The Relief On Company Deadlock

Company deadlock refers to breakdown of the effective operational mechanismof a company resulting from the conflict of interest and contradiction betweenshareholders and senior management personnel of the company, under which thecompany’s shareholders or senior management personnel are divided into two partieswho opposes to each other. As a consequence, no proposal from either party can beaccepted by the other. Even shareholders’ meeting or meeting of the board ofdirectors can not be held, no proposal can be passed and the whole company is putunder paralysis. Because of the breakdown of the decision-making mechanism andthe effective implementation system of the company, company deadlock seriouslyimpairs the operations on business of the company and the interests and benefits ofthe company’s shareholders. Even benefits of a third party may also be severelyinfluenced in a direct way, and finally the entire society will suffer from the companydeadlock. Because of the limitation of company principles, such as ‘the doctrine ofoverwhelming majority capital’, company deadlock is inevitable. The closecharacteristics of the limited liability company make it much easier for companydeadlock to be constituted in Limited Liability Company.Company deadlock has been a rather prickly problem in the area of company law,especially in the Limited Liability Company and unlisted company limited by shares.As a main source of disputes concerning company, this issue has attracted moreattention from many scholars, and it has gradually become a heated debate in legalfield. The Company Law of China has initiatively proscribed some remedies forcompany deadlock in2005, but such provisions are not sufficient enough to tackle thecomplex disputes. Through examination of existing remedies for company deadlockhome and abroad, I attempt to put forward my suggestions that in the futurelegislation of company law and judicial interpretations, the legislators should ensurethe same basic principles of the existing company deadlock relief system under the premise, to further improve the judicial dissolution of the system, the appropriateintroduction of the forced buyout right system and compulsory system of divisionoffend on mediation, arbitration priority, and stress that the articles of association ofthe company impasse prior prevention function, build a more perfect system ofcompany deadlock relief from the level of legal system to eradicate the breeding ofthe company deadlock in order to better protect the interests of the shareholders torealize the maximization of the interests of the company and the wholesocio-economic benefits.Except its introduction and conclusion, this paper consists of the following fourparts:Part one briefly introduces the remedies for company deadlock. This partprimarily deals with the conception of company deadlock, and discusses thedifferences between company deadlock and company oppression, the causes ofcompany deadlock and the detriments of company deadlock. I intend to define theconception of company deadlock by illustration of the fundamental contents ofcompany deadlock.Part two primarily states comparative analysis of the remedies for companydeadlock. By comparing remedies of company deadlock in Anglo-American lawsystem with that of continental law system, the author expounds the common pointsand different ones between them, and believes that this analysis will produceinstructive solution for Chinese legislation in company law.Part three concerns the examination of the measure of handling the companydeadlock in our company law. This part mainly analyses and perfects the measures ofhandling company deadlock by judicial dissolution. Therefore, I hope that thisanalysis will draw attention of legislative bodies and judicial organizations.Part four mainly details some alternative measures to supply remedies forcompany deadlock. Based on drawing some advanced experiences of other countries,I provide certain instructive suggestions for current China’s company law, andintroduce some measures such as forced buyout right, arbitration priority, and stressthat the articles of association of the company impasse prior prevention function. Ihope that conclusions resulting from this thesis will make contributions to polish China’s legislature which can provide ideal solutions for company deadlock in turn.