Balance Of Interests In The Application Of Derivative Action

Derivation action is that when a company's legal interests have been violated by the others especially its major shareholders, directors, supervisors, managers and other controllers but the company cannot file a law suit, for the company's interests shareholders who match the standards can file a law suit in the name of the corporation. For historical reasons this system are pretty important in corporation law development history. Since Chinese corporation law has a relative short history there is no derivation action in it for a long period. It isn't established formally in legislation until the corporation law modified in 2005. This plays an important and optimistic role in protecting minority shareholders'interests, eliminating the investors'risk, strengthening the shareholders'supervision to company governance and consummating company's internal governance structure. However, the promulgation about deviation action in corporation law isn't specific, so it is difficult in practicing. Based on balancing different parties'profits in derivation action, this thesis studies the specific rights and duties of the different parties especially the plaintiffs in derivation action and what the court should do in the specific litigations. Then it gives some suggestions to Chinese derivation action practice. The thesis divided into four parts:The first part introduces the fundamental definition of derivation action and its difference from shareholder direct action and its development in China.The second part talks about the balance of the contradict parties in derivation practicing. Firstly derivation action considers the balance between the company owner, especially the minority shareholders and the managers; secondly in system designation it shows the balance between legal litigation encouragement and malicious litigation limitation; lastly derivation action reasonably solves the problem of the contradiction between company internal governance and external judicial intervention.The third part starts from the actual practice and discusses the rights and duties of litigation parties in action. Since the plaintiff's position in derivation action is special this part focuses on the plaintiff's rights and duties in the action. The rights of the plaintiff in derivation action include: the right to file litigation, the indirect right to share interests; the limited right to settlement, the right to claim compensation in winning the lawsuit. The duties of the plaintiff include: the mainly burden of proof, the plaintiff shareholders pays the fees in the first place, the duty to provide litigation security and the duty to take compensation responsibility when lose the case.The forth part simply analyzes the role which the court should play and the specific duties the court should have in derivation operation. In derivation action the court's duties include: distribute the burden of proof fairly and reasonably, duty of noticing, protecting the company's interests according to the law and avoid shareholders abusing the litigation right.Lastly the thesis gives some advices and suggestions to Chinese derivation litigation from substantial and procedural: clarify the duty of care of the company's managers and directors and make clear their rights, clarify the specific standard of litigation security to make the court judges in the same level, distinguish the plaintiff's subjective tendency, if the plaintiff was in bad faith he should indemnify the company,if the plaintiff was in good faith the compensation would be appropriate.