The Regulatory Constraint For Investment With Dormant Stock Right

Investment behavior with dormant stock right is an objective existence in the profit oriented economic life. The development of marked-based economy system has provided chances for investment behavior with dormant stock right and results in a large number of shareholders both dormant and explicit. Dissensions will appear easily between dormant shareholders and explicit shareholder when they are facing profits and risks in business, because dormant invest behavior has avoided the requirement for pronunciamentos in corporation law. It is notable that there is a large group of employees who hold the share of their company after the strypped-down of.state-owned enterprises, and they appear to be "dormant" to the third party. Thereby, it is necessary to discuss how to protect the rights and interests of the dormant shareholders under these special backgrounds. There are no clear regulations related to the standard for the cognizance of shareholders' qualification as well as the distribution of the rights and obligations of dormant and explicit shareholders in the current legislation of China. This situation leads to different criterions used by courts at all levels when they are facing such cases.This study tries to demonstrate the rationality and practical significance to recognize the investment behavior with dormant stock right from theoretics and analysis of specific cases. Through the discussions on legal nexus of share trust, this article tries to define the allocation of right and obligations of dormant and explicit shareholders, and to establish the reference pattern for dormant investigation. Apart form introduction, the main contents of this article are arranged as follows:The first part mainly focuses on the validity of investment behavior with dormant stock right, the definition of the connotation and denotation of investment behavior with dormant stock right, and to analyze the dissensions of dormant share investment. This article believes that although there are no clear regulations to investment behavior with dormant stock right in China, these investments are not forbidden. Secondly, the investment behavior with dormant stock right discussed in this article is within the extension of company with limited liability. The dormant shareholders under this behavior refers to the artificial persons, natural persons, or other organizations whose identities of shareholders are not shown in contributive proof, beadroll of shareholders, articles of corporation, and industrial and commercial registration.The second part of this article mainly concentrates on the feasibility of the establishment of legal nexus of dormant investment in the ways of trust. This article deem that the cognizance of shareholders'qualification should be based on "True Meaning Doctrine", which means the dormant shareholders who have took on the obligations of shareholders should be endowed with shareholders' qualification. In the legal nexus of share trust, the trustees are under high obligations to be in good faith, the shares which are trusted are independent, and this share trust relationship is relatively stable. These characteristics made it superior in system to establish dormant share investment legal nexus based on trust relationship.The third part of this study focuses on the unique superiority of managing the affairs of employees holding shares by share trust. The problems of employees holding shares are inevitable during the process of deepening state system restructuring and changing the mode of management of state-owned enterprises. However, the regulation of legal status of employees sharing stocks is still vacant. The trust legal nexus has its unique superiority to solve these problems. Under the mode of trust share to manage employees holding shares, the motivation effect of employees shares could be brought into play.The fourth part of this article mainly analyzes the rights and obligations of every party under the mechanism of share right trust. This article believes that using trust legal nexus to systemize dormant share investment is feasible and ascendant. The establishment of this system relies on the unambiguous allocation of every party's rights and obligations. It is believed that the key points are the analyze of obligations of assignees and the rights of clients according to the trust law and corporation law of China. The main rights of clients including right to learn the truth and the rights to adjust manage methods, the rights to relieve and choose assignees, the rights to dissent the enforcement of share rights, etc. The main obligations including to be faithful and cautious, manage separately and in person, register and keep secrets, and defray the profits of trust, etc.