Study On Shareholder Derivative Litigation In China's Practice

Shareholder derivative litigations are lawsuits brought by corporate shareholders on behalf of the corporation, suing to enforce the corporation's claim, not her own personal claim. However, in certain instances, especially in claims against corporate management, the corporation is unlikely to act on its own. Since it is generally understood that derivative litigation is a final measure to maintain sound corporate governance and protect shareholders'rights, the introduction of derivative suit is good to be adopted by China's legislator. Shareholder derivative litigation system can be a double-edged sword, if used properly, can serve to protect rights and interests of small shareholders, improve the effectiveness of corporate governance structures; but if used improperly, it will jeopardize the interests of the corporate. In this article, the author tries to explore the right balance to ensure that both shareholder incentives and effective safeguards are in place.