The Restraint Mechanism Of Shareholder Derivative Action In China

In the 2005 revision of the "Company Law", we introduced shareholder derivative action system to protect the interests of minority shareholders. However it is very simple, the provisions about the shareholder derivative action did not make a clear, including how to constraint to the plaintiff shareholders adequate to sue, how to prevent to the plaintiff shareholders abuse of the right. In practice it may appear to be inadequate or be abused. Also because of the shortcomings of the system, sometimes for self-interest or be induced, shareholders can not properly use the system to settle disputes, so it appears the shareholder derivative litigation deviate the purpose of it, thus the problem must be timely solution. Restraint mechanism of shareholder derivative action is the best way to reject to inadequate to sue or to abuse of the right. Restraint mechanism is not an absolute limit shareholder derivative litigation, but in order to balance the conflict of interest of between the company and shareholders, majority shareholders and minority shareholders. In order to better play to the advantages of shareholder derivative litigation, should be set more stringent conditions to prevent speculative litigation or malicious litigation. To play better against conflict of interest and the protection of the interests of minority shareholders, restraint mechanism established and perfected is an important significance.This article,as the background of "Company Law" and combined with the foreign advanced legislative experience, in the legal view and under the company's autonomy constraint the plaintiff to shareholder derivative action, introduce how to establish the restraint mechanism of the Derivative Action in China.The first part, introduce the shareholder derivative action. Understanding the historical development of derivative litigation and the meaning of the system, you can recognize the role of establishment of shareholder derivative action; even so recognize the significance of restraint mechanism.The second part, analysis the necessity of the establishment of restraint mechanism. The provision about shareholder derivative action are protect the interest of minority shareholders, though it should not expansion of the right of minority shareholders, but should balance the conflicts of the right, Under certain conditions to adequate to play the monitor right of minority shareholders, that is the purpose of the shareholder derivative litigation.The third part, from two aspects introduces the shareholder derivative action. one part, combined with foreign advanced legislation, discusses restraint mechanism of shareholder derivative action constraint on the plaintiff shareholders, and to explore how it can be improved in China. Firstly, the qualifications of the plaintiff shareholders, the research conclude the three eligibility criteria for prosecution:plaintiff is shareholder of related-company; the plaintiffs motivation to be good; the plaintiff will fairly and adequately representatives of corporate interests. Secondly, by ruling a clear vested interests of shareholders to restraint the right of plaintiff, clearly the responsibility of the lost-plaintiffs, and limiting the plaintiff settlement, withdrawal, prevent shareholders by lawyer inducement to speculative litigation or proceedings or collusion, or with the defendant malicious collusion settlement, withdrawal damage the company's interests. Finally, perfect the cost of litigation security system to require the litigation; prior to provide excessive cost for the processing of the litigation, plaintiffs will be adequate to sue.The other part, mainly introduce the perspective of the company to explore how to constraint shareholder derivative litigation within the company filed. The right of Company's shareholders is to appeal the restriction, there are two main ways:First of all, the pre-program, which bound the shareholders before the litigation, effective complaints to the abuse action or inadequate action. Secondly, Business Judgment Rule protects directors and other senior managements, giving the company the right to terminate the proceedings. Business Judgment Rule is mainly a manifestation of the company autonomy, the company that the directors and other senior managements meet the Business Judgment Rule, the company could request the court to terminate the proceedings, the court review by different standards based on the different causes of action, make the decision whether to allow plaintiffs to sue. Its purpose is to strengthen the right of the company.