Interests Of The Company Derivative Litigation In The Balance

For historic reasons, the corporate legislation of China is still far from maturity; and has been proved to have a lot of problems in practice. One of the biggest problems is the lack of terms for the protection of minority shareholders. Derivative action, as an important measure for minority shareholder protection, has not yet been embodied by our Corporation Law.This essay endeavors to elaborate the feasibility of derivative action, from the point of view that the interests of different parties in a corporation should be balanced. Also the essay will explore the features of the special suit on the basis of comparison between rules and norms of other major countries so to propose legislative suggestions of our own.Berivative action is a special action brought by legally qualified shareholders who, as plantiff of the suit, sue on behalf of the corportation, against any infringement on the corporate rights and interests, when the corporation as a whole refuses or is reluctant to adopt measures against those who might be liable.The first chapter is to study the history of derivatives action reeds that it is a result of conflict between the interests of directors and that of minority shareholders, so the balance of which has alwaysbeen the core throughout its development. Chapter 11 is to expoundthe feasibility of derivative suit by illustrating major reasons that cause damages to minority shareholders, in duding the controversybetween the corporate instinct of seeking profits and its social responsibities, the rule of "capital decides " that produces controlling shareholders and possible abuse of rights, and etc. These reasons are also the jurisprudential jurisprudential basis for establishing the derivative suit system. It is from the third chapter that the structure of a derivative action is discussed, this chapter deals emphatically with the procedural characteristics of derivative action, such as qualifications of plaintiff share holders, scope of defendants, security for expenses, reimbursement of plaintiffs expenses and indemnification of defendants. According to the author, all these are by-products of interest conflicts between the two parties. It is impossible for judges to go through a procedure without making substantive judgments, so the final chapter a way of doing it, that is to apply Business Judgment rule in derivative action . In this chapter, the author first introduces the conditions for a director to take his obligations, then by systematically elaborating the business judgment rule, the author points out that the rule itself is also a result of the conflicts as mentioned above, and finally, the author makes a brief introduction of the application of Business Judgment Rule in a derivative action.In summary, the author systematically expounds derivative action upon the equity of corporate interests, and presents specific suggestions for its application in China. The author believes that the establishment (foundation) of derivative action in our coporate law will effectively help to protect minority shareholders' rights, and will contribute a lot & the perfection of corporate administrative structure.