The Shareholder's Derivative Action

The shareholder's derivative action is asserted by a shareholder on the corporation's behalf against the third party (usually a corporate officer) when the corporation's failure to take some actions against the third party and the corporation's interests are damaged by the third party. Not only plays the shareholder's derivative action system an active role in the protection of the corporation's interests and rights, but also helps it to improve corporate governance standards and improve the mechanism of corporate governance. However, the internal and external corporate governance is a mutual offset system, it can be divided into internal corporate governance mechanisms and external governance mechanisms. The shareholder derivative action is an external adjustment mechanism of corporate governance. When internal governance mechanisms run difficultly, timely judicial intervention will help it to improve corporate governance and shareholder rights. Thus, the derivative action becomes not only an important right of the minority shareholders, but also an important system in the modern company law. The shareholder's derivative action system which is regarded as a great advance in our legislation has been established in our new Company Law and Securities Law, However, the specific provisions of the shareholder's derivative action remain to be improved. In this paper, the author studies the shareholder's derivative action in the angle of the corporate governance, describes outside values of shareholder derivative litigation in corporate governance, analyses Shareholder derivative litigation, describes the internal governance structure of supervision and control functions,and analyses the values of derivative litigation. At the end of the paper, In the analysis and comments of our Shareholders Derivative Litigation judicial practice and legislation on the basis of the situation, the author points out that we should learn from the advanced legislation foreign countries to perfect the shareholder's derivative action system in our country.This paper is divided into four chapters as follows:The first chapter is the basic theory of shareholder derivative litigation. This chapter introduces the concept of shareholder derivative litigation, and then analyses shareholder derivative action source flow, finally, discusses the function of the company's shareholder derivative litigation. Shareholder derivative action is form Foss rules and its exceptions in the United Kingdom. It interpreted the positive and negative aspects of the system characteristics of the Derivative Action. It can be considered as the source of shareholder derivative litigation. Shareholder derivative litigation system has gone through the process from scratch. Judges have to always maintain a cautious attitude and be close to its limiting harshly when the judicial power through the shareholder derivative litigation intervenes the internal corporate governance.However,judges soften the standpoint of the rules later through cases. Thus, the Shareholder derivative litigation system has got great development and has been widely accepted by everyone. It can be said that these are the inseparable needs of corporate governance, and these are inevitable choices to raise the level of corporate governance and improve the corporate governance mechanism.The second chapter is the value orientation of shareholder derivative litigation. Justice and equality is the fundamental values of shareholder derivative litigation structure. Justice is the primary value of social system. Establishing the derivative litigation bases on the objective facts that strength disparities exit in the majority shareholder and minority shareholders, and provide special protection for minority shareholders who is on the weak position. So it is in favor of achieving equality and justice and pursuiting the ultimate goal. From the perspective of company law, it is an inherent requirement of the principle of shareholder equality that stressing the right of minority shareholders Litigation System, which achieves protecting the rights of minority shareholders. It is the basic value of the pursuit of derivative litigation that protecting the legitimate interests of the company and minority shareholders. It is the ultimate value of the shareholders to pursue derivative litigation that improving corporate governance and improving the operating efficiency, increasing social wealth.The third chapter is the designs of shareholder derivative litigation system. From the perspective of corporate governance mechanisms, external governance is a means to achieving self-government and the purpose of the company. Therefore, this chapter which is from the angles of the parties, pre-procedure, security systems and incentives discusses four aspects of derivative litigation. It focus on the legitimacy of corporate governance procedures, and assists companies to achieve the ultimate self-government. First of all, the plaintiff, defendant, and companies in the derivative action among the parties must set out. They are also important participants in corporate governance. Therefore, legislation should give full play to their role in corporate governance as the guiding ideology of self-government, to regulate them. Secondly, doing all pre-procedure is the principle of internal remedies. This paper analyses the significance of this system and introduces the national legislation. Finally, from the angle of the shareholder derivative action. this paper described the value of derivative litigation cases and legislative functions.Chapter IV is consummated on shareholder derivative action in China's system. This chapter introduces the derivative lawsuit system in China. Secondly, the paper analyses the main problems of the lawsuit system. Finally, the paper combines the legislation of foreign shareholders derivative and lawsuit system and gives constructive suggestions to China's. and strengthen corporate governance.So,it is in favor of promoting comprehensive economic and social development. Although China's new Company Law has stipulated this system, this system has much room to be perfected due to the lack of maneuverability. Because of the obscurity of action jurisdiction, derivative litigation is lack of the dismissed system. The U.S. legislation draw on the experiences to build the special system of litigation committee, the principle of commercial judgments, the Court's standard of review. It is important that shareholder derivative action can improve our system, and enhance the level of corporate governance.Finally, it is the summaries of these chapters. At the present, judicial intervention in corporate governance has become cautious expansion of the potential, and shareholder lawsuit provisions have played a positive role in promoting corporate governance. The purpose of the establishment of shareholder derivative litigation is that through the shareholder derivative litigation protecting the interests of the company, and ensuring the company's normal business. This is also the purpose of corporate governance concerned. Shareholder derivative litigation as a governance mechanism outside the company, especially, the value of corporate governance is self-evident. The paper hopes that the system can strengthen our corporate governance, and play a more active role in promoting economic development in China.