Legal Regulation Of Shareholders' Derivative Suit

Shareholders'Derivative Suit is the action that one or a few shareholders take representing the company asking for the one who damages the company's interest to compensate, when the company delays or rejects to do. Shareholders'Derivative Suit originates from common law. It's be established and improved by setting up exceptions for the"Foss V. Harbottle Rule". In the practice of modern companies, the board of directors masters the company gradually. The board of shareholders which makes important decides is controlled by the majority shareholders. Minority shareholders can't prevent the actions that the majority shareholders take because they can't make the most restriction. Actually, the board of directors and the majority shareholders are the same, so they can damage the company's interest simplely and ensure it's safe. The most restriction in their hands decides that they have controlled the company totally. The minority shareholders can't do anything to stop them through the normal procedure of the company. The most important value of Shareholders'Derivative Suit is that it can protect the interest of minority shareholders effectively. The shareholder who accords with certain demands can sue representing the company to protect the interest of the company and themselves.The influence of Shareholders'Derivative Suit extends fast after it is be established. It's not only be common law system absorbed, but also be civil law system adopted. It has become an important rule of modern company law. Through this rule, minority shareholders can protect their interest by lawsuit. In the other hand, this rule has majority risk, because it goes against the general legal doctrines. It's possible that someone uses it to seek improper interest. In this situation, Shareholders'Derivative Suit can't prove effective. On the contrary, it will impede the operation of the company. The key is a balance between encouraging proper suit and holding back strike suit. It's just the most important problem that this thesis reseaches. There are four sections in this thesis. The first section introduces the concept and the value of Shareholders'Derivative Suit. The second section discusses the purpose of Shareholders'Derivative Suit and introduces the legislations of Shareholders'Derivative Suit in other countries. These legislations include the requirements to sue, the positions of all subjects in the suit, how to attend to the interest when the plaintiff wins and how to take the blame when the plaintiff fails. This section relates to a series of problems about Shareholders'Derivative Suit in order to make suggestions for the legislations in our country. The third section begins with one case and then compares the legislations of the ord and new company law in our country, to affirm the accomplishment of the new company law in Shareholders'Derivative Suit. In the last section, the writer makes suggestions about how to perfect the legislations of Shareholders'Derivative Suit in our country.