On The State Coercion In Corporate Law

Where is the clear line between state coercion and private autonomy in corporate law? This is a basic theoretical issue of corporate law. It can be simplified to be a more distinct issue, i.e., what is the criterion of state coercion in corporate law and how to exercise such state coercive power. This is the core issue this article aims to answer.This article argues that the state coercion in corporate law should aim to prevent and prohibit private coercive behavior in corporate law. This is the criterion of state coercion in corporate law. It can be shortly called private coercion criterion. This criterion is different from that of market failure and government failure which have developed as the debate on the contractual freedom in corporate law was launched. This criterion can provide stronger explanation and wider application than previous standards. The private coercion criterion is the core theorem of this article.The private coercive behavior in corporate law can be divided into two categories, i.e., civil private coercive behavior and governmental coercive behavior. The civil private coercive behavior includes three types: the first is the oppressive behavior the controlling shareholder imposed upon non-controlling shareholders, the second is bureaucratic behavior of corporate management, the third is the fraudulent behavior in the process of corporate organizing. The governmental coercive behavior in corporate law also includes three kinds. They are state capture, administrative corruption and judicial corruption.The state coercion in corporate law should be carried out under the authority of purpose, the principle of rule of law, and should be contingent. This means the state coercion in corporate law should conform to the standard of necessity and efficiency. The legislation of corporate law should satisfy the requirements of generality, equality and certainty. Corporate law should also root deeply from social foundation and strive for keeping a deliberate balance between conflicting interests. Meanwhile judicial body should possess strong enough powers to restrict the abuse of legislative power without any ifs and buts. For this purpose, the power of judicial review should be entrusted as to effectively eliminate and limit the influence of bad corporate prescriptions. Judicial body should cultivate the ability of pursuing equality case by case. Most importantly, Judiciary should differentiate the public law liability and private law liability of mandatory rule concerning corporate. This is one of the most effective systems to prevent public powers from permeating private sphere without restraint. The article also argues that China's corporate law should adopt the self-enforcing model in consideration of its weak market mechanism and judicial system.