Study On Judicial Remedy For The Interest Of Minority Shareholders

In the practice of corporate law in China, especially in the history of joint stockcorporate development, it is common that the majority shareholders take theiradvantage of being a majority to prejudice the minorities. To some extent, this has hada bad effect on the development of companies in China. Therefore, to protect andremedy the minorities appropriately who are prejudiced has become one of the urgentproblems in the construction of the Chinese legal system.In the current Chinese laws, regulations and regulatory documents, many rights havebeen granted to the minorities and some remedies have been provided for them, buteffective minority shareholder remedies are still in a great lack. The latest amendedCorporate Law which will become effective soon has introduced many systems andregulations protecting the interests of the minority shareholders, however, most of theregulations are in principle, in lack of feasibilities and in need of further improvementand concretion.Among all remedial methods for the interests of minority shareholders, the mosteffective one should be judicial remedy. Through judicial remedy and with theenforcing power of judicial organs, the unbalanced interest will be repaired to theoriginal balanced situation. In the countries where corporate institution is developed,judicial remedy for the shareholders' rights is one of the most important requirements.It has become one of the important systems to give litigation right to shareholdersespecially shareholders in minority. However, the judicial remedy in China forshareholders in minority group is complete enough and it has become an urgent needin China's corporate practice to further perfect the judicial remedy for minorityshareholders in China.In contrast to the situations of Chinese minorities, their counterparts in theAnglo-America legal system are enjoying a much better minority remedies for theirfree choices. In UK, as a general rule, minority shareholders can not bring an action against thedamage to or internal irregularities in the corporation as a shareholder. This has beenknown as "Foss v. Harbottle" rule. But through years of corporate practice, it is animportant trend in modem corporate law that modem countries, on the basis ofrecognition of Foss v. Harbottle, consistently strengthen the protection of the interestof shareholders in minority group, either by substantial laws or by procedural laws. Inorder to ensure the realization of interest of shareholders in minority group, countriesnot only establish different kinds of protection in substantial laws and provideshareholder direct litigation right but also create derivative actions in judicial practicewith the purpose of providing an effective way of remedy to shareholders in minoritywhose interest has been damaged. Meanwhile, countries have all established judicialmechanism of withdrawal of stock, providing a final remedy and safeguard forshareholders in minority.At present, in order to change situations of incomplete remedial institution forminority shareholders' interest in Chinese legal system, we shall complete thesafeguard system for the protection of minority shareholders' interests by enactingperfect, detailed and operable rules and supplementary regulations on the basis of newCorporate Law. On one hand, we shall perfect relevant provisions in corporate law onsubstantial rights of shareholders, especially those minority shareholders, so thatminority shareholders' substantial rights are well founded in law, content of whichshall include improving interrogatory right, accumulated voting right andshareholders' voting rights exclusion mechanism as well as establishing representativevoting, written voting systems and regulations of majority shareholders' good faith.On the other hand, we shall refer to developed countries' legislation, complete judicialremedies for minority shareholders and provide minority shareholders a variety oflitigious rights so that their substantial rights could be well protected. The contentshall include perfecting derivative action institution, shareholders' personal action anddefective decision in shareholders' meeting litigation as well as considering theadoption of class action while judging on torts in stock market. Meanwhile, we shalluse for reference some mechanisms in foreign legal systems and establish them inChinese legal system taking judicial mechanism of withdrawal of stock as an example.