Non-litigation Relief To Corporation Deadlock

In the environment of Market Economy, the corporation has been the most active member due to its limited liability, promoting the world rapidly. However, because of the flaw of legal system, the diversification of the interest of shareholders, the corporation often gets into the deadlock in the process of operating. Then, any agreement cannot be reached between shareholders or directors. In order to save and keep the company, to protect the shareholders and to conserve social and judicial resources, the paper is trying to relieve the deadlock in way of non-litigation.The paper firstly starts with the concept of the corporation deadlock, so as to suit the remedy to the case. The author thinks that, the deadlock is caused by contradictions and frictions among shareholders, directors and other management staff because of various interests, resulting in the power sector cannot create an effective resolution, and then the business affairs are paralyzed. Thereafter the paper analyzes the reasons for company deadlock. The reason not only involves governance structures, but also involves company itself. But the diversity and pluralism of interests are the fundamental reason.The second part of the paper demonstrates the need of non-litigation relief. The judicial relief for the deadlock seems frail: firstly, the subject of the right is limited. It is available for only one-tenth shareholders who have the voting rights to initiate the judicial proceedings to dissolve the company, when any other methods are worthless to relieve the deadlock. But there is no approach for other shareholders holding less than one-tenth voting rights to litigate the deadlock. Secondly, the model of relief is relatively simple. According to the Commercial Law revised in 2005, only article 183 offers the only way to relieve the deadlock: judicial dissolution.The third part of the paper demonstrates the feasibility of non-litigation remedies. Generally speaking, non-litigation has flexible ways, easy for parties to accept, effective to resolve the conflict and may keep the company by the greatest extent. Except that, it may meet the diversified interests. In practical terms, the non-litigation has a profound social and cultural foundation in our country, usually providing such ways as consultation, mediation and arbitration to quell conflicts including the company deadlock.The fourth part of the paper proposes four kinds of specific methods about non-litigation. The first one is the pre-emptive constitution. As the maximum programmer, the constitution can have some provisions for the deadlock beforehand, for example, the way to deal, the structure to administrate. The second method is mediation. The reason for civil mediation is that it has a unique practical nature under the influence of Confucian culture in our country. Influenced by the doctrine of the mean, subjects of interests will respond and make some compromises and concessions. However, the mediation has its own limitation for deadlock. It cannot fundamentally eliminate the causes of the company impasse. The third method is to transfer the shares. According to the Commercial Law, it is nearly free for the shareholders to transfer the shares, except some simple procedural constraints. The final method is arbitration. As the most important non-litigation method, arbitration can relieve the deadlock quickly, secretly and professionally. Arbitration Act, Enacted in 1994, is the legal basis for this method.The last part of the paper is about the alternation between non-litigation and litigation. It will not totally deny the non-litigation method above, but to solve the deadlock issue completely. The two methods have their own advantages and disadvantages. After all non-litigation methods are exhausted, judicial proceeding could be considered, because the dispute should be calmed down by an effective way .Hope the paper could provide some useful reference for the company deadlock.