Shareholder Representative Litigation System Litigation Practice In Research

In the case of corporate interests having been jeopardized and the company being reluctant to exercise their rights or refusing to, that shareholders have a right to prosecute on behalf of the company will play a great positive role in safeguarding the interests of minority shareholders and creditors. In 2005, the revised Company Law firstly introduced such Shareholder Representative Action (SRA) system. This paper mainly takes a practical example based on reality of our country to do some specialized research concerning the practice of the SRA system in our country.In addition to the introduction and the conclusion, the dissertation includes other four parts:INTRODUCTION introduced a case of Zhongqi Future Company which was concerning SRA, and then made a brief overview of the concept of SRA and its characteristics, and its development and eventual establishment in our country. At last it made a brief analysis of the provisions about SRA in the revised Company Law, and suggested that the provisions of the Company Law are far more general, and do not have strong enough operability, and then they will encounter many problems in judicial practice, such as pre-suit requirements of SRA, the litigant structure, the allocation of the litigation risks and benefits, and sponsor for litigation costs, and so on.The first part focused on the pre-suit requirements of SRA. and through the case of Zhongqi Future Company, the author analyzed the pre-suit requirements in our country and gave suggestions concerning the following, how to prevent speculative litigation and abuse of right to appeal, meanwhile not to affect shareholder's enthusiasm to appeal. Therefore it needs to respect the legal personality of the company to greatest possibility. Firstly we should seek remedy in the company, so that all related parties would save money, and the company can avoid the impact to normal operations. The second part mainly elaborated the related parties in SRA, including who should be plaintiffs, the scope of defendants, the company's legal status, as well as other shareholders' legal status. And some other things like both protecting the equal right to appeal of plaintiffs and defendants at the same time, and earnestly safeguarding the legitimate rights of the company and other parties in a lawsuit. We believe that companies in SRA should be a third person who have no independent right to request, and we should also allow other shareholders to participate in the proceedings, and, even if the other shareholders do not participate in the proceedings, should also have the right to know the progress of litigation.The third part analyzed the allocation of the litigation risks and benefits in SRA. In this paper, the author believed that if in favour of the plaintiff, the defendant should pay damages to the company; otherwise, the plaintiff bears the burden of the cost of litigation. Firstly, in order to encourage shareholders to launch lawsuits of SRA, our country should adopt the method that the losing party bears the reasonable burden of the cost of litigation. Secondly, if the plaintiff won a case, infringement shareholders and directors could not enjoy benefits. Even if unsuccessful, as long as the plaintiff was well-intentioned, the statutory costs of litigation and other reasonable legal costs should be paid by the company. If the plaintiff was malicious or had misconduct in the action, the plaintiff should bear all the above costs.PartⅣbriefly analyzed the significance of the sponsor system of litigation costs in SRA. As a restraint mechanism for malicious actions, the system did not play well in practice. China's "Company Law" does not provide this system. The author believed that it was still necessary to introduce this system. The system to a certain extent, could prevent SRA from malicious abuse, thereby protect the interest of the company and other shareholders.