On The Legal Protection Of The Rights And Interests Of Minority Shareholders Of Limited Liability Company

The rights of minority shareholders in closed-held corporations are infringed by majority shareholders in every aspect. There are few regulations about acts of majority shareholders in Company Act of PRC. How to regulate acts of majority shareholders and protect the rights of minority shareholders are the main purposes of this article.Protections of rights of minority shareholders in closed-held corporations are very important and necessary. Majority shareholders have the power to determine who will serve on the board of directors and therefore they have complete control over management decisions. Any right that minority shareholders have to participate in decision-making is at the sufferance of the majority. Therefore, majority shareholders have broad powers to the minority and give minority shareholders no assurance of the rights to participate in decision-making, or to withdraw from the enterprise at will. Rights of minority shareholders are overlooked by majority.Regulations of minority shareholders protections in Company Act of PRC are not being perfected. In order to treat shareholders of corporations fairly and to make closed-held corporations more profitable and long-lasting, the author suggest five aspects to make Company Act of PRC more complete. First, set up fiduciary duties of shareholders in closed held corporations. It was generally accepted that shareholders in general did owe duties to other shareholders that is substantially the same as the duty partners in a partnership owe to each other. Fiduciary duties of shareholders in closed held corporations can be classified to prudence duties and loyalty duties. How to make majority shareholders responsible to the minority is the key of Company Act of PRC. Second, provisions in shareholders' information rights must be completed. Information between majority and minorityshareholders is not balanced in closed held corporations. The right of knowing management in company is very important to shareholders especially to minority shareholders. The right of knowing managing information consists of rights of checking financial reports of company rights of checking book and rights of inquiring. How to perform this kind of rights is important and it can be achieved by procedural provisions. Third, exclusive voting is a very important regulation because other rights can become true if voting rights can be substantially achieved. If majority shareholders abuse the rights of voting in general meeting and infringe other shareholders' rights, other shareholders have power to exclusive their rights of voting. Provisions in company law should complete the subjects of this rights and how to exercise this rights. Forth, complete derivative action. A derivative action is an action brought by one or more shareholders to remedy or prevent a wrong to the corporation. Shareholders sue in a representative capacity on a cause of action that belongs to the corporation but which for some reason the corporation is unwilling to pursue. How to align parties in a derivative suit is of importance. Defenses in the suit and judicial effect of the suit are to be resolved in company law. Last, if affairs of company are involved in deadlock, and there are no other alternative ways to solve problems, shareholders have the rights to claim to the court to wind up the company.By the above resolutions, shareholders can prohibit one from infringing on controlling shareholders. If condition permitted, we can draft Limited Liability Company Act of PRC to make companies in our country more profitable and competitive.