| This paper aims at studying legal means of restraining the abuse of corporate controlling right through analysis of legal principals, empirical studies, comparative analysis, economic analysis of laws and other methodologies, taking reference of successful cases and theories in corporate laws of the US, UK, Japan and other countries, and putting forward legal measures to restrain controlling shareholders from abusing their rights, involvements in unfair related party transactions, and manipulating corporate affairs resulting in damage to the interests of the company and its minority shareholders. It has been a period of time over which companies in our country, especially those insiders of the listed companies, take advantage of their privileged positions as controlling shareholders to abuse their powers frequently, suppressing the minority interest holders and making illegal profit for their own, which have seriously damaged the harmony and stability of corporate relations. Under the severe circumstances, we are pressed to respond from the legal perspective in order to promptly restrain such behavior from expanding. However, in the practical process, due to the weakness and lack of theoretical foundation, faced with asymmetry of interests, we are not yet able to cope with the situations as well as hoped. Many of the legal measures are imbalanced, being either lacking protection, or overly restrictive, and even losing the targets and objectives of restraining. Therefore we are in great need to understand and to answer a series of questions including how to understand corporate controlling rights, sources of abuses of controlling rights, whether the capital majority vote principle should be reexamined, how to establish a rational approach to protection of shareholder rights, how to construct a reasonable legal restraining system and others. These are the topics that this paper will be exploring. In addition to the Introduction and Conclusion parts, the paper consists of 5 chapters:Chapter 1 carries out a fundamental analysis on abuse of corporate controlling rights. The chapter first explores the structural content of corporate controlling rights and root cause of controlling rights abuse, and then goes on to propose that corporate controlling right is a new economic right derived from shareholding rights as a result of scale development of the modern companies. As it has its own independent value properties, it has become a target competed for by different entities of companies in order to satisfy their own interests. Yet under the dual effects of shareholder interest conflicts and agency cost problems, people often have to face the risks of controlling right abuse in the pursuit for maximization of self interests. In fact, the actual cases and behavioral motives of controlling rights abuses in reality are much more complicated than that can be assumed in theory, concerning control of shareholder controls, insider controls and co-existence of the two and a variety of complexities. Seemingly similar rights abuse problems vary greatly in their root sources, motives or natures of behaviors, which poses requirement on us to distinguish. Therefore, before discussion of legal measures, it is necessary to firstly clarify which status of controlling right the object of restraining measures possesses. As an opening part of the paper, this chapter mainly aims at defining the content of corporate controlling rights and the forms and causes of controlling rights abuse as well as other fundamental issues, which provide clarification on the paper's study focus.Chapter 2 is the mechanism by which corporate controlling rights abuses focus on and considerations for the corporate laws. The first two sections of this chapter discuss whether abuse of the right of controlling shareholders can be attributable to excessively concentrated equity structure and the principle of resolution by majority capital holders. The opinion is that although the two have resulted in the privileged position of controlling shareholders as an objective fact, and have enabled them to obtain controlling rights over the company, they are not in their own the key factors that induce abuse of controlling rights. Controlling rights abuse should be a discretionary abuse of rights of controlling shareholders in order to pursue additional interests and has no necessary legal connection with the shareholding models and resolution rules of the company. Based on such, the author carries out an in-depth analysis from legal perspective on how to understand the rational source and limitations existing in company organizations under capital majority vote principle, how to overcome such limitations to follow the principle of righteousness, rational approach to restraining controlling rights abuse, boundary of minority interest protection and other issues. This chapter is the rational analysis part of the paper, with two purposes one being that to prove against those unfounded blames on centralized shareholding structure and capital majority vote principle themselves, and the other being to clarify how to balance the relationship between legitimate rights of controlling shareholders and minority interest protection in company groups. At the end, the purpose of restraining controlling rights abuse is established from the perspective of overcoming limitations of autonomy of companies, which is to correct errors made by controlling rights abuse and to compensate for the minority shareholder interests instead of restructuring a rational order inside the company aligned with the wills of legislators.Chapter 3 attempts to structure a legal regulatory system to restrain corporate controlling rights abuse. As a chapter connecting the preceding and the following, the chapter firstly analyzes the selection of legal measures for restraining controlling rights abuse according to the agent cost theory, from a new perspective of taking the restraining of controlling rights abuse as an economic problem of reducing agency costs. It is proposed that the legal measures and strategies should be inclined towards open standards instead of prescript models for adjustment, and the judges should appraise after whatever happens on the legal facts and to provide channels to help the interest parties. Followed is a discussion on the efficiency of two measures, namely improving the corporate governance structure and requesting controlling shareholders to take credit obligation to restrain corporate controlling right abuse. The conclusion is that as long as the company law still acknowledge the reasonableness and necessity of capital majority vote, controlling shareholders will have absolute opportunity and capability to abuse their rights. Even the most reasonable and articulate corporate governance models cannot prevent this. Also the basis of emergence of credit obligations is not solid, and can hardly endure the tests of applicability of legal deductions. Therefore, these two contents are not suitable to be accommodated into the system and scope of legal restraining measures. In the end, the author proposes the legal restraining system including substantive laws and procedural laws according to the ideas of restraining corporate controlling rights established in this paper.Chapter 4 is on the substantive law restraining measures on corporate controlling rights abuse. Controlling rights abuse is on one hand infringement on the company's independent personality and limited liability, while on the other hand infringement on legitimate interests of minority shareholders and interest parties. Therefore, the substantive laws should consider interests of oth sides. In this Chapter, the author makes a highlight analysis on three types of substantive law system i.e. corporate personality denial system, principle of equitable subordination and putative connected relation theory. Among them, the personality denial system can be regarded as a general legal strategy, while the principle of equitable subordination and punitive connected relation theory are the special rules that can supplement according to specific circumstances, one applicable to company bankruptcy and liquidation cases, the other to unfair related corporate transactions. Such not only highlights the efficiency of applicability of laws, but also avoid the irrational requests brought by expanded applicability resulted from over inclination towards a single principle. Despite so, these substantive law systems do not have legal connections or logical relations in between, but are practical rules derived to target specific circumstances. We are not combining these rules for the purpose of structuring the so-called substantive laws system. On the contrary, substantive laws system should maintain a certain openness, and not be limited by the existing legal measure. It should continue summarizing and drawing lessons from the continuously emerging problems, to enrich and supplement new content.Chapter 5 is the procedural law regulatory system for corporate controlling rights abuse. In this chapter, the author acknowledges the necessity of involvement of judicial remedy in the problem of corporate controlling right abuse, acknowledging that it is the final resolution mechanism of social disputes, and important means of balancing corporate relations. Meanwhile, the special provisions that restrict corporate lawsuits represented by the Foss Rule are analyzed, as well as significance of seeking balance in procedural laws that the laws must properly balance relationships between companies'autonomy and outside interventions to protect minority shareholders appropriately without overly intervention on rights of controlling shareholders to execute corporate affairs. From this point of view, the author divides procedural law regulation into direct litigation and indirect litigation. In regards to specific lawsuit basis, according to the content of shareholder's rights, the author classifies the causes of action into shareholder voting right disputes and shareholder quitting or dissolving the company. The former, shareholder voting rights disputes can also be divided into corporate resolution cancelation lawsuits and corporate resolution invalidation lawsuits, which content involves shareholder interest distribution request right, share subscription rights, resolution voting rights etc. The latter is the last choice, and the least positive one that minority shareholders can make when faced with infringements on their rights. In this way, procedural law regulating system consists of shareholding voting right lawsuit, shareholder derived lawsuit and shareholder quitting and dissolving lawsuit.
|
PDF Full Text Request