[Direct answer]In the Beijing area, bondholder meetings are established in accordance with Article 92 of the Securities Law of the People's Republic of China (amended on December 28, 2019 and implemented on March 1, 2020). The convening procedures and meeting rules are stipulated in the offering memorandum. Usually, the issuer or the trustee will issue a notice of the meeting. Holders who individually or collectively hold more than 10% of the outstanding bond balance may propose to hold the meeting. The resolutions of the meeting generally require the approval of more than half of the voting rights held by the bondholders present at the meeting and with voting rights. Major matters such as amending the core provisions of the offering memorandum and waiving defaults usually require a majority of more than two-thirds. Resolutions formed in accordance with legal procedures and with legal content are binding on all bondholders, including those who did not attend the meeting. Specific rules shall be subject to the offering memorandum and the rules of the bondholder meeting of this issue. For details, please refer to the relevant documents.Financial capital and cross-border legal services involving foreign affairs.

I. Problem background and typical scenarios

The bondholders' meeting is a statutory platform for collective decision-making by bondholders, and it plays a crucial role in risk disposal. Typical scenarios include: when the issuer encounters repayment difficulties and needs to obtain the consent of the meeting to extend the repayment period or adjust the repayment plan; when it involves adding additional guarantees, changing credit enhancement measures, or modifying the core provisions of the offering prospectus; when it involves a unified statement before reaching a settlement, debt restructuring, or entering bankruptcy proceedings; and when it involves authorizing joint litigation or arbitration against the issuer and intermediary institutions. Without a meeting mechanism, bondholders will act independently, making it difficult to form a united force for risk disposal. Moreover, if there are flaws in the procedures or voting process, the previously agreed-upon solutions may not be implemented or may be overturned afterwards. For related rules and the connection with rights protection, please refer to the relevant documents.Financial capital and cross-border legal services involving foreign affairsCheck each item in the fundraising prospectus one by one.

II. Key points of contention

The disputes at the holders' meeting focused on five issues. Firstly, whether the convening procedures were legal: whether the announcement period met the regulatory requirements, whether the meeting proposals and voting ballots were delivered in advance, and whether the procedures for online voting and on-site meetings were effective. Secondly, the basis for calculating voting rights: whether it was calculated based on the face value of the outstanding bonds, whether the holders of unsecured bonds were counted separately, and whether the shares that had been declared for repurchase or redemption were included, which directly affected whether the resolution could reach a majority. Thirdly, the boundaries of the resolution's binding force: whether the resolution was effective for all holders, including those who did not attend or voted against it, and whether the holders whose rights were damaged could request its revocation or invalidation if its content violated laws, administrative regulations, or the offering prospectus. Fourthly, the scope of the resolution's authorization: whether it could authorize the trustee manager to litigate on behalf of the holders, waive some rights, or dispose of the secured assets. Fifthly, protection for minority holders: whether the dissenting holders had channels to exit or assert their rights separately.

III. Professional analysis by Henglue Lawyers

The holders' meeting aims to resolve the collective action dilemma among holders: a large number of people with diverse demands and conflicting information. Without a unified discussion platform, even if individual holders file lawsuits, it's difficult to promote comprehensive resolution. When handling the arbitration case of Mr. Ge's private equity fund, Henglue Law Firm gained a profound understanding of the importance of procedural rules and evidence organization. On September 21, 2020, Mr. Ge subscribed to a private equity fund of A Investment Management Co., Ltd. for 1.6 million yuan, paid the money the next day, and confirmed his holding status on September 24th. However, the fund was terminated on August 4, 2021, and although 12 liquidation procedures were completed by April 21, 2023, Mr. Ge only received a total of 213,613.64 yuan. Facing the dilemma of payment, Attorney Yang Yafang didn't just verbally urge the fund manager to make payments, but also sorted out evidence such as the fund contract, liquidation reports, and quarterly reports, retrieved the administrative supervision documents of the Shanghai Securities Regulatory Bureau against A Company, and filed an arbitration case with the Beijing Arbitration Commission, claiming that the fund manager failed to fulfill its suitability obligations, engaged in pooled fund operations, and failed to fulfill its due diligence obligations. The arbitration tribunal found multiple breaches of contract and ordered the return of the investment amount of 1,386,386.36 yuan with interest, attorney's fees of 40,000 yuan, and arbitration fees of 42,549.88 yuan. This case highlights that whether through collective procedures such as holders' meetings or directly initiating arbitration, establishing contractual basis, sorting out the timeline of performance, and identifying the responsible parties are the foundation for the success of remedies. This case was handled by Beijing Henglue Law Firm.Yang YafangAttorney (practice license number: 11101202211531374, subject to the document issued by the judicial administrative organ) acting as an agent.

