Research On The System Of Shareholder's Derivative Lawsuit

Shareholder's Derivative Lawsuit is a legal proceeding taken by the shareholders in the name of themselves for the benefit of the company against the infringement when the just rights are infringed by the superior officials as big shareholders, directors or managers while the company refuses or is reluctant to take the legal proceeding.Different from common lawsuits in the civil actions, shareholder's derivative lawsuit has its unique features. Shareholder's derivative lawsuit has dual characters of subrogation action and representative action. The real defendant is those in or out of the company who infringed the interests of the company, but not the company itself. The ownership of the jurisdiction result may be very complicated. If the shareholders win, the benefits from the jurisdiction will belong to the company instead of the plaintiff shareholders who only can share the benefits with other shareholders equally. If lose, the plaintiff will not only pay the procedure fees but cannot take the legal proceeding for the same reason for the sake of the judicial effect to the company and other shareholders. Shareholder's derivative lawsuit can protect the interests of the company, also may be abused by the shareholders and lawyers to obtain benefits. Therefore, every country set many requirements and restrictions to ensure its positive role.It is still a controversial question in the law theory circles whether the nature of the proceeding right of shareholder's derivative lawsuit is public welfare right or self-welfare right. The author holds that the reason of shareholders to start a legal proceeding is not the shareholder itself as the part of the company but the company as a whole, and the result of winning is to obtain or avoid the lost of the interest of the company. So the proceeding right that the plaintiff shareholders exercise is not for the interest of themselves, and should be the public welfare right.The system of shareholder's derivative lawsuit developed with the enhancement of the protection for the rights of minority shareholders. The social problem of the shareholder's rights failing to be fully protected and relieved is more and more serious when the power center shifts from the shareholders conference to the board of directors and the administrative stratum. How to avoid the directors and superiors of the company abusing their power to infringe the just rights and interests of the company and minority shareholders, and seek the balance among different parties of interests has been the common research topic in the Corporation Law of every country in the world. The functions of the shareholder's derivative lawsuit perform in two ways: first, beforehand restraint function, to prevent or restrain the illegal actions of the people in the company; second, afterward relief function, to help protect interests of the company and minority shareholders.Shareholder's derivative lawsuit originated from the Balance Act of the Britain, and first was used as a protection measure for the minority shareholders'rights in the Balance Act. This system was not well developed in Britain but in America. Since 1817, after the development of almost 200 years, shareholder's derivative lawsuit in America has formed complete rules in the substantive law and procedural law. Influenced by the countries as Britain and America, Japan revised the Act of Business, and gave detailed stipulation to the system of shareholder's derivative lawsuit. Taiwan Authority of our country also stipulated this system in the Corporation Law by drawing lessons from the related systems of America and Japan.The legislation of the system of shareholder's derivative lawsuit in our country started rather late. Our corporation law strictly follows the principle of corporation personality independence, and the company obtains its independent personality different from the shareholders once it is set legally. The proceeding right which belongs to the company can only be exercised by the company. Therefore, there were no stipulations to the shareholder's derivative lawsuit in former Corporation Law, and it was only involved in one letter in reply of Fajing(1994)No.269 on Nov.14, 1994, which indicated that the plaintiff shareholder must be from a Chinese-foreign joint venture, and the applied range was rather narrow, the content was very simple as well. And many questions concerning the shareholder's derivative lawsuit were not involved in the letter. It was that there were no clear stipulations to this system in the law caused the phenomenon of the big shareholder, directors of the board and superiors of the company infringing the interests of the company and minority shareholders. Owing to lack of legal basis, the court couldn't protect the interests of the middle and minor shareholders as a whole. It was gratifying that Article No.152 in the new Corporation Law enacted on Jan.1, 2006 sets the system of shareholder's derivative lawsuit finally, and conditionally entrust the proceeding right to the shareholders.As an important system in the new Corporation Law, the system of shareholder's derivative lawsuit is beneficial to the protection to the interests of middle and minor shareholders and the restriction to the superiors of the company though it still has some shortcomings. The main problems of it are the vacancy of the proceeding status of other shareholders, the vague of the extension of the Emergency in the beforehand procedure, and the incompleteness of the sharing of proceeding fees. In order to not only encourage the shareholders to exercise their proceeding rights, but also avoid the evil abusing of power of shareholders, we should establish relevant measures. Firstly, enhancing the stimulating mechanism of shareholder's derivative lawsuit including clarifying the derivative proceeding to be the non-property proceeding, and entrusting the winner the right of request for proceeding fees compensation, and entrusting the plaintiff shareholders who wins the proceeding the right of direct benefiting from the compensation on special circumstances. Secondly, completing the restriction mechanism of the proceeding including setting the guaranteeing system of proceeding fees, limiting the disciplinary rights of plaintiff shareholders, clarifying the compensation responsibilities of the losing proceeding shareholders with evil intentions.