Limited Liability Company Shareholders To Suppress

This dissertation mainly focuses on the topic of oppression of shareholders in limited liability company and intends to lay solid foundation for the remedy rules of oppression of shareholders to our country through the comparative analysis of law, especially the judgments and remedy rules of different countries. The oppression of shareholders is primary legal problem of limited liability company (or close corporation), and thereby is also directly named as "Close Corporation Problem". What is actually oppression of shareholders? This question must be discussed in connection with the analysis of legal systems, and differently answered in different counties' legal systems. The oppression of shareholders chiefly refers to the unfair prejudice in the laws of Great Britain, whereas the frustration reasonable expectation in American laws. The concept of oppression of shareholders does not exist in the German laws, but there are similar rules, which mainly refer to various "substantial causes" resulting in the break of trusts between shareholders. The types of oppression of shareholders differentiate with each other in different countries, but share the common specification, i.e. shareholders using their controlling position oppress the interests of minority shareholders. The nature of the oppression of shareholders is that shareholders realize the maximization of their interests through opportunistic actions. Therefore, minority shareholders may also conduct the oppressing behaviors through opportunistic actions. The resolution of the problem of oppression of shareholders depends not only on the protection of the interests of medium/minority shareholders, but also (the core of the resolution) on the balance of interests among shareholders. The oppression of shareholders is a usual phenomenon in limited liability company, which largely relates to the specification of limited liability company, the malfunction of majority rule and insufficiency of legal remedy. In a limited liability company there exist comparatively fewer shareholders, and these shareholders usually participate in the corporate management. Additionally, the transfer of the equities of shareholders is restricted. In case of dispute among shareholders, the shareholders cannot freely and easily quit from the company, which may easily result in the formation of oppressing behaviors, and even worsen the oppressing situation. The majority rule provides the controlling shareholder with the enjoyment of preferential position. Once the majority rule is wrongly used, the phenomenon of oppression of shareholders may occur. The last but not the least, the insufficiency of legal remedy rules deteriorate the problem of oppression of shareholders. The Chinese limited liability companies have the same features, and are not immune to the problem of oppression of shareholders. The remedy rules in Chinese laws with regard to the oppression of shareholders have many shortcomings: First of all, the law over intervenes the private governance, which is reflected into two categories: the over intervening of structural rules and distributional rules by laws; second, the laws are insufficient with mandatory rules to adjust the shortcomings of private governance, which is shown as the absence of the post-legal remedy rules in case of deadlock or oppressing behaviors in companies. The parties in question may prevent the occurrence of the oppression of shareholders in advance through contractual arrangements, which however, is restricted by the mandatory regulations of company law. The classification and statements of the legal regulations raised by Melvin Avon Eisenberg with regard to close corporation are reasonable and persuasive, and shall be accepted by our country as the leading rule in the corporation legislation. The structural rules and distributional rules shall be mainly enabling and supplementary rules, where the fiduciary rules shall be largely mandatory rules. Under such legal structure, the shareholders, in order to prevent the oppressing behaviors, may...