American financial writer Michael Lewis once wrote a famous financial literature titled "Barbarians at the Gate," which describes some classic cases of "activist investors" (the so-called "barbarians at the gate") forcibly intervening in the governance of listed companies.

A similar figure seems to be appearing at the door of China's banking industry.

On August 28, 2025, QRCB is set to hold its first extraordinary general meeting of shareholders in 2025. Recently, prior to the shareholders' meeting, QRCB held a board meeting, during which it reviewed and approved the "Proposal on Not Submitting Shareholder's Temporary Proposal for Review at the Shareholders' Meeting."

Who proposed the temporary proposal in the face of the dominant shareholders and management team? Why did the board refuse to submit this proposal for review at the shareholders' meeting?

Who is the proposer?

According to the board announcement of QRCB, on August 18, 2025, QRCB received a "Temporary Proposal on Implementing Cash Dividends for Three Consecutive Years in the Third Quarter" (hereinafter referred to as the "Temporary Proposal") and related attachment materials submitted by Tongfa Yu (Shenzhen) Investment Co., Ltd. (referred to as "Tongfa Yu Investment"), requesting to add the review of this "Temporary Proposal" at the first extraordinary general meeting of shareholders to be held on August 28, 2025.

Tongfa Yu (Shenzhen) Investment Co., Ltd., as the fund manager, represents three funds: Tongfa Yu Luhuo Chunjin Value No. 1 Private Securities Investment Fund, Tongfa Yu Chuan Cheng Hui Guang Private Securities Investment Fund, and Tongfa Yu De Cai Shuang Xin Private Securities Investment Fund, and is entrusted by 11 individual shareholders to exercise the right to propose temporary proposals.

The temporary proposal mentions that these shareholders currently hold more than 3% of the shares of QRCB in total, and they jointly proposed the "Temporary Proposal on Implementing Cash Dividends for Three Consecutive Years in the Third Quarter."

According to the Company Law, shareholders holding more than 1% of the company's shares individually or collectively can propose temporary proposals in writing to the board of directors ten days before the shareholders' meeting. The temporary proposal must have a clear agenda and specific resolution matters.

What are the core terms of the temporary proposal?

The temporary proposal put forward by Tongfa Yu Investment mainly includes the following contents:

1. QRCB's business scale, profitability, and capital strength have continued to improve in recent years, with ample cash reserves, which provides the objective conditions for implementing cash dividends in the third quarter, ensuring that the capital adequacy ratio meets regulatory requirements and aligns with medium- and long-term strategic development.

2. It is suggested to implement "third-quarter cash dividends" in the accounting years of 2025, 2026, and 2027.

3. The cash dividend ratio can refer to the "net profit attributable to shareholders of the listed company" published in QRCB's third-quarter report, with a dividend ratio of no less than 30% of the above net profit.

4. To ensure the efficient and compliant advancement of the third-quarter dividend matters, it is suggested that the shareholders' meeting authorize the board of directors to handle all matters related to the dividends in the third-quarter report within the framework of principles.

Why did the board refuse the temporary proposal?

So why did the board of QRCB refuse to include this temporary proposal in the voting agenda of the shareholders' meeting? The board of directors of QRCB issued an announcement emphasizing the following reasons:

First, the board of directors of QRCB has the right and obligation to determine whether the temporary proposals submitted by shareholders comply with relevant regulations and whether they should be submitted for consideration at the shareholders' meeting. This is a right granted to the board by Article 115, Paragraph 2 of the Company Law. This article states that when "the temporary proposal violates laws, administrative regulations, or the company's articles of association, or does not fall within the scope of authority of the shareholders' meeting," the board may choose not to submit the temporary proposal for consideration at the shareholders' meeting.

Next, the board of directors of QRCB detailed which laws, administrative regulations, or articles of association the temporary proposal violated.

The announcement issued by the board believes that the proposal violates Article 7 of the "Guidelines for the Supervision of Listed Companies No. 3 - Cash Dividends of Listed Companies" (hereinafter referred to as "Guidelines No. 3"), which mentions that "when a listed company convenes an annual shareholders' meeting to review the annual profit distribution plan, it may review and approve the conditions, upper limit ratio, and upper limit amount for the mid-term cash dividend for the next year. The upper limit for the mid-term dividend reviewed by the annual shareholders' meeting should not exceed the net profit attributable to the shareholders of the listed company for the corresponding period. The board of directors shall formulate a specific mid-term dividend plan based on the resolution of the shareholders' meeting, provided that the conditions for profit distribution are met."

Article 6.5.9 of the "Self-Regulatory Guidelines No. 1" states that "after the profit distribution plan of the listed company is approved by the shareholders' meeting, or the board of directors formulates a specific plan based on the mid-term dividend conditions and upper limits approved by the annual shareholders' meeting, it shall make timely financial arrangements to ensure the smooth implementation of the cash dividend plan."

Specifically, the topic and content of this "temporary proposal" regarding mid-term dividends and board authorization, violate the provisions that the authorization matters for the next year's mid-term dividends must be reviewed by the annual shareholders' meeting.

In addition, the cash dividend ratio proposed in this "temporary proposal" is not less than 30% of the "net profit attributable to the shareholders of the listed company" as stated in the quarterly report for each year, and it authorizes the board of directors to formulate and disclose specific dividend implementation plans based on a lower limit rather than an upper limit for the dividend ratio. According to the Company Law and the Articles of Association, the review of the profit distribution plan is the authority of the shareholders' meeting. Combined with the relevant provisions of "Guidelines No. 3" and "Self-Regulatory Guidelines No. 1" regarding the authorization of the board of directors by the shareholders' meeting, the board of directors only has the right to formulate plans within the upper limit of the profit distribution ratio reviewed by the shareholders' meeting and does not have the right to independently decide the specific profit distribution amount or ratio based on the relevant lower limit reviewed by the shareholders' meeting.

Is it "set in stone"?

Of course, whether the announcement from the board of directors of QRCB means that the above matters are "set in stone" is still open to discussion.

First, the proposals from relevant secondary market investors to strengthen dividends generally align with the policy of "encouraging listed companies to return to shareholders." Of course, the dividend ratio should also consider the long-term development needs of the company.

Second, the relevant regulations mention that matters such as mid-term dividends must be reviewed by the shareholders' meeting. It remains to be clarified which provisions the third-quarter dividends should refer to and whether they must necessarily be reviewed by the shareholders' meeting From the perspective of overseas operational practices, large banks, including HSBC, have examples of quarterly dividend operations. HSBC often distributes dividends four times a year (quarterly) under normal dividend conditions.

Thirdly, whether setting a minimum dividend ratio conflicts with the provisions of Article 6.5.9 of the "Self-Discipline Regulatory Guidelines No. 1," which states that "the profit distribution plan of listed companies shall be approved by the shareholders' meeting, or the board of directors shall make timely arrangements for funds after formulating specific plans based on the mid-term dividend conditions approved by the annual shareholders' meeting, to ensure the smooth implementation of the cash dividend plan," is open to discussion.

Therefore, the dispute between the aforementioned minority shareholders and the board of directors may not only represent a divergence in understanding of the relevant regulatory clauses but also reflects an inevitable process for financial institutions and listed companies in enhancing shareholder returns. Each game surrounding this process is an opportunity for the securities market to improve relevant regulations.

From this perspective, it is worth watching whether this dispute will have further developments.

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