddie Mac, nationalizing them. The Treasury Department under Henry M. Paulson Jr. created the "Distressed Asset Relief Program". Capital was injected into some systemically important banks to improve their asset quality and solvency and restore market confidence. The Chinese government may also take over some financial institutions that are in a debt crisis. The latest examples include Anbang Insurance Group and Baoshang Bank, etc.
所以,在理论上分析上述假设的问题不是没有意义的。不过,一家公司要取得华为控股的多数股权(或者控制性股权),可能只有两种办法:一是,从现有控股股东那里购买(例如从持股99%的TUC手中收购股权);二是,向华为注入大笔出资,将原有股东稀释为小股东,自己掌握控股权。但是,这两种办法都需要得到现有股东,即TUC和任正非的同意。而TUC的意见又必须反映持股员工代表会的意见。实际上,如果当前持有华为员工股的多数职工,尤其是高管层的持股员工,不同意转让股权或者其他人注资,其他公司是无法取得华为的控股权的。这实际上就是员工持股或者ESOP都有的一个功能:抵制外部人控股。
Therefore, it is NOT meaningless to analyze the above hypothetical issues in theory. However, there may be only two ways for a company to acquire a majority (or controlling) stake in Huawei Holdings: first, to buy it from the existing controlling shareholders (e.g., from TUC, which holds 99% of the shares); second, to inject a large capital contribution into Huawei, diluting the original shareholders into minority shareholders and taking the controlling stake itself. However, both approaches require the consent of the existing shareholders, i.e. TUC and Ren Zhengfei. In turn, the TUC's opinion must reflect the views of the shareholding employees' representative council. In fact, if the majority of employees currently holding Huawei's employee shares, especially those at the senior management level, do not agree to transfer their shares or others to inject capital, other companies will not be able to acquire a controlling stake in Huawei. This is actually one of the functions that employee stock ownership or ESOPs have: to resist outsiders from acquiring control.
当然,我们仍然可以假设上述障碍都被以某种方式扫除了,华为被另一家公司兼并或者控股(无论是不是国有公司),新公司先解雇全体员工,再与他们重新签订雇佣合同。那么,按照目前华为员工股的规则,一个员工一旦与公司解除雇佣关系(无论自愿的还是非自愿的),那么,公司应当回购他的股份,按照他所持员工股的实际价值,向他支付回购款。如果华为同时解除全体员工的雇佣关系的话,它就需要支付巨额的资金。如果新公司拒绝回购离职员工的股份,员工会去起诉它,并得到法院支持。如果新公司按规定回购员工股,那就极有可能直接导致公司耗尽现金流,无法正常运营。即便新公司立即与全体员工重新签订了雇佣合同,它也必须向持股员工支付回购款。
Of course, we can still assume that all of these obstacles are somehow removed, and Huawei is merged or taken over by another company (state-owned or not), and the new company fires all of its employees and then re-signs them to new employment contracts. Then, according to the current rules for Huawei's employee shares, once an employee terminates his employment with the company (whether voluntarily or involuntarily), then the company should buy back his or her shares and pay him or her according to the actual value of the employee shares he or she holds. If Huawei terminates the employment relationship of all employees at the same time, it will have to pay a huge amount of money. If the new company refuses to buy back the departing employee's shares, the employee will sue it and get the courts’ support. If the new company repurchases employee shares as required, it is highly likely that the company will spend a huge amount of money on its cash. Even if the new company immediately re-signs employment contracts with all of its employees, it must still pay the shareholding employees before that.
Question 5
Is Mr. Ren Zhengfei able to freely trade or pass on as an inheritance his current 1% stake in the company?
任正非在华为控股持有的1.14%的股权,不属于员工股,按照《公司法》是可以对外转让的。但是,由于华为控股是一家有限责任公司(类似美国的closely held company 或者英国的private limited company),根据《公司法》第71条的规定,如果任正非转让这1%的股权,另一股东——华为工会委员会(TUC)是有优先购买权的。
Ren Zhengfei's 1.14% stake in Huawei Holdings is not the “employee share” that we have been talking about. It is transferable under the Company Law. However, since Huawei Holding is a limited liability company (similar to a closed company in the United States or a private limited company in the UK), according to Article 71 of the Company Law, if Ren Zhengfei transfers this 1.14% stake, the other shareholder, the TUC, has a pre-emptive right to buy it.
按照《公司法》第75条的规定,有限公司股权是可以继承的。所以任正非的1%的股权也是可以被继承的。
According to Article 75 of the Company Law, the share of a limited liability company is inheritable. So Ren Zhengfei's shareholding is inheritable.
***
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There are other questions raised beforehand, including three delivered one day before the event, that weren’t addressed due to the time limit and their nature - some of them are apparently out of Prof. Wang’s expertise as a Company Law expert.
To ensure the greatest transparency possible, they are listed below:
6. The interrelationship between CPC Committees and executive management of firms, particularly private ones.
7. The nature of the “dispute” with the US securities authorities in relation to the PCAOB audits.
(Question raised one day ahead of the offline event)
1. We’d be keen to know more about the Huawei ownership structure, and the relevant social background of their key shareholders (though we’re not sure if this can be specified).
2. We’ve heard that Huawei is now doing a lot of government projects relevant to smart cities and we’re eager to know how they got these contracts. Did they win them through a public tendering process or were they directly tasked by local governments?
[Brief answer from your Pekingnologist: Chinese laws and regulations stipulate that bidding notice and decisions shall be made open. You can Google 华为+智慧城市+招标 in Mandarin and there appear to be some answers. ]
3. More broadly, a trend specified in the three-year SOE reform plan is that China will encourage more mergers and acquisitions between its SOEs and POEs, which will further blur the difference between the two. What does this mean for companies like Huawei in strategic sectors? Also, China’s recent anti-monopolistic moves targeting e-platforms (including e-finance), would this signify any reinforcement of government control (including ownership control) of such platforms?
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Again, the three PDFs that have been uploaded to Google Drive
1) An updated translation of Prof. Wang’s Mandarin paper which is largely the same as the Feb.1 newsletter Huawei’s Ownership and Governance Structure
2) Prof. Wang’s prepared PowerPoint slides shown at the event
3) Prof. Wang’s prepared response (including footnotes) to the diplomats’ questions gathered beforehand.