Study On The Legal Issues Of Dormant Investment In Limited Liability Corporation In China

Without the specific rule subject to dormant investment in market economy in China, there will be different results from the same legal issue of dormant investment. So the writer focused on the legal issues of dormant investor in the limited liability corporation, and made much research on analyzing the following four parts. Besides preface and epilogue, this paper is divided into four chapters, which sums up over 35,000 words.Part 1: The relationship between dormant investor and dormant shareholder.This paper introduces the general theory of dormant investment: the source and concept of dormant investment, the cause and legal characteristic of dormant investment, as well as the type and legal force of dormant investment. On the basis of clarifying the definition of both dormant investor and dormant shareholder, it concludes that dormant shareholder is different from dormant investor, which is just one kind of dormant investor, also concludes that there are two requirements for the dormant investor to be a dormant shareholder. One is that dormant investor invests on a limited liability corporation with the purpose of being a shareholder or obtaining the title of share, and the other is that dormant investor's investment is legal instead of illegal, which is not evading the law.Part 2: The legal status of dormant shareholder.On the basis of analyzing the three typical theories of dormant investor: essence theory; formalism theory; theory of discrimination between the shareholders within and without, it concludes that we should keep to the principle of improving business efficiency and guaranteeing commercial transaction security, for the purpose of safeguarding everyone's benefit. On the other hand, we also should adhere to publicity principle and rechtsscheintheorie in order to balance the interests of all parts. Thus this paper suggests that on the premise of applying to formalism theory, we should approve dormant shareholder to transform to be a legal shareholder of company under some specific conditions. If transforming, the dormant shareholder will be exposed to three problems. First, the dormant shareholder should invest on the limited liability corporation actually or obtain the investment of the limited liability corporation from the others legally. Second, the shareholders of company should agree or approve dormant shareholders to be partners. Third, the dormant shareholder's transforming should not damage the legitimate interests of the others. Besides, it discusses the process and the result of transforming, as well as the change of legal relationship after transforming.Part 3: The regulations of dormant investment in China.This paper discusses the regulations of dormant investment on the limited liability corporation in China. It concludes that there is no specific rule related to dormant investors in the law in force, neither is there a uniform method in judicial practice. Meanwhile, it analyzes Regulation of Applicability for PRC Company Law (3rd amendment).Part 4: The suggestions for regulating legal issues of dormant investment.After discussing the above three questions, this paper suggests settling the legal issues of dormant investment on the limited liability corporation by two appropriate ways. From the microscopic view, it suggests amending company law in order to settle the legal issue of dormant shareholder. From the macroscopic view, it suggests introducing and advocating the new mode of investments, such as trust of title of share, undisclosed agency and anonymous agency, in order to guide dormant investments to being more standard and more normative. Besides, this paper also suggests enacting detailed rules to regulate evasion of law in dormant investment.