Research On Shareholder's Exit Machanism In Limited Liability Company

Limited Liability Company is a very popular investment model considering the fact that the requirement for investment scale is relatively low. However, many problems emerge, among which is the difficulty for shareholders to exit. Many countries strictly limit shareholder's right to exit due to the fact that the number of shareholders of a limited liability company is small and any change in the shareholders'structure may have significant impact on the company. Such restriction makes it almost impossible for shareholders to transfer their shares and as a result also makes it easier for the majority shareholders to infringe the legitimate rights of minority shareholders. The cumulating voting rule, the petition right to have the company purchase shareholder's shares and the right to request the people's court to dissolve the company are all important exit approaches available to shareholders stipulated by the Company Law. However, a better drafted exit mechanism for shareholders is still in need.The author discusses the shareholder's exit mechanism in four parts in this essay: The first part analyzes the basic theories concerning the shareholder's exit mechanism in a limited liability company; The second part makes a comparing study of different shareholder's exit mechanisms in different countries; The third part discusses the deficiency in the legislation relating shareholder's exit mechanism in China; In the last part, the author makes several suggestions on the improvement of shareholder's exit mechanism in the Company Law.