Research On The Oppression Of Shareholders In Close Corporation In America

American traditional corporations can be cataloged into publicly held corporations and close corporations. Close corporations can be defined as having:⑴a small number of shareholders;⑵no ready market for the corporate stock;⑶substantial majority shareholder participation in the management, direction and operations of the corporation. Close corporations are very important in American economy. Every state corporate law in America is designed on the base point of raising capital publicly and large-scale enterprises. The number of special rules for close corporations is only small and the same rules are applied to both kinds of corporations. The particular matters concerning close corporations, such as oppression matters, are governed mostly by the case law.Controlling shareholders often take advantage of their dominant position to oppress the minority ones. The causes lie in two aspects: one, also the most important one, is the intention of controlling shareholders and the other is that there are objective factors helping controlling shareholders achieve oppression. These factors are⑴the lack of exit rights,⑵the norm of majority rule,⑶the absence of advance planning,⑷the deference of the business judgment rule. The existence of all of these factors in the same business context makes it inevitable for the minority shareholders to be oppressed by the controlling ones.There are four criterions judging oppression applied by the state courts: the first is the pure controlling shareholders perspective, the second is the pure minority shareholders perspective, the third is the modified perspective, and the last one is entire fairness criterion. The pure controlling shareholders perspective of oppression concerns itself solely with the propriety of the controlling'conduct, and it can be divided as wrong conducts criterion and fiduciary duty criterion. The pure minority shareholders perspective's concern is the absolute protection of the minority's reasonable expectations. The modified perspective concerns both the propriety of the controlling'conduct and the protection of the minority's reasonable expectations, and it can be divided into modified controlling shareholders perspective and modified minority shareholders perspective according to different emphasis. The entire fairness criterion is the criterion in American corporate law, which is applied by the court to determine whether the controlling shareholders'conduct amount to oppression or not. The criterions above have their advantages and shortcomings, but the modified minority shareholders perspective is more suitable to protect the profit of small shareholders by contrast and applied by most state courts. The entire fairness criterion better coordinate the relationship between autonomy and the protection of the profit of minority shareholders and it can be used as reference.The protection for the minority shareholders in American corporate law consists of the defense before oppression and the remedy after oppression. The defense is carried by the shareholders themselves through writing some rules stipulating the power distribution or avenues to resolving the disputes into the bylaws. The corporate law admits the rules effect so far as they don't break the compelling stipulation. The remedy has a developing course. The traditional remedy was to provide compensation to the minority for past economic injuries combined with injunctive relief to help guarantee fairness in the future. In recent years, courts have developed some alternative remedies including arbitration, dissolution, buyout and other ways to relieve the oppressed shareholders. The buyout remedy is used most widely. When the shares are buyout, the court often has to determine the fair value and it usually refuses to accept any discount to the shares. It is proper to take the date when the minority shareholder was squeeze out the management as the valuation date.The limited liability company in China is similar to the close corporation in America, and the former minority shareholders face the same danger as to that the latter ones face. So they need enough protection too. Our corporate law emphasizes the shareholders autonomy, allows them to protect themselves through their own arrangement. But because of the limitation of rationalization, the nature for money of merchant and the peculiarity of lacking credit in our present society, the defense through autonomy cannot provide full protection for the minority shareholders. Our corporate law doesn't offer a recapitulative standard to judge oppression, but provides the buyout remedy for a single oppressed situation, so in this context it is very difficult to protect the profit of the oppressed shareholders. It is a proper way to establish the modified minority shareholders perspective criterion to judge whether the controlling one's conduct amounts to oppression, and give the oppressed ones relief of buyout or dissolution.