Judicial Remedies For Shareholder Rights In Chinese Company Law

Protecting shareholder rights sufficiently is very important to realize the interests of shareholders, consummate corporate governance system and enhance the development of company system. Any right without remedy is not a right. Judicial remedies are indispensable to protect shareholder rights. Direct action and derivative action are two judicial remedies to protect shareholder rights in Chinese company law. This thesis wishes to enhance the development of theory of company law, related legislations and judicial practice by discussing some issues of judicial remedies of shareholder rights. After all, law is a highly practical subject to adjust different legal relations.The first part of this thesis describes direct action. When shareholders'rights are damaged by others or cannot be realized by themselves, they may file lawsuits relying on related provisions of Chinese company law and civil procedural law. Who are defendants of direct actions have different situations. It may adapt to the multiplicity of defendants that the article 153 of the Company Law 2005 doesn't stipulate the subjects of the defendants. The liability upon the director or senior manager to the company inducing from the their misbehaviors which make the company be the defendant in direct action and assume the liability to the plaintiff shareholder, and the liability upon the company to the shareholder, shall be adjudicated by court in the same judicial proceeding, namely the direct action, because the two kinds of liabilities emerge from the same factual foundation. This thesis designs a makeshift on the basis of nowadays'legislative foundation and a solution in the long run by consummating the system of the third party without independent right to petition in order to solve this problem.This thesis represents three examples of direct actions. Preemptive rights may protect the shareholders'interests of proportionality, to prevent the dilution of the proportional interests of shareholders in the company. In order to protect the preemptive right, shareholder may bring lawsuit which claims to revoke or declare null and void the resolution of the shareholder meeting, to ask the court to order the shareholder meeting to make a resolution again, or to affirm preemptive rights. The remedy of petitioning the dissolution of the company is useful to solve conflicts between shareholders, but it should be the remedy of the last resort, because it may damage the producing and operating organizations, business relations and social employment. Appraisal rights may solve conflicts between majority shareholders who want to reform the company and dissenting minority shareholders, and be helpful to be against the oppression upon the minority shareholders by the majority shareholders and the abuse of the majority rule. The company law should expand the scope of appraisal rights to make full use of positive effect of appraisal rights.The second part describes derivative action. The Company Law 2005, which provides derivative action for the first time, perfects the system of protecting the interests of companies and shareholders, is useful to consummate the system of corporate governance, and makes a great progress in the development of the Chinese company law. The qualification of the qualified plaintiff shareholder in derivative action is suspectable to be much too strict in some respects. The scope of defendants of derivative action is extensive. Through the discussion of some related procedures of derivative action in the USA, it may be noticed that legislative and judicial rules after the beginning of derivative action in our country are deficient and should be provided and concreted, and the independent operation of companies and managerial power should be granted more respect, in order to guarantee the corporate efficiency. The thesis holds that the managers of the company should be granted the opportunity to provide to court the proof proving that the decision of waiving litigation rights of the company is reasonable, and the recommendation to dismiss the derivative action, and the court should scrutinize the proof and reasonability of the recommendation. When the court recognizes the proof and the reasonability of the recommendation, it should dismiss the derivative action. The litigation expense of the plaintiff shareholder in derivative action should be reduced and be allowed to be compensated by the company, as would be in favor of clearing the obstacles to file a derivative action and of playing the role of derivative action to protect the interests of shareholders and companies and to consummate the system of corporate governance.