The Analysis Of Shareholders' Derivative Right To Disgorge Insider's Short-swing Profits

The System of Disgorging Insiders'Short-swing Profits is defined that the publicly held corporation's director,manager and the shareholder owning more than 10 percent of any security, who make the security transaction within any six-month period, should return the profits earned from the security transaction to the issuer of the security. As a special illegal conduct, short-swing trading is very harmful to the society, so the System of Disgorging Insiders'Short-swing Profits is provided in the Security Law by every country and area to prevent the insiders'short-swing trading. This system can not only deter the insiders'short-swing trading efficiently but also maintain the investors'reliance on the securities business and ensure the securities business'fairness and justice. Along with this system established in the American legislation , other countries and areas all provide it in the Security Law. We also provide this system in the law and it strengthens the insiders'duty to exercise due care, which makes up the limitations of short-swing trading system.The right to disgorge insiders'short-swing profits belongs to the directors or supervisors at first. While they refuse to execute this right, the shareholders are entitled to disgorge insiders'short-swing profits in themselves'names in order to protect the interests of corporation and its shareholders in many countries and areas. The Security Law carried out in January 1st, 2006 first stipulates the shareholders'rights to disgorge short-swing profits in the legal condition to make up the weak points of our legal system. The system of shareholders'derivative right to disgorge short-swing profits established in the Security Law is a big advancement in the legislation of china, which is very significant in theories and practices. It not only protects the interests of little shareholders and strengthens the passion and confidence of most investors, but also make up the deficiency in the bylaw of our publicly held corporation and insures the healthy development of the organizations.Because the civil law and corporate law both doesn't provide the system of shareholders'derivative suit, we shall confronted many legal problems while shareholders execute the right of disgorging short-swing profits. If this legal problems doesn't be analyzed and researched further, they will influence the exertion of this right. This text first introduces the basic theory of the system of disgorging short-swing profits, then analyzes the establishment of the system of shareholders'derivative right to disgorge short-swing profits. Finally, the legal matters which shall be faced in the exertion of shareholders'derivative right are researched on emphases. Such as the subject,precondition,the security for litigation fee and so on in the lawsuit. Upon the basis of comparison on different countries'legislation and the practice and environment in china, the text gives some legal suggestions to the exertion of shareholders'derivative right in order to make the system of disgorging short-swing profits more effective in china.