Legal Regulations On Controlling Shareholders Abusing Controlling Rights

By discussing the corporate controlling rights and capital majority decision rule,this paper tries to describe the complexity of controlling shareholders abusingcorporate controlling rights. From the perspective of fiduciary duty, this paper aims atregulating controlling shareholders exercising corