Study On The System Of Shareholders Representative Action

Shareholders also known as shareholder derivative lawsuit which means when the interests of the company are torted by others but the company's corporate authority refuse or not willing to exercising litigation right ,in order to safeguard the interests of the company, the shareholders in the name of the company sue for compensation. Although the system development from the equitable cases of Britan and Amercan, it is now widely used in Two Legal system countries.The practice of the On behalf of the shareholder litigation arising in the differant countries shows that the system can do good efect to safeguard thecompanys interests and the rights of shareholders, can strengthen the oversee on the company's directors and other senior managers when they are operate the company and ensure the healthy operation of the company.On behalf of the shareholder litigation system is the necessary means which can realize the civil rights of shareholders, make up the deficiencies of the corporate governance structure, as well as the shortage of other methods. At the same time, the system is also conducive to the protection of the rights and interests of their own company and protect the busness part of the company, maintening the normal trading.The amended " company Law of the People's Republic" (hereinafter referred to as the new "Company Law") was passed at the 10th National People's Congress Standing Committee 18th meeting, in October 27, 2005 and in January 1, 2006 it come into force.The new "Company Law" clearly absorbs the system shows that the shareholders rights and interests are expanded of our country ,also it means research on behalf of the shareholder litigation has reached a certain height, which will provide a solid legal basis and theoretical basis in practice for litigation on behalf of shareholder .The establishment of On behalf of the shareholder litigation system in the new company law will play an important role on impoveing the corporate governance mechanism and protecting the companyand small and medium-sized shareholders intersstas well as promoting the development of China's market economy.However, the deficiencies of China's new company law relating to shareholder litigation should be further improved. We need to establish specific implementation details to further improve the "Company Law" legislation so that we can protect small shareholders and the interests of the company better.Also ,this article will reserch on the practical problems that brought about with the new company law setted the legal rights and interests of the shareholders. In this paper, the text is divided into four parts:The first part provides an overview of the the definition, characteristics and the nature of the shareholeders litigation .Also, with the historical and logical approach, the author tyr to find the Origin of the system.On behalf of the shareholders representative action,also is known as shareholder derivative lawsuits, derivative litigation, subrogation litigation,has both subrogation litigation and legal representative of the characteristics. The nature of the litigation on behalf of the shareholders representative action,is the main shareholder lawsuit filed on the right to bring litigation. The shareholders representative action is a kind of common use, instead of the right of the right of self benefit,it is from the common law judicial practice. After the establishment of this system in common law, France allowed shareholders to exercise the right to bring litigation on the right to bring litigation in 1893,then it is established by the company law of Germany, Japan and China Taiwan region.The second part analysis the jurispudence of the legal right of appealing of the lawsuit on behalf of the shareholders. From the two sides of substantive and procedural laws, this paper intrduces the representative point of the scholars at home and abroad and pay a brief assessment of them.Generally,there are three theories on the Substantive legal basis of the shareholders representative action,they are shareholders of the right theory, creditor rights theory and the rights of the beneficiaries of the trust theory.Furthermore, there are also three theories on the basis of procedural law,they're traditional theory of the parties, generalized theory of the parties and litigation theory of play.By the way of comparision,the third part mainly dicusses on the developped and the typical litigants system of foreign country , (including plaintiff, the defendant may appeal the scope of the act, the company's position in litigation, the other shareholder litigation in the position, and so on), pre-litigation procedure ,the cost of the security system of checking and balanceing, the plaintiff wins the case, the plaintiff loses, reconciliation, and withdrawing the proceedings, the attribution of the outcome of the proceedings and other procedures carried out,and at last,the author gives a brief analysis.The shareholders representative action has different characteristics in the legislation of the two legal sytem. For China,we should learn from the successful experiences of foreign legislation in order to make this system give full play to its rationality.In this part, the United States and Japan will be mainly represented, with a view to contribution to Chinese legislation by comparing.The fourth part discusses the applyment of the on behalf of the shareholder litigation in our judicial system. Firstly, the paper introduces the development history of the on behalf of the shareholder litigation in China ,then followed by analysising the meaning of the systeym established in our counrys companys law, thirdly, pointing the omission related to the shareholder litigation out again, finally, the author give his own Views on how to futher improve the lawsuit system on behalf of the shareholders.The Commercial law system is established very late in China,we legislated company law in 1993. Furthermore,there're no improvement in both 1999's amendment and 2004's amendment. Based on current situation, China's legislature have made improvements.In the new company law purposed on January 1, 2006, the shareholders representative action is introduced, undoubtedly, it's a landmark significance of Chinese legislative process. The shareholders representative action can effectively expand the scope of the rights of shareholders and methods,so it is a real entity to protect the rights of a shareholder the right to the procedure. At the same time, the shareholders representative action could check the acts of the controlling shareholder, the directors and the senior management to harm the interests of company and small and medium-sized shareholders by privileges. Furthermore, the shareholders representative action can promote fair play in market,it also can provide a sound legal environment to Law-abiding person,and this is helpful to the reasonable enthusiasm for the competition.In one word, the shareholders representative action Provides a reliable legal basis to the research andpractice on behalf of the shareholder litigation.There're also many questions in the new company law: Firstly, the eligibility restrictions on plaintiff shareholders is reasonable enough.Secondly,there're not regulations about the punishment to combined offends by directors(Board of directors) and dupervisors(Board of dupervisors).Thirdly, fiduciary duty isn't ordered in new company law, meanwhile, the shareholders representative cannot prosecute for the Abuses of power. Finally,there're not enough regulations about company and other shareholder litigation in the position, legal costs of security, incentives, ownership of the outcome of the proceedings, jurisdiction of the Court, limitation and burden of proof in the new law.Consequently, there is a long way before Chenese company law, we must do some necessary complements in thejudicial interpretation.