Close Corporation Problem And Its Legal Relief

The limited liability company(LLC) created by German GmbH Law in 1892 isknown as "legislators invention", but it is not the product envisaged by the legislators.Although to some extent the creation had been a jurist idealistic concept, but thepractice proved its reasonablity for small and medium-sized enterprise (SME). But inreality, restrictions on the transfer of shares often lead the shareholders in controversyto the dilemma --the phenomenon of close corporation problem is undoubtedly thegreatest problem in practice. However, in our country, whether statutory or judicialpractice had ignored such things for a long time, resulting the great detriment to theinterests of shareholders. In the new "Company Law", there are a lot of changes ofLLC to a larger extent. It also provides a number of relief for close corporationproblem, though still imperfect. In this context, this article, from the perspective oflaw and economics, through comparative methods, methods of weighing the interests,case analysis methods and theoretical and empirical analysis of the phenomenon,should seek best relief mechanism of close corporation problem.The article is separated into five parts:The first part is foreword. This part will preliminarily introduce and explore theinspiration and basic significance of close corporation problem. Then we analyze thescope of applicable LLC.The second part focuses on the basic issues of the close corporation problem.This part is divided into four chapters. The first chapter analyses the fundamentalcharacteristic of the LLC. Chapter II explores the basic manifestations of the plightand their mutual relations, and notes that those manifestations are closely relatedphenomenon as a direct result of the LLC inevitably, so their settlement mechanism isdirectly the same. Chapter III analyses the reasons for the close corporation problem.The illiquidity of shares subject to the closed nature of LLC is the premise of closecorporation problem and the lost of its nature of person joint is the essence of factors.The abuse of the majority rule and the conservative concept of the capital credit arethe direct causes. Chapter â…£ pointed out that the damage of close corporationproblem including both internal and external.The third part analyses the issue of relief mechanism. First, we analyse the legalbasis for the mechanism, stressing that reasonable expectations principle, the theoryof corporate autonomy and judicial relief and the theory of "remedies precede rights"take an important role for the choice of the relief mechanism. Then we compare thetypical national legislation and empirical analysis in both two legal systems, obtainingthe basic characteristics of the relief mechanism. The fourth part is the close corporation problem and the status of reliefmechanisms in China. First we note that the China's social realities, especially thehuman environment better breed close corporation problem. Then there are thelegislative and judicial resources to be described and analysed, and our new"Company Law" undertakes some evaluation in the provisions relating to the reliefmeasures of close corporation problem. On this basis, I propose the fundamentalperspective that the judicial interpretation is the object of a key development, and itshould increase the discretionary powers of judges. At the same time we shouldcontinue to strengthen theoretical study as the preparation for amending the law.Part V reaches the conclusion on the basis of the analysis of the above to explainthe theory and gets a summary.