Judicial Relief For "Frozen-out" Shareholders Of Close Corporation In America And Reference

Shareholder disputes present one of the most prevalent and destructive problems encountered by the privately-owned business. Shareholder conflicts appear to be universal. Minority shareholder allegations against the majority reverberate in courtrooms throughout the world. Indeed, conflicts among shareholders continue to pose among the most difficult challenges to businesses, and in turn, to business law.A closely held corporation in America is a business organization similar to a Limited Liability Company in China. Because of the particularities of a closely held corporation, the minority shareholders are often"frozen out"by the majority shareholders and their expectations are frustrated during the operation. In order to protecting the minority shareholders from "frozen-out", the courts of states in America have developed special approaches and effective remedies through legal precedents, through which reaching a balance between the controlling shareholders'policy-making power in the operation and the protection of the non-controlling shareholders. It has very great reference meanings in protecting the minority shareholders in a Limited Liability Company in our country.Except the introduction and conclusion, the article includes four parts.Part I analyzes the common characteristics of a closely held corporation in America and a Limited Liability Company in China.Part II presents the dilemmas of the "frozen-out" minority shareholders in a closely held corporation in America and in a Limited Liability Company in China. Then analyzes the properties and the causes of "freeze-out". Minority shareholders in a corporation with a public market for its stock can "vote with their feet" if they feel themselves oppressed or otherwise mistreated by those in control. By contrast, the non-controlling shareholder in a closely held corporation usually has no ready buyer other than the controlling shareholder - and sometimes even that is not an option.Part III discusses the produce and evolution of three different approaches for "freeze-out" in America that is direct definition approach, shareholder's fiduciary duty approach and reasonable expectations approach. This part also compares the advantages and deficiencies of these three approaches. In addition, taking the company law of Oregon as an example, this part discusses in detail the judicialremedies, especially the buy-out remedy which is the most common and reasonable one, for "frozen-out" minority shareholders in America. In America, when a serious and irreconcilable dispute occurs between the minority and majority shareholders, the most common legal remedy sought by the minority shareholder is a court order of buy-out.Part IV analyzes the deficiencies of the Company Law on protecting the "frozen-out" minority shareholders of a Limited Liability Company in our country and brings out constructive suggestions on how to reference the American approaches and remedies and improve the Company Law of China.