On Shareholder Derivative Action

As provided in the Article 152 of the newly-amended Company Law of PRC, where a company was infringed upon by any director, supervisor or senior manager, the shareholder, on behalf of a company, has the right to file directly a derivative action with the people'court in the name of himself/herself under the specific circumstance.Although the company law entitles a shareholder to bring a derivative action (also called representative action), no relevant procedure provided in the civil procedure law of PRC can be used to protect and implement the said right to derivative action effectively.In effect, the system of settlement of dispute of derivative action which can be used effectively has not established in China. lacking of the effective procedure on settlement of dispute would be encumber the implementing and enforcement of the said shareholder's right, the protection of the interest of the minority shareholder(s) , and the implementing of the supervision by the shareholder on the director and senior manager, and the effective governance of company and development of market economy in China.With the study method of comparison, this paper goes through the analyses and unscrambling of the key content with respect to the derivative action, and provides available information and proposal on amendment to the relevant law or system. The paper also probes into the issues on the realizing of governance of the corporation and improvement of the measures of the legal remedy of protection of the minority shareholder in order that the derivative action can be used to resolve the contradiction between the shareholder and manager, senior officer and harmonize the conflicts between the judicial review and self-government of company.This article consists of three chapters:Chapterâ… is the introduction to shareholder derivative action. This chapter introduces the derivative action including that the definition, origin, nature, attributes of derivative action and conducts a comparison between the derivative action and the relevant concepts, and concludes its function.Chapterâ…¡concerns exploration on shareholder derivative action system in foreign laws, including the parties of derivative action, internal remedy procedure, exhausted internal remedy principle and exempt of internal remedy procedure, the specific procedure issues arising from the process of the trial of derivative action, jurisdiction, cause of action, security-for-expenses statute, settlement and withdrawal, and the judgment etc.Chapterâ…¢relates to the status of legislation and comments of the law of China, the suggestion of the improvement of the system of derivative action of China, including the establishment of the principle, the improvement of internal remedy procedure, the status of company in derivative action, the role of the plaintiff shareholder's lawyer.