The Study Of The Corporate Deadlock And Remedies

This article focuses on the legal issue of the corporate deadlock. The corporate deadlock is a kind of situation which appears frequently in corporate operation practice. It is reflected by the phenomena that the shareholders or directors with equal right or power come into conflict and can't compromise, then the meeting of shareholders or directors can't be held or any resolution can't be made, and finally the governance and management of the corporate get paralyzed. The corporate deadlock may results in the stagnation of normal operation, loss of corporate assets, serious damage of shareholder's rights, and even a lot of social problems.As to the corporate deadlock, other countries have studied for many years and accumulated a wealth of theoretical results and practical experience. However, China's concern about the issue just starts with the research and practice in this area being lagging far behind. For a long time, how to deal with the corporate deadlock is a gap in legislation. With the acceleration of the process of building China's socialist market economy, the deadlock appears more frequently in our corporate and the problem has gradually become the focus of whole society. For this reason, the current Company Law implemented on January 1, 2006 reflects the concern about the corporate deadlock and makes the provisions of judicial dissolution in Section 183. Although judicial power can interfere in the corporate deadlock, the Company Law fails to establish a complete set of corporate deadlock remedies system, and scarcity of relief measures and imperfections of procedures and mechanisms are still a problem in the judicial practice.The article starts with a real corporate deadlock case, to study the corporate deadlock and remedies, to describe the connotation of corporate deadlock, to discuss the application of Section 183 in judicial practice and to analyze the decision of this case under the existing legal framework, then to point out the problems of corporate deadlock remedies mechanisms in our country, meanwhile, on the study of legislation system and judicial practice of common law countries and civil law countries, and with the relevant company law theory, to propose how to improve judicial dissolution under current legal environment in our country. On this basis, in order to effectively solve the problem of corporate deadlock, through the analysis and comparison of alternative remedies in foreign countries, the author advises that our country shall establish the buyout system, strengthen arbitration and mediation, and encourage prevention through the articles of association, so as to form a complete and effective remedies system. The article consists of four parts:Part One: The facts and judgment of the case. This part introduces a real judicial dissolution case about corporation deadlock, summarizes the main facts and the different decisions of district court and appellate court, to give rise to the issue of corporate deadlock and remedies.Part Two: The legal perspective of corporate deadlock. It is divided into two issues. The first is the connotation of the corporate deadlock, systematically expounding the concept, characteristics, classification, causes and dangers of corporate deadlock. The second is the corporate deadlock remedies mechanisms in our country, which discusses the legislative background of the judicial dissolution, the current situation of corporate deadlock remedies mechanisms, as well as the existing problems of corporate deadlock remedies mechanisms in China, to reflect the necessity of the establishment of corporate deadlock remedies system.Part Three: The judicial dissolution mechanism of corporate deadlock. Firstly the author expounds the theory to deal with the corporate deadlock in foreign countries and points out that the judicial dissolution mechanism is in accordance with legal principles, then enumerates the judicial dissolution mechanism in common law countries and civil law countries and analyzes the judicial dissolution mechanism, and last puts forward how to improve the judicial dissolution mechanism in China and gives amendment advice on aspects of subjects, identification, application, liquidation, preservation of property and evidence, malicious litigation. Part Four: The establishment and improvement of corporate deadlock remedies system in China. Even improved, the judicial dissolution mechanism still has limitations on application and can't completely solve the corporate deadlock problem, and we need to introduce other remedies. The alternative remedies to resolve the corporate deadlock problem in foreign countries mainly include buyout,temporary receivers or custodians, temporary directors, the right to direct judicial governance, corporate separation, arbitration and prevention by articles, etc. On the basis of discussion and comparison on the pros and cons of the function and application of each remedy, which provides a reference for the establishment of corporate deadlock remedies system, the author proposes to establish buyout mechanism, to enhance the autonomy function of arbitration and mediation, and to encourage prevention through the articles of association, combined with the judicial dissolution mechanism, eventually to form the diversified organic corporate deadlock remedies system.