On Shareholder's Double Derivative Suit Legal System Research

When a holding company makes its subsidiary company operate a non arm'length transaction or disadvantageous business, hollowing out the subsidiary company's assets, the minority shareholders and creditors of the subsidiary company may file a derivative suit against the holding company, the representative director of the holding company, and other subsidiary companies who benefit from the loss of the subsidiary company according to Article 152 Company Act. Since the holding company holds majority shares of the subsidiary company, all shareholders of the holding company should bear all damage ultimately. However, compared with minority shareholders of the subsidiary company, there are not efficient methods in our present laws for minority shareholders of the holding company to obtain remedy. Obviously their rights and interests are neglected. Referring to American case law, when corruption and scandals occur in affiliated companies, not only the minority shareholders of the subsidiary company and the holding company can file a derivative suit, and the minority shareholders of the holding company also can file a double derivative suit for the subsidiary company's interests and participate in monitoring the company actively. Based on the point of view of comparative law, there seems to be some space to improve and revise the regulations for the rights of minor shareholders of the holding company in our current Company Law.A double derivative suit is still one part of a derivative suit, and is a system to allow minority shareholders of the holding company to file a derivative suit for the subsidiary's interests. The character similar to a single derivative suit shall be referred to general regulations of a derivative suit. Although the system of a derivative suit of our current law has been amended repeatedly, there are many restrictions in the percentage and time limits of shares, guarantee in advance, procedure fees and defeated compensation because the law prevents minority shareholders to file such suits regularly, which cause this little effect of current derivative suits system. The value of introducing a double derivative suit would vanish if we don't improve and amend it thoroughly. In addition, the proper parties of a derivative suit are only board directors and supervisors of the holding company in present Company Act. If the stipulation still not be amended, the scope of a double derivative would be limited either. The third parties of the company shall be the objective party of a double derivative suit as well as other representative directors and holding shareholders of the company, and then we can realize the true meaning of a double derivative suit.Unquestionably, there are still unclear parts of basic theories of a double derivative suit to be figured out. In order to intensify the function of compensations of affiliated enterprises and prevent illegal conducts, double derivative suits should be introduced immediately. Therefore, this thesis will try to provide some regulation proposals of double derivative suit, to improve our corporate law and to strengthen the civil compensation system.