Limited Liability Company Shareholders To Exit Mechanism

Within the latest amendment of The Company Law of the People's Republic of China 2006, some new regulations about the Right of Returned Stock of the Shareholders of the Limited Company have been adopted. As a breakthrough, it has been made a significant influence on both theoretical and empirical fields. Nevertheless, there are some flaws in regards to the legitimate circumstances, procedures and the price of the retuned stock. Clearly, the limitation and uncertainty of this regulation have already caused some problems in practice. These flaws not only have a negative impact on the operation of withdrawing right of shareholders and the protection of minority shareholders, but also on our environment of investment. Furthermore, this regulation is going against the establishing of "free trading" environment. Some scholars describes this limitation as a "one way system" which forced the investors and shareholders into a dilemma. When the company deadlock happened, the minority shareholders could neither transfer their shareholder rights, nor apply for the dismissal of the company in order to withdraw their money.Beginning with the regulations of the amendment of The Company Law, this article examines different theories regarding the withdrawing right of shareholders. It explores the major initiatives of different countries within different jurisdictions and the lessons that can be learned from them. Finally, it seeks to apply some new points and ideas in regards to the improvements of withdrawing right of shareholders. This article will be delivered in four chapters as follows:The first chapter assesses the current statutory of withdrawing Right of the Stockholders of the Limited Company. It commends the amendment of the company law by adopting the mechanism of returned stock. In the mean time, it examines a case which happens after the adoption of the law. From the view of integration with legislation and practice, it points out the main problems existing in subject, circumstance and procedures. On the other hand, it presents where the author stands in the discussion of protection of the minority shareholder rights as well as emphasizes that the main topic of this article would be the post remedies.The second chapter outlines the basic theories and hot debates related to the mechanism of returned stock in order to demonstrate the necessity and rationality of the protection of returned stock rights. In China, the revolution of withdrawing right of shareholders has been facing a series of problems, such as closed corporation, legal capital system, corporate capital reduction and the production of creditor. Having all these problems in mind, the article outlines the characteristics of the limited company; examines different theories referring to the nature of share; explores the true meaning of the equality of share rights; presents the balance of the protection between the creditor interests and shareholder interests; and assesses the flexibility of the capital system. In conclusion, the withdrawing mechanism of shareholders in China needs to be improved and well established.The third chapter reviews withdrawing mechanism of shareholders from a comparative law perspective. It reviews the classic theories and remedies on withdrawing mechanism of shareholders in different counties and jurisdictions and especially emphasizes on British law since England was the original of the withdrawing mechanism. It introduces the case law and statutory law regulation in terms of "Just and Equitable Wind-up" and "Unfair Prejudice". It aims to use the successful experiences in withdrawing mechanism of shareholders for our reference.Based on all the discussion above, the last chapter applies a mode of withdrawing mechanism of shareholders in china, which includes the share transfer mechanism, company capital reduction, and judicial dissolution system and so on. As the conclusion of this paper, I would argue that the main body of the withdraw rights would be the minority shareholders. To add the situation from company deadlock and shareholders themselves into the current provision will be discussed at length. Further, some empirical problems will be discussed such as, the pricing of the withdraw right of shareholders. Finally, the discussion about the withdraw rights of the shareholders will be combined with other regulations in order to improve this system of company law as a whole.