Limited Liability Company Shareholders To Exit Mechanism

Due to the close characteristics and the personal nature of a limited liability company and the lack of equity floating and transaction market, it is very difficult for middle & small shareholders to withdraw from the company. It is very necessary to found the withdrawing mechanism, by which the middle& small shareholders are entitled to withdraw from the company after they cannot realize their reasonable expectation in such conditions as the company is at a stand, controlling shareholders infringe the fiduciary duty. Most nations of the two system of law have established relatively effective share repurchase system and withdrawing mechanism for shareholders. Based on the experience of these countries, our new 'Company Law' is established for the first time, including the withdrawing mechanism for shareholders in limited liability companies. However, there is still much to be improved in the procedure and the exercise of rights.The article comprises four parts.Part one analyzes the basic theory of the withdrawing mechanism for shareholders in the limited liability companies. Firstly, it is indicated that the shareholders' withdrawing mechanism of a limited liability company refers to such a exit right for a shareholder in a limited company, that a shareholder, according to the legal circumstances, lose all his shares as well as his qualification as a shareholder of the company through such ways as judicial withdrawing or share repurchase claim of dissenters. Secondly, combined with the close characteristics and the personal nature of a limited liability company, it explains the necessity of establishing a mechanism of shareholder exit in a limited company, and the influence of the mechanism for the relative subjects of all kinds of interest. Lastly, the following three aspects are discussed for demonstrating the rationality of establishing the withdrawing mechanism for shareholders in limited liability companies: contract theory, the theory of reasonable expectation and the theory of fiduciary duty.Part two induces the history and the status quo of the withdrawing mechanism for shareholders in limited liability companies of our country from three aspects of the theory research, the legislative activities and the judicial practice. Particularly, the author point out, by the way of demonstration and comparison, the difference and puzzle in the judicial practice resulted from the ambiguous clause of the new 'Company Law'.Part three provides the comparative analysis of the withdrawing mechanism for shareholders in limited liability companies of overseas countries. It makes a detailed research of the regulation and prejudication of the representative countries of Anglo-American genealogy of law such as the Great Britain and the United States, and that of the representative countries of the continental genealogy such as German and Japan. And then, it analyzes the common and the difference comparatively of the mechanism in the main countries of the two system of law.Part four reviews the withdrawing mechanism for shareholders in limited liability companies of our country, and puts forward some suggestions so as to improve the legal system. Based on the evaluation of the share repurchase right of dissenters and the judicial withdrawing mechanism, referring to the experience of the foreign countries , and according to the actuality of our economic and social lives, the author advances some suggestions to improve the withdrawing mechanism for shareholders in limited liability companies of PRC.