Shareholders Derivative Suit

The system of shareholders derivative suit is an important system in the corporation law of the main countries developing market-oriented economy all over the world. It has special function in standardizing the conduct of the big shareholders and the directors, safeguarding the rights and interests of the small and medium-sized shareholders. The fact that the corporation law in China does not standardize this system is an important reason why many big shareholders and directors in corporation abuse their power. This paper starts from the legislative virgin ground in the system of shareholders derivative suit and the necessity and possibility of establishing the system of shareholders derivative suit, makes comparison of two legislative system of shareholders derivative suit, uses the advanced experience of other countries for reference, tries to design a system of shareholders derivative suit which is not only suitable to the legislative practice but also easy to operate. This paper is divided into three chapters: Chapterâ… comments on the rational bases of shareholders derivative suit. It is divided into three parts. The first part introduces the definition of shareholders derivative suit: a system when the corporation's legislative rights and interests are infringed by others, especially the shareholders holding a controlling number of the shares, directors and other high executives, but the company is unable or slack to ascertain the responsibility of the infringers and achieve other rights, the shareholders satisfying the legal conditions bring a lawsuit against infringers in their own names, and ascertain the legislative responsibility of the infringers for the company's interest, according to the legal proceeding. The basic features are substitution and representative ness which clearly distinguish from features in general legislative rules: first, when the company is slack to perform the right of action, the shareholders for the prosecution substitute the company to bring a lawsuit, which limits the freedom of handling its own right; second, the shareholders for the prosecution transcend the company and directly bring a lawsuit against the person infringing the company's interest, which disregards the company's independent dignity; third, when the company is slack to perform the right of action according to the majorities'opinion, several shareholders substitute the company to bring a lawsuit, which negates the principle that the majority determines the capital. The second part introduces the legislative current situation of system of shareholders derivative suit in China. It points out the virgin ground in our countries'corporation law protecting the rights and interests of small shareholders. The absence of this regulation is unfavorable not only to protect the rights and interests of small shareholders, but also to establish the order of the socialist market economy. Therefore the positive change under the unfavorable situation is the realistic motive of establishing the system of shareholders derivative suit. The third part introduces the inevitability and necessity of establishing the system of shareholders derivative suit in our country. There are various meanings in our company's law establishing the legislative protective system of the small shareholders: first, the inevitable demand and logical extension of company's democratic nature; second, the important assurance of the company's stable, harmonious and healthy development; third, the reasonable expectations of the small shareholders acquire the guarantee; fourth, the necessity of the fact that our company's law adapts to the small shareholders'equality in status and modern trends'development of legal protection. Chapter â…¡comments on the comparison of the system of shareholders derivative suit in contemporary countries. It is divided into five parts. This chapter tries to draw some advanced experience from the company's law in contemporary's two legislative systems regulating the system of shareholders derivative suit, improve the administrative structure in our country's company, and design a company's law which conforms to the legislative system, legislative environment in our country. The first part makes comparison and introduces the suitable agent of bringing the derivative action: first, the company's shareholders; second, company's loaners; third, "the suitable person"appointed by court. The second part makes comparison and introduces the prerequisites of bringing the derivative lawsuit: first, the formal request or notice to the company; second, the goodwill to the plaintiff's action; third, provision of the derivative lawsuit's fee. The third part makes comparison and introduces the exemption of the shareholders'responsibility in company and the bring of shareholders derivative suit, and emphasizes the comparison on the issue "if the unsuitable action that the directors cause the occurrence of infringing the interest of the company has been approved by the board of directors and the meeting of the shareholders, which therefore has the binding force on the company, whether the small shareholders in the company still have the right of bringing the derivative action.", America and Canada have different regulation. The fourth part makes comparison and introduces the procedure of derivative action, and mainly deals with the legislative status of the parties. The fifth part makes comparison and introduces the shareholders'right and responsibility of the derivative action: first, the shareholders'right when the derivative action wins a lawsuit; second, the shareholders'legislative responsibility when the derivative action loses a lawsuit. Chapter â…¢comments on the design of the derivative action system in our country. It is divided into two parts. The first part introduces that, when designing the system of the derivative action in our country, we must make sure the basic principle which the system should follow. Only the principle is made clearly, can we make the construction of the concrete system. These basic principles includes: first, the principle of protecting minority shareholders'right; second, the principle of balancing between company's autonomy and country's intervention; third, the principle of coordinating encouraging the just lawsuit with preventing speculative lawsuit; third, the principle of giving consideration to both drawing the advanced experience abroad and balancing the legal system within country. The second part introduces the main contents of the shareholders derivative suit system in our country. As one of the important system in company's law, the features of shareholders derivative suit system manifest from its specific contents. When constructing the derivative action system in our country, we must pay much attention to the design of the specific contents. Under the prerequisite of the following the former basic principles, it should be standard, reasonable, and operable and have the function of protecting the interest of the minority shareholders, improving the administrative structure. First, it regulates the qualifications of plaintiff. From the quality of holding the share, it regulatesthat only the shareholders holding over a certain proportion more than the total share issuing by the company have the right to bring derivative action. From the time of holding the share, it regulates that it should reference to the principle of the "holding share then"in America, meanwhile it allows the shareholders to have the right to bring the lawsuit who do not hold the share when the error occurs but acquire the share later; from the just and sufficiency of the shareholders for the prosecution, it grants the court extensive censorship power. Second, it regulates the right and the responsibility of the plaintiff. On the right of the plaintiff, it mainly grants the shareholders winning the lawsuit pay the request right with the fee; on the responsibility of the plaintiff, it mainly takes the compensating responsibility to the company and defendant when loses the lawsuit. Third, it regulates that the company's status in shareholders derivative suit can be performed as the third party without independent request right to bring the lawsuit. Fourth, it regulates that the object range of shareholders derivative suit is limited in the directors, managers, supervisors, liquidators, and holding shareholders. Fifth, it regulates the pre-procedure of shareholders derivative suit, demanding that before bringing the derivative action the plaintiff must request the meeting of the supervisors (or supervisors) in written form to bring the lawsuit to the defendant. Of course, it regulates the exception. Sixth, it regulates that when our country introduces the system of the shareholders derivative suit, it does not specially regulate the cost guarantee system of the shareholders derivative suit. Seventh, it regulates the status of court in the shareholders derivative suit, demanding that it must grant the court in the censorship of the shareholders derivative suit the flexible freedom in some aspects such as whether it conforms to the essential condition of bringing the lawsuit, whether it is applicable to the pre-procedure exception, whether the shareholders for prosecution satisfy the demand of representing the just and sufficiency, whether it allows the plaintiff shareholders to withdraw a charge, whether the compromise is just and so on.