The Controlling Director’s RMB 8 Million Related-Party Loan

The loan is a related-party transaction because Wang is a director and controlling shareholder and the borrower is his wholly owned company. Under the 2023 Company Law art. 182, a director must report a related-party transaction and obtain approval in accordance with the articles. Ruihe’s articles require shareholder approval for transactions above RMB 5 million. Only the board approved an RMB 8 million loan, so the required corporate procedure was not followed. That does not automatically make the loan contract void as against Wang Trading, but it is strong evidence that Wang breached his duty of loyalty under art. 180. Ruihe may claim damages under art. 188 for any loss caused by the loan, including unpaid principal and interest. It may also seek disgorgement of income obtained by Wang in violation of his duties under art. 186. The 3% interest paid to Wang Trading is arguably an indirect benefit to Wang, so Ruihe can argue that the interest belongs to the company. Whether Wang Trading is liable depends on its knowledge: if it knew or should have known of the breach, it may be jointly liable for restitution or damages. The other directors who voted for the loan may also be liable if they failed their duty of diligence, but Li and Chen, who did not approve it, are not liable on that basis.

Chen is a shareholder of a limited liability company, so she does not need a minimum shareholding or holding period. Under Company Law art. 189, she must first request the supervisory board, or the board if there is no supervisory board, to bring a lawsuit against the responsible directors. If the body refuses, or fails to act within 30 days after receiving the request, Chen may bring a derivative action in her own name for the company’s benefit. The exception is an emergency: if delay would cause irreparable harm to the company, she may sue directly. The company should be joined as a third party, because the claim belongs to it, not to Chen personally. The defendants may include Wang and the other directors who approved the loan and breached their duties of loyalty or diligence. Wang Trading may also be joined as a defendant or third party if it received company assets or knowingly participated in the breach. Chen’s dissent at the board meeting helps show that she did not acquiesce, but it is not a substitute for the demand requirement. The remedy sought should be payment to Ruihe, not to Chen.

Yes, if Ruihe cannot pay its due debts. Under the 2023 Company Law art. 54, where a company cannot pay its due debts, the company or a creditor with a due claim may require a shareholder who has subscribed but not paid capital to pay the unpaid contribution early. The facts show that Ruihe could not pay wages and a due bank loan by September 2025. The bank is therefore a creditor with a matured claim. Wang subscribed RMB 10 million and paid only RMB 6 million, so his unpaid contribution is RMB 4 million. The articles’ 2029 due date does not defeat the bank’s demand once the statutory acceleration condition is met. Wang must pay the RMB 4 million, and his liability is limited to that unpaid amount plus any statutory consequences. The bank cannot reach Wang’s personal assets beyond the unpaid subscription on a pure shareholder-liability theory. If multiple creditors demand payment, the company’s or court’s distribution rules may determine priority, but the acceleration right itself is clear.