Shareholder Derivative Litigation

Derivative action is such kind of legal institution when the directors, supervisors or senior managers do something infringed the legal interest of corporation, or the interest is infringed by outsiders, but the corporate refuse to or keep a slack hank in investigating the duty of these actors, the shareholders whose qualification are entitled by law could raise a lawsuit in the name of themselves, and the interest will belong to corporation directly. Derivative action plays an important role in strengthening the supervision, improving the administrative organization, safeguarding the interest of corporation and protecting the interest of shareholders especially the medium and small shareholders. Corporation law in other countries design the institution from tow aspects: encouraging mechanism which encourage shareholders in litigation and hard controlling mechanism which prevent abusive litigation. There is no clear clause in our new Corporation Law about how to guard shareholder's right and protect it from being abused, which is urgently need to make clear in judicial practice. We could consider about establishing a kind of encouraging mechanism of litigation to mobilize the supervision to shareholder's action. There should be a platform which is convenient for the shareholders communicating with each other on the need of those shareholders as plaintiff who want to possess rational shares. Corporation should take part in a litigation as an independent prosecutor. By setting up an informing system other shareholders could be ensured have the right to know the facts of a case and take part in it. It should be made clear that what kind of courts has the jurisdiction over derivative action. In the question of litigation costs, derivative action should not be classified as property case, remedy to litigation cost could be introduced, the duty on composition should be limited if the plaintiff lost. And so on. In order to get rid of abusive or malicious litigation, there should be strictly judicial controlling on assurance institution about litigation cost and the right to reconciliation and canceling litigation if a plaintiff raised it.