Shareholder agreements in China: Why unanimous consent alone doesn’t bind the company

When structuring investments or joint ventures in China, shareholder agreements are among the most widely used governance tools. Shareholder agreements are private contracts that frequently extend into governance territory. Critics have long argued they amount to “shadow governance” – a workaround that can displace formal corporate structures. Chinese courts have historically been inconsistent on enforceability, and that uncertainty remains.

China’s revised Company Law raises the bar. It strengthens directors’ duties, centres governance on the board, and signals that company and shareholder interests are not automatically aligned. The Supreme People’s Court is now developing judicial interpretations to set clear enforceability boundaries.

A draft interpretation identifies three pathways:

1. Unanimous written consent on matters within the shareholders’ meeting’s statutory remit, with proper formalities completed
2. Express statutory permission – the new law directly allows unanimous shareholder arrangements to bind the company on specific matters, including profit distribution, supervisory board composition, and pre-emptive rights
3. Company approval by internal resolution, provided the agreement does not breach mandatory law – though the draft leaves open which body must approve it and at what voting threshold

Unanimous consent opens the door – it doesn’t walk you through it. Open questions include:

• What happens to an agreement when new shareholders enter?
• If a resolution based on an invalidated agreement falls, what is its status?
• Must third parties now review private shareholder agreements before transacting?

Shareholder agreements remain useful – but they require careful legal structuring to be effective under the new framework. Unanimity is no substitute for proper governance.