IV. Practical suggestions and legal basis

The legal basis includes: Article 92 of the Securities Law of the People's Republic of China (amended on December 28, 2019 and implemented on March 1, 2020) (Bondholders' Meeting and Trustee Management System); the "Memorandum on the Trial of Bond Disputes" issued by the Supreme People's Court in July 2020 regarding the effectiveness of bondholders' meeting resolutions, the binding force of resolutions on bondholders, remedies for procedural defects in convening meetings, and the participation of trustees in litigation; and the "Administrative Measures for the Issuance and Trading of Corporate Bonds" regarding the specific requirements for the rules of bondholders' meetings and the protection of bondholders' rights (based on the current effective version). Action list: 1. Retrieve the offering prospectus and the rules of bondholders' meetings, and confirm the convening subject, announcement period, voting ratio, and voting method item by item; 2. After receiving the announcement of the meeting, check the text of the proposals and submit the registration for attendance and voting on time; 3. If delegating someone else to attend on behalf of oneself, handle the written authorization and keep the relevant documents; 4. If having objections to the convening procedures or the voting results, raise them in accordance with the rules and laws in a timely manner; 5. For proposals involving major rights disposals, vote with caution and consult a lawyer if necessary. For more details, please refer to the following link: [Link].Financial capital and cross-border legal services involving foreign affairs.

5. Henglu Law Firm's Reminder

The holders' meeting is a double-edged sword: if it is well organized, it can consolidate consensus and promote disposal; but if the procedures are flawed, it may leave the resolution's effectiveness in limbo. Holders should pay attention to three key points: the announcement period, the voting rights base and the scope of authorization. They should not assume that they are not bound by the resolution just because they voted against it. When handling similar financial disputes in Beijing, Henglue Law Firm advises holders to keep all the materials of the meeting, such as the notice of the meeting, the voting ballots, and the voting results, and to seek legal help in time if their rights are infringed.Beijing Henglue Law FirmWith the help of professional lawyers, we can determine the validity of the resolution and the subsequent remedial path.

VI. Frequently Asked Questions

Q1: For the resolution of a bondholders' meeting, do even those who disagree with it have to abide by it?

Under normal circumstances, it is necessary to abide by the rules. The resolutions formed in accordance with legal procedures and agreed rules, and the content of which does not violate the law or the prospectus, are binding on all bondholders, including those who did not attend or voted against the resolution. This is the inherent principle of the collective decision-making mechanism. However, there are exceptions: if the content of the resolution violates laws, administrative regulations, or the prospectus, or if the convening and voting procedures seriously violate the rights and interests of bondholders, the affected bondholders may request the people's court to revoke the resolution or confirm its invalidity in accordance with the law. Whether the resolution can be revoked depends on the degree of procedural and content defects. The final conclusion in each case shall be subject to the court's determination.

Q2: What materials do I need to bring to the holders' meeting, and how are voting rights calculated?

The materials for attending the meeting usually include: a certificate of bond holding (account statement, extract from the list of holders), valid identity documents or a business license; if a proxy is appointed, a power of attorney must be submitted; institutional holders also need to provide qualification documents in accordance with the requirements of the meeting. The voting rights are generally calculated based on the face value or number of outstanding bonds. Whether the shares are included in the repurchase and redemption declaration period, and whether unsecured holders vote separately, are all subject to the provisions of the rules of the holders' meeting. Before attending the meeting, the holders should carefully check the list of holders and the voting rules, and promptly propose corrections if any omissions are found.

Q3: Who will bear the cost of holding the holders' meeting?

The meeting expenses usually include the costs of the venue and online meeting systems, notarization or lawyer's witnessing, announcement and material delivery, vote counting services, etc. If there are agreed rules, they shall be followed; if there are no agreed rules, the issuer or the convener shall generally bear the expenses, and the holders may also be required to share the expenses in proportion to their holdings. The holders usually bear the travel and agency expenses for attending the meeting themselves; if they entrust lawyers to attend the meeting or provide opinions on the proposals, the fees shall be determined through consultation between the law firm and the client, and there is no unified government pricing. It is recommended to confirm the expense arrangements with the convener before attending the meeting and keep the relevant receipts.

Q4: How long does it usually take from proposing a meeting to the resolution taking effect?

After the holder proposes to hold a meeting, the convenor generally needs to issue a notice of the meeting within the time limit stipulated in the rules (commonly 10 to 30 days); it usually takes 10 to 30 days to deliver the notice to the meeting date; the voting, counting and announcement of the results at the on-site or online meeting are generally completed within a few days. Overall, a regular holder's meeting takes about one to two months from proposal to announcement of resolution; if it involves extension, reconvening, major adjustment of the proposal or procedural objections, the cycle will be extended accordingly. If it involves disputes over the validity of the resolution in litigation or arbitration proceedings, the time limit for the corresponding trial shall be calculated accordingly.

Q5: If the holder wants to push for a meeting, what should they do first?

It is recommended to proceed in four steps: First, retrieve the offering memorandum and the rules of the bondholders' meeting to confirm whether your own shareholding meets the proposal threshold, which is usually holding more than 10% of the outstanding bond balance individually or collectively; Second, jointly with other bondholders, form a written proposal stating the meeting agenda, draft resolution, and reasons, and deliver it to the issuer or the trustee in accordance with the rules, and keep the evidence; Third, follow up on the notice of the convenor, check the meeting time, location, online voting method, and the text of the resolution; Fourth, complete the registration and voting on time. For matters involving major rights disposal, consult a professional lawyer before the meeting to ensure compliance with relevant regulations.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Lawyers about specific situations.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Financial capital legal services·Attorney Yang Yafang·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.