The Company Judicial Dissolution System

Company Judicial dissolution is an important modern company law on the rights of a shareholder relieves system, which shows the interference and intervention of judicial power on company dissolution. This system was first established in the case law of United Kingdom and the United States of America and then confirmed by other countries, such as Germany, France and Japan. This system enjoys a 150-year history and has become an indispensable part of protection system of shareholder rights. The 183rd Item of the Chinese new Company Law revised in 2005 states: more than 10% shareholders who enjoy the right to vote for important and crucial issues of company could request the people's court to dissolve the company in the case of that management of the company confronts a serious handicap; further investment would result in serious losses of shareholders' interests; this circumstance couldn't be solved in other means. This article marked the establishment of company judicial dissolution system in China. The establishment of such a system drives the people's court out of predicament of no rules to follow when dealing with such cases as to dissolve the company, which reflects the protection of Company Law on shareholders in the deadlock of company. However, this article is general, simple, obviously principled and not applicable, which brought to the judicial practice a certain degree of confusion and difficulties. Therefore, it is necessary to carry out a systematic research on judicial dissolution system of the company and then consummate it with a hope to a better serve to our judicial practice.The article through case study, document analysis, comparative reference, historical studies focuses on relative issues of judicial dissolution system of the company. This article starts from basic theories of judicial dissolution system of company, then launch out a discussion on the deficiencies of Chinese judicial dissolution system with combination of analogical cases abroad and finally put forward suggestions for bettering this system. In addition to introduction and conclusion, the main content of the article is divided into four sections.In the chapter of Introduction, the article, through a few typical cases, cuts into the confusion which the article 183 of the Chinese "Company Law" leads the judicial practice to; and then points out the emergence of research on bettering this system. Furthermore, this chapter gives a brief introduction to current study and narrates methodology and the scope of this article.In the first chapter of this article, it is about elementary theories about this system. Firstly it is an introduction to the concept and characteristics of company judicial dissolution: judicial dissolution is one of types of company mandatory dissolution, which is triggered by request of the entitled, realized by sentence of court and takes company into liquidation proceedings. Secondly it is an analysis of value, function and deficiencies of this system: this system is a make-up to disadvantages of company system and a protection of minor shareholders; this system could facilitate main shareholders to fulfill duty of loyalty and balance interest distribution among them; this system could maintain social economical order; at the same time, this system is of deficiencies of high operative cost and inequitable risk when improperly operated. Finally, the last but the most important, it is a discussion on its theoretical base of law: justice and equality is its philosophical base; have right to have necessarily relieve is its Civil Laws base; limited autonomy of company and moderate intervention of state is its Economic Laws base; rights to expectation and coexistence of shareholders is its Company Laws base. Through what this chapter has narrated, we get a general but profound understanding to this system, which makes a theoretical preparation for later discussion.The second chapter is a review to foreign company judicial dissolution system. The chapter reviews in detail the legislation and practice of this system in UK, USA, Germany, Japan, France, Korea, Chinese Taiwan, Hong Kong and other major countries in the world, and then makes an analysis with the hope for a comprehensive and applicable reference to bettering Chinese system.The third chapter is a discussion on Chinese company judicial dissolution. It is firstly a brief introduction to historical background of legislation of Chinese company dissolution system, then a theoretical comprehension to the 183rd items of Revised Chinese Company Law, finally an important analysis on deficiencies of this item on company judicial dissolution which includes reasons to judicial dissolution-too principled and narrowed-down; procedures-too general and rough; preconditions-uncertain and ambiguous; quality of litigant-too broad; relieving means-too single and simple. What have done above figures out clearly what should be done in the bettering of Chinese company judicial dissolution.The fourth chapter is bettering suggestions for Chinese company judicial dissolution. It marks that there are something more to be perfected in the bettering of Chinese company judicial dissolution. Requests should be enlarged and detailed, such as misuse of authority of main shareholders, misuse and waste of company capital, disobey to purpose or public interest of company, serious breach of faith, in addition to company deadlock. It should be wholly restricted the subject qualification of defender shareholder and confirmed company as defendant of judicial dissolution. The principle of exhaustive internal relieves should be considered as a precondition procedure of shareholder prosecution in order to keep away from vicious and abusive prosecution; at the same time, court should take intercession first among relative parties as sentencing principle in sentencing phase. Domestic courts should take in diversified replacing judicial relieving means such as mandatory stock purchase expert company dissolution in order to keep away from negative effect of this system. Furthermore, this chapter suggests that pre-prosecution assurance and compensation mechanism should be set up to keep away from vicious and abusive prosecution. In addition, local court in the location of company should be confirmed as dominant court according to regulations of Supreme Court on bankruptcy. As to the applicable types of company, this article marks that there is no need to follow what Americans did to confine in the field of Limited Liability Company. At last, the article discusses the issue of liquidation after judicial dissolution with a suggestion: it should be clearly confirmed that court is entitled to hold liquidation procedure.The chapter of conclusion summarized countermeasures towards bettering domestic judicial dissolution system of company as followed: specific and professional explanation should be done in short term while Company Law should be revised in long term; meanwhile, Accurate legal precedent system may be set up in the field of Company Law for the need to make up deficiencies of statute law, which would accelerate the fulfillment and practice of Company Law in China.