On The System Of Shareholders' Appraisal Right In China

Shareholder's right to withdraw stock equity is also referred to be appraisal right or dissenting shareholder's appraisal right. It means when the shareholders'meeting of a liability limited company or the shareholders'general meeting of a company limited by shares made resolution in connection with certain affairs, the shareholder who voted against or dissented with such resolution is entitled to demand the company repurchasing his stock equity or shares at a fair and reasonable price.The system of shareholder's appraisal right surmounted the Three Capital Principle, the nature of juridical association, and the independence of company's assets in traditional company law theory, which made it possible for minor shareholders to retreat from the company, without affecting the existence of the company, through exercising their appraisal right.As a system popularizing the culture of stock equity, shareholder's appraisal right was widely accepted in European and American company systems. To insure the safety of social exchange and protect the rights and interests of minor shareholders, the system of shareholder's appraisal right was accepted in our current Company Law as well.In accordance with our current Company Law, the statutory situations under which the shareholder of a liability limited company can exercise their appraisal right are as follows: (1) the company consecutively does not distribute profits to shareholders, however the company has consecutively been profitable, and has conformed to the conditions for distributing profits stipulated by this Law; (2) the company mergers, divides, or assigns its main properties; (3) the term of business stipulated by the articles of association expires, or other reasons for the company to dissolute occurs, but the meeting of shareholders meeting passed a resolution of amending the articles of association to make the company go on existing. The statutory situation under which the shareholder of a company limited by shares can exercise their appraisal right is that when the company's shareholders'general meeting resolved to merger or divide, the shareholder dissented with such resolution and demanded the company repurchasing his share in the company. Such stipulation made the system of shareholder's appraisal right in liability limited company differ from that in company limited by shares. In addition, it is evadable by major shareholders in practice. Apart from that, although the system of shareholder's appraisal right is applicable in foreign invested companies, the feasibility for shareholders thereof to exercise their appraisal rights is not as strong as it should be on account of the discrepancy between the Company Law and relevant laws for foreign invested enterprises.In order to make such system protect minor shareholders'rights and interests adequately, its feasibility shall be strengthened. In addition, exceptional situations under which minor shareholders can not exercise their appraisal rights shall be stipulated, the litigation system for appraisal right cases shall be perfected, the system of appraisal rights for the two kinds of companies shall be equalized, and relevant laws for foreign invested enterprises shall be integrated.