Analysis On The Improvement Of Legal System For The Rights And Interests Protection Of Dormant Shareholders In State-Owned Companies

State-owned enterprises are the backbone of China's national economy, among which the vast majorities are the small and medium enterprises. Therefore, the reform of state-owned small and medium enterprises has great significance to the establishment of a socialist market economy, as well as the consolidation of socialist system. The state-owned enterprises play an important role to the development of socialist productive forces and achievement of national industrialization and modernization. The reform of state-owned enterprise is the central link in China's economic structural transformation process. Property rights reform of state-owned enterprises, including the property rights reform to small and medium enterprises, began in 1978. The purpose is to solve the problem "single property rights structure", which has become the bottleneck to the further development of those enterprises. During the 30 years reform, many attempts have been taken into practice, such as reducing tax burden and giving more benefits to enterprises, replacing profit delivery with tax payment, contract management, lease management, shareholding co-operative system. Lately the corporate system was introduced into China, and was considered as a recipe to China's State-owned enterprises reform. Practice has proved that the corporate system was the best choice of the state-owned enterprise property rights reform, and many state-owned small and medium sized enterprises choose to transform into limited liability Company as the way of restructure. After reform, the new established state-owned limited liability company changed the old single-property rights structure, and adopted a variety of ways to absorb social capital to invest the company, including transfer of the workers'compensation into the share of the new company under the premise of a voluntary. In this way, workers in the company have a multi-role, not only as laborers to obtain payment for labor, but also as investors to obtain the company's return on assets. The workers' enthusiasms for production have been fully mobilized. Both the theoretical analysis and practical experience show that employee stock ownership system is an effective way to solve the problem of dormant shareholders in the state-owned SMEs (small and medium size enterprises).However, since the imperfection of relevant laws and policies on the issue of employee stock ownership, government policies regarding the state-owned enterprise reform has conflicts with the, especially on the provisions defining the number of stockholders of a limited liability company, which results in serious damage to the legitimate rights and interests of workers who hold the shares.For the reasons above, with comprehensive use of legal theory, especially the theory of "Company Law" in the economic law, following the principles of Marx's dialectical materialism and historical materialism, using the research method of combining theory, history and reality, adhering to the logic coherence of theory and history, the integration of theory and practice, the combination of "part and whole", "macro-and micro", the thoughts of research in this paper is to have a deep research of the dormant shareholders resulted from the employee stock ownership in the state-owned limited liability company, to propose the new vision for the reform of employee stock ownership system of the state-owned limited liability company in the wish of providing some help to solve the problems in this reform.The body is divided into three chapters. The basic structure of the paper is as follows:Chapter I:The definition analysis of dormant shareholders in State-owned Company. This chapter analyzes the definition and characters of dormant shareholder in China. By comparing the two different types of shareholders, in which one is formed in the market condition and the other is formed after the transformation of state-owned enterprises, we explain their similarities and differences in nature and character, and pave the way for the following analysis for the rights and interests protection of dormant shareholders during the transformation of state-owned enterprise.Chapter II:The analysis of legal issue to the rights and interests protection of dormant shareholders in the state-owned company. Through the above analysis, this chapter indicates that the roots, which cause the problem of dormant shareholders in the State-owned company, is the imperfection of supporting laws and regulations, the chaos of existing holding means. We analyze the hysteresis in legislation erection and the irrationality in the current laws, regarding the protection of dormant shareholders in the process of the State-owned enterprise reform. I introduce the main means of shareholding adopted in the reform, and analyze their pros and cons focusing on the angle of protection of the workers who hold the shares, providing some ideas for the direction of reform in the future. In the implementation of State-owned enterprises, as of the legitimate rights and interests of workers can not be well protected, the enthusiasms of workers also has been stricken. Therefore, the improvement of relevant legislations and selection of better ways of shareholding have become urgent.Chapter III:The improvement of legal system regarding rights and interests protection of the dormant shareholders in the State-owned Company. Firstly with my consideration on the legislation erection of the dormant shareholders'protection, I put forward proposals for the improvement. Secondly I highlight the Employee Stock Ownership Trust (ESOT) as a solution for the workers to hold the shares. I introduce the development of history of the ESOT, as well as the situation of ESOT in and abroad, explain the advantages in the hope that with combination of the actual condition in China, the information can help to improve the employee shareholding system in the reform. Finally, with the continue of China's economic reform, the reform of state-owned enterprises and transform for the role of the workers have completed basically. The problem of dormant shareholders in those enterprises becomes much more prominent. Both of improving the legal construction and establishing the ESOT are good measures to solve this problem.