Shareholders Derivative Action Research

The Shareholders'Derivative Action,originated from British and American Common Law system, refers to the litigation surrogate practice of protecting the shareholders'interest, in case of the relevant company's refusal or default in conducting prosecution against the inflicter.This system serves as an effective compensation for the legal person's personality and the principle of capital majority representation in the management of a company, thus, in most of the market economy countries and areas, becoming a substantial policy of promoting management level and protecting minority shareholders. The New Company Law, promulgated by China in 2005, formally introduced the Shareholders'Derivative Action System into our legal practice in the hope of providing judicial guarantee for the medium and small investors. Since the official establishment of the system, major foci and main concerns are directed to framework design and thus there exist flaws and setbacks in many aspects, especially operational difficulties in specific judicial practices.With the application of commonly used research methods, such as history study, comparison, regulation analysis, etc, this paper explores into the nature, basis, value and concrete framework of the Shareholders'Derivative Action System. This paper aims at revealing the disadvantages of the system since its introduction into China, offering operational advice during its localization endeavor and thus facilitating the market economy process.The paper falls into four chapters.Chapter One is an overall introduction of the Shareholders'Derivative Action System. It covers history, concept, nature, value, features and basis of the system. There is also a comparative study of the Shareholders'Derivative Action and relevant systems.Chapter Two delves into substantive issues in the Shareholders'Derivative Action System. This chapter falls into two sections. In Section One, there are discussions concerning the legal relations in the system such as the qualifications of the plaintiff, the scope of the defendant, the status of the company and the shareholders, and the object of the system. Section Two is a research into the rights and responsibilities of the plaintiff and defendant such as the litigation expenses compensates claim right, sharing of benefits in winning the lawsuit and also assuming of responsibilities if losing the case.Chapter Three is about the procedural issues of the system. Through a comparative study with the legislations in Britain, America, Japan, Korea, and Taiwan, the author tries to present a comprehensive analysis of the usual procedural practices, namely, security for expense in derivative action , pre-suit requirement, jurisdiction, reconciliation, withdrawal, dismissal, Res Judicata, limitation of action and burden of proof.Chapter Four, besides the prospects and significance of the system, is an analysis of the localization problems. The author also proposes suggestions compensating the flaws and setbacks mentioned in Chapter Two and Chapter Three.All in all, the Shareholders'Derivative Action System is still at its budding phase in China and we should endeavor to consummate this system in our legal practice, by drawing extensively from others'experiences, in the interest of the minority shareholders.