Research On Protecting The Interests Of Minority Shareholder In The Dependent Company Of A Business Group

Along with the further development and evolution of market economy and institutions of enterprises, and for a better adaptation to the requirement of socialized production and economies of scale, developing more group enterprises is becoming an inevitable trend.The controlling company in the business group often takes advantage of its control over the dependent companies to direct them to engage in the business against its own benefit. Under such circumstance, the controlling company does not assume any liabilities other than its investment loss, according to the traditional shareholder limited liability doctrine, which makes it difficult for the dependent company and its minority shareholders who have a lower hand to protect their interests. Therefore, it is an inevitable problem for the law systems to establish the liability of the controlling company and protection of the dependent company and its minority shareholders.Agent cost of share decentralization comes from managers and all shareholders; however, in companies with comparative centralization or high centralization of shareholders, it is a serious phenomenon that majority shareholders seriously harm the interests of minority stockholders. Without the control of laws or relevant systems, it is inevitable that the majority shareholders will maximize their private benefit in every possible way. Through theory of company ownership structure and game theory of non-cooperation and efficiency constant, the article analyzes the system of benefit conflicts between controlling shareholders and minority stockholders. The solution to this problem is to build a consummate mechanism of corporate governance.Problems concerning the protection of minority shareholders in business group can be discussed from two aspects. On one hand, when the controlling relationship first comes into being, minority shareholders' rights of knowing and voting should be protected. Since the formation of controlling relationship and business group may fundamentally change an enterprise's management, business direction and profit status, which can be regarded as vital decisions for an enterprise, the board of directors can not make decisions alone, instead, minority shareholders should also enjoy the rights of knowing and deciding. It is necessary to make those points clear in our present laws. Actually, provisions on shareholders' rights of knowing, voting and questioning in the Corporation Laws has provided preventive protections for minority shareholders when business group first comes into being. On the other hand, how to regulate connected transactions among business groups and protect legal rights of the minority shareholders of the dependent companies is also a problem. This paper attempts to put forward strategies of regulating related transactions through defining this concept and analyzing its causes and types.Preventive measures and regulations towards related transactions alone can not solve the problem that the benefits of minority shareholders are being damaged. Only through finding out the causes of illegal related transactions and solving the regulation problem of those business groups behind the related transactions can we effectively protect the benefits of the dependent companies and the minority shareholders. After an analysis of the flaws existing in the present listed companies' regulations on how to protect minority shareholders, this paper points out that the following six aspects should be paid special attention to: establishing shareholder protection systems from the perspective of business group' s regulation including emphasizing the transparency of ownership structure and pushing shares of listed companies into full circulation steadily; establishing systems allowing minority shareholders to restrict and balance majority shareholders' power; developing shareholders' lawsuit system; speeding up the development of board system; strengthening the supervising function of the board of supervisors; enhancing management' s legal precautions towards business group' s related transactions; developing the information-revealing system of the listed companies; founding independent and efficient legal system concerning securities and developing legal remedy system and implementation system.