CONSULTATION ON THE TERMINATION OF AN INVESTMENT PARTNERSHIP FOR COMPANY FORMATION

Matter in Brief:

TH Joint Stock Company (hereinafter referred to as “TH”), not a public company, is owned by several high-net-worth individuals, resulting in substantial capital investment. TH seeks to terminate its investment partnership with Mr. N, a shareholder and high-level executive of the company. Due to Mr. N’s intention to emigrate, he no longer wishes to maintain any investment or managerial legal relationships with TH.

Based on the legal documents provided by TH, Mr. N currently holds the following legal relationships with the company: (i) Shareholder of TH; (ii) Member of the Board of Directors of TH; and (iii) Deputy General Director of TH.

Client’s Request:

Given that Mr. N is a shareholder of TH, holding 15% of TH’s charter capital, and concurrently holding several key managerial positions within the company, TH requests that TAPHALAW provide legal advice on the appropriate methods, procedures, and steps to terminate the aforementioned legal relationships between TH and Mr. N in a cautious manner. The advice should ensure compliance with TH’s internal regulations, adherence to all relevant laws, and minimization of potential disputes between TH and Mr. N following such termination.

Attorney’s Work Performed:

TAPHALAW’s Attorney provided a consulting report to TH, offering legal advice to address the issues at hand. The key points of the advice are summarized as follows:

1. Regarding the shareholder relationship between Mr. N and TH:

Attorney conducted a comprehensive review of TH’s Articles of Association, internal governance documents related to shareholder management, and the provisions of the 2020 Enterprise Law.

Prior to engaging TAPHALAW, Mr. N had submitted a request to TH seeking to withdraw his share capital. Attorney determined that Mr. N intended to terminate his status as a shareholder of the Company and recover his investment and related benefits. This process must be carried out in accordance with the provisions of the Company’s Articles of Association and the 2020 Enterprise Law.

Attorney advised on various options for TH to assist Mr. N in terminating his status as a shareholder. The legal solutions proposed by Attorney were developed based on the provisions of the 2020 Enterprise Law, the Articles of Association, and TH’s internal governance documents, providing a detailed analysis of the conditions, procedures, and formalities for each option. After a thorough analysis of these solutions, Attorney recommended that TH advise Mr. N to transfer his shares to one or more existing shareholders of the Company or to a third party who is not a shareholder of the company, emphasizing the advantages of this solution.

Outcome: TH’s Shareholder Relations Department communicated the detailed “withdrawal” options for Mr. N as advised by TAPHALAW. Mr. N selected the option of transferring his shares to another existing shareholder after reaching an agreement with that shareholder. The Shareholder Relations Department provided advice and support to Mr. N and the shareholder receiving the transferred shares to complete the legal formalities for the transfer and the termination of the share transfer agreement.

2. Regarding the Resignation of Mr. N from the Board of Directors of TH

TAPHALAW’s Attorney conducted a review of the Articles of Association of TH, TH’s internal governance documents, and the provisions of the 2020 Enterprise Law to provide legal advice.

Accordingly, the attorney advised TH to proceed with the necessary procedures for the General Meeting of Shareholders (GMS) of TH to remove Mr. N from his position as a member of the Board of Directors. To align with the reason for the removal, the attorney advised TH to guide Mr. N in submitting a resignation letter from his position as a member of the Board of Directors. Upon receipt of Mr. N’s resignation letter, the Board of Directors of TH convened a GMS to remove Mr. N from his position as a member of the Board of Directors in accordance with the procedures stipulated in the Articles of Association and the detailed guidance provided in TH’s internal governance documents.

Outcome: Mr. N submitted a resignation letter from his position as a member of the Board of Directors in the prescribed format. TH completed the procedures to convene a GMS, removed Mr. N from his position as a member of the Board of Directors, and issued a resolution to this effect.

3. Termination of TH’s Deputy General Director Position

TAPHALAW’s Attorney has conducted a review of TH’s Articles of Association, internal governance documents, the 2020 Enterprise Law, and the 2019 Labor Code to provide advice on this matter.

According to TH’s Articles of Association, the Board of Directors has the authority to appoint and dismiss Deputy General Directors. Mr. N was appointed as Deputy General Director of TH on September 6, 2022, and has since entered into an indefinite-term employment contract with TH. To terminate Mr. N’s position, TH’s Board of Directors must dismiss him from his role as Deputy General Director, and TH must also terminate his employment contract.

Based on these findings, the attorney has advised TH to follow the necessary procedures for the Board of Directors to dismiss Mr. N from his position as Deputy General Director. To justify the dismissal, the attorney has suggested that TH guide Mr. N in submitting a letter of resignation. Upon receipt of Mr. N’s letter, the Board of Directors will convene a meeting to dismiss him in accordance with the procedures outlined in the Articles of Association and internal governance documents.

Furthermore, to mitigate potential disputes and given the mutual desire to resolve the matter amicably, the attorney has advised TH to negotiate a termination of Mr. N’s employment contract. This would involve settling any outstanding payments due to Mr. N under the terms of the employment contract and applicable law.

Outcome: Mr. N has submitted a letter of resignation in the prescribed format. TH has followed the necessary procedures to convene a meeting of the Board of Directors, which has passed a resolution dismissing Mr. N from the position of Deputy General Director. TH has also initiated the process of negotiating the termination and settlement of Mr. N’s employment contract.

Upon completion of the matter, the attorney has collaborated with the Client’s Investor Relations Department and Human Resources Department to compile a complete set of legal documents. Additionally, the attorney has provided guidance to the relevant personnel at TH regarding the storage of these documents to facilitate the tracking of future legal activities within TH.