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Key points:

On July 15, Zong Fuli, the successor to Wahaha CEO Zong Qinghou, tendered her resignation, causing an uproar in public opinion across the country.

A week later, on July 22, the company announced that she would continue to serve as general manager of Hangzhou Wahaha Group.

After all, she is the daughter of Zong Qinghou. Zong Fuli's self-rescue drama by submitting a letter of resignation has come to a temporary end with Zong Fuli's initial victory. What signals did this drama send?

1. Could the major state-owned shareholder be trying to seize Wahaha’s independent management rights?

A week ago on July 15, when Zong Fuli sent out her resignation letter, her short 100-word letter clearly revealed two signals:

First, the opening paragraph directly named Shangcheng District government and some shareholders to question the legitimacy of her taking over the management of Wahaha Group from her father Zong Qinghou. Since 46% of Wahaha Group's shares are held by Hangzhou Shangcheng District's district-level tourism and trade service platform "Wen Shanglv Investment Holding Group Co., Ltd.", in fact, the shareholders Zong Fuli refers to here should be the same as Shangcheng District government, logically.

In addition to the largest state-owned shareholder, the Zong family holds 29.4% of the shares of Wahaha Group, making it the second largest shareholder. Another shareholder representing Wahaha employees holds 24.6% of the shares.

Second, it revealed Zong Fuli's actual position in Wahaha Group, which is vice chairman and general manager. According to Southern Weekend, Zong Fuli, 42, was appointed as the head of the beverage group in February after her father Zong Qinghou passed away, which means she took over the position of general manager, which was one of the positions her father held in the company before his death.

After Zong Fuli resigned, the most widely circulated media article supporting Shangcheng District was the one in the screenshot above. Sanlang reasonably suspected that this might be a short essay by Wahaha's major shareholder to defend his action of forcing Zong Fuli to resign.

Why does Sanlang think that Zong Fuli's self-rescue drama through public opinion using a letter of resignation first conveys the message that "the major state-owned shareholder may be trying to seize Wahaha's independent management rights"?

Because people who are familiar with company law should know that the majority shareholder, second largest shareholder, and third largest shareholder of a company have a legally significant agreement on the management rights of the company. This agreement is reflected in the allocation of the main management positions of the company in the company's articles of association.

Generally speaking, the majority shareholder serves as the chairman of the board, the second largest shareholder serves as the vice chairman and general manager, the third largest shareholder serves as the vice chairman, or the ordinary director serves as the chairman of the board of supervisors. Other shareholders who reach a certain share serve as directors.

Of course, there are exceptions. In some high-tech companies, the founders may have a relatively small stake, but the company's articles of association stipulate that shareholders with a larger stake cannot directly participate in the company's management and operation, and their shares will be subject to certain restrictions when shareholders vote to ensure that the founders control the company.

There is another exception. In companies with dispersed equity, the company's articles of association stipulate that shareholders only participate in the board of directors' decision-making on the company's business direction, and the company's business management rights are handed over to the general manager selected by the board of directors. This belongs to the professional manager management model.

Therefore, from a legal perspective, a shareholder’s position in the company is his or her say in the management of the company based on the shares he or she holds. Although the shareholder’s name is written on the invoice, it actually represents the shares he or she holds.

Zong Qinghou was the chairman and general manager of Wahaha Group during his lifetime. Sanlang speculated that when Shangcheng District accepted Nengda’s Wahaha shares, there was a high probability that there was an equity restriction agreement with Zong Qinghou, such as not participating in the company’s operations and not serving as the company’s chairman, etc. This is similar to the equity agreement between the founder of Alibaba and its major shareholder Yahoo.

Therefore, from the perspective of law or contract, not only should the equity be inherited or transferred, but also the management rights related to the equity should be inherited or transferred. Therefore, it should be noted that positions related to equity, such as chairman and general manager of a company, are subject to the provisions and support of the law and the company's articles of association, and have nothing to do with the personal identity, style and ability of the holder.

During his lifetime, Zong Qinghou held the position of chairman and general manager of Wahaha Group, which he passed on to his successor Zong Fuli. This is in compliance with company law and the operation of general private companies.

Saburo spent so much time and effort introducing the provisions of the Company Law and the Articles of Association on key operational and management rights of the company's chairman, general manager, etc., because most people may not be aware that private companies in a market economy environment are completely different from state-owned enterprises in that the appointment and removal of operational and management personnel by the State-owned Assets Supervision and Administration Commission or other state-owned equity managers are entirely different.

Therefore, it is inappropriate and illegal to question the legitimacy of Zong Fuli's management of Wahaha Group based on her management ability and interpersonal relationship with local government officials, because this is only related to her equity, not her management ability.

Moreover, the Company Law cannot be amended, such as stipulating that shareholders who do not have management capabilities cannot serve as chairman or general manager. This is not only because no one dares to invest in a business after such a stipulation, but also because the nature of a business is that whoever invests, operates, and takes their own profits and risks. This is the essence of a market economy.

Not only did Zong Fuli point out Shangcheng District's doubts about the legitimacy of her management of Wahaha in the first sentence of her resignation letter, but Zong Fuli's uncle Zong Ze's subsequent remarks also indirectly confirmed the huge dispute between Zong Fuli and Shangcheng District officials over the management rights of Wahaha.

The day after Zong Fuli resigned, Zong Qinghou's brother and Zong Fuli's uncle Zong Zehou publicly stated in his circle of friends that Zong Fuli's biggest problem was that she should not consider how to expand the scale and how to make drastic changes to the status quo when taking over Wahaha. In essence, the state is the major shareholder of Wahaha. If all the shares are yours, of course you can do whatever you want. You are a professional manager of a state-owned enterprise.

Most people think that this is Zong Zehou criticizing her niece Zong Fuli for not being a good person and not standing in her own position. Sanlang believes that in fact, this is Zong Zehou's clever disclosure of the truth about Zong Fuli's resignation, implicitly accusing the state-owned shareholders of ignoring the Wahaha company's charter, which is actually disrespecting the equity behind Zong Fuli, because the equity behind Zong Fuli is the second largest shareholder, not a professional manager. Zong Fuli's management position in the company cannot be deprived by questioning her management ability.

2. The inheritance of property of large private enterprises is not as easy as the law stipulates.

Five months ago, the founder Zong Qinghou passed away due to illness. Although the vice chairman and general manager of Wahaha Group were passed to his daughter in accordance with the company's articles of association and Zong Qinghou's will, Sanlang checked the national enterprise credit information disclosure system, Tianyancha, Qichacha and other equity inquiry platforms and found that the relevant equity of Wahaha Group and the company's management were not changed synchronously. This is very rare and very dangerous.

The National Enterprise Credit Information Publicity System shows that Wahaha Group was established in February 1993 with a registered capital of 526.3747 million yuan. Shareholders include Zong Qinghou, the Grassroots Trade Union Joint Committee of Hangzhou Wahaha Group Co., Ltd., and Hangzhou Shangcheng District Cultural Tourism Investment Holding Group Co., Ltd.

The most recent change in Wahaha Group's senior management was in August 2019. Before the change, the board of directors consisted of Zong Qinghou, Zhang Yiyong, Du Jianying, Huang Minzhen, Wu Jianlin, etc. After the change, the board of directors consisted of Zong Qinghou, Zhang Hui, Wu Jianlin, Pan Jiajie, Yu Qiangbing, etc., of which Zong Qinghou was the chairman and general manager.

The above business information tells us the following facts:

First, Zong Qinghou’s shares in Wahaha Group have not yet been registered for changes to the Articles of Association at the industrial and commercial registration authorities. However, the registration of changes to the Articles of Association is a necessary legal procedure for equity inheritance.

Second, although on March 27, 2024, the official website of Wahaha Group stated that Zong Fuli's identity was "Zong Fuli, General Manager of Hangzhou Wahaha Group and President of Hongsheng Beverage Group". However, in the legal sense, in the current management of Wahaha Group, Zong Fuli is neither the vice chairman nor the general manager. Because according to the provisions of the Company Law, changes in important business management personnel such as the chairman, general manager, and chairman of the board of supervisors require changes to the "Articles of Association" and submitting them to the industrial and commercial registration management department for filing.

Third, the slow change in the industrial and commercial registration of Wahaha Group should not be due to the heir Zong Fuli's forgetfulness, procrastination or obstruction, logically speaking.

Because Qichacha shows that Zong Fuli currently serves as the legal representative and other positions in 36 companies, including Hangzhou Wahaha Hongzhen Investment Co., Ltd. and Hangzhou Wahaha Guangsheng Investment Co., Ltd. Many of these companies originally had their mother as the chairman, but now the chairman has been changed to Zong Fuli.

For example, the National Enterprise Credit Information Disclosure System shows that in March 2024, Zong Fuli took over 100% of the shares of Hangzhou Wahaha Hongzhen Investment Co., Ltd., the main controlling shareholder of the Wahaha OEM factory, and served as executive director and general manager.

On July 5, the senior management of Hongsheng Beverage Group Co., Ltd. was changed. Two directors, Shi Lijuan and Shi Youzhen, withdrew, and Zong Fuli's position was changed from chairman to executive director. Shi Youzhen is the wife of Wahaha founder Zong Qinghou and also the mother of Zong Fuli.

Fourth, Wahaha’s state-owned shareholder once planned to transfer its 46% stake in Wahaha Group.

According to information from Baidu's bidding information query platform Fanfan Xunbiaobao, Sanlang found that in July last year, Hangzhou Shangcheng State-owned Investment Holdings launched a bidding for equity valuation and legal services for the proposed transfer of its 46% equity in Wahaha Group. Wanbang Asset Appraisal won the bid for the equity valuation service, while Grandall Law Firm won the bid for the legal services for equity disposal. There is no further public information yet.

Based on the above information, it is reasonable to speculate whether the equity value of Shangcheng District was damaged due to the restriction of not participating in the operation and management when transferring 46% of the equity? Or did the transferee make participation in the actual operation of Wahaha a precondition for the transfer? As a result, Shangcheng District used its special status as an official to put pressure on the industrial and commercial registration management department to refuse to register the change of Zong Qinghou's equity in Wahaha Group and the "Company Articles of Association" of the chairman and general manager?

Did Zong Fuli sense the huge risk to her father’s equity value after the registration of changes to the Company’s Articles of Association was blocked for five months?

Third, rules should be established for officials who covet and interfere with the legitimate operations of private enterprises!

On July 22, Wahaha Group issued a statement saying that in order to ensure the company's stable and healthy development, after friendly consultation among all shareholders, Ms. Zong Fuli decided to continue to perform relevant management responsibilities of Wahaha Group.

But judging from this statement, has the conflict between the major shareholder and the second largest shareholder been resolved? What was the reason that forced the major state-owned shareholder to use various means to force Zong Fuli to resign publicly and then ask her to return to Wahaha Group? What did Zong Fuli ask for when she returned to the Wahaha Group that originally belonged to her? The statement did not mention it, and the outside world does not know.

The important meeting that just ended mentioned that we must unswervingly encourage, support and guide the development of the non-public economy, ensure that all types of ownership economies have equal access to production factors, fair participation in market competition and equal legal protection.

The fact that Zong Fuli was forced to resign by a state-owned shareholder happened at a time when the whole country was highly emphasizing the encouragement of the development of the non-public economy. This undoubtedly made the people of the whole country realize that private entrepreneurs operating in accordance with the law and having their property rights and operating rights protected by law are both valuable and carry great risks.

There is no doubt that Zong Fuli was able to successfully save herself through public opinion this time, thanks to three reasons:

First, the timing is highly sensitive;

Second, Zong Qinghou had just passed away, and people turned to support his daughter Zong Fuli out of their simple feelings for Zong Qinghou, an iconic figure of private entrepreneurs;

Third, the huge influence of the Wahaha brand has attracted people's attention.

But we must also note that not all private enterprises are as lucky as Zong Fuli when their right to independent management, property rights, and personal freedom are infringed. For example, Li Tuchun, the founder of Prince Milk.

Although Zong Fuli was invited back, the relevant departments should thoroughly investigate and deal with the post on July 8 titled "A solid report on the embezzlement of huge state-owned assets of Wahaha Group by Zong Fuli, President of Hongsheng Group", as well as why Zong Fuli's inheritance of Zong Qinghou's equity and position five months after his death has not yet completed the legal procedures, and the key figures involved. They should treat this matter as a typical case of legally protecting private entrepreneurs and private enterprises, give reassurance to private entrepreneurs who have suffered setbacks, and set rules for officials who covet the property rights and operating rights of private enterprises and interfere with the legal operation of private enterprises!

【Author: Xu Sanlang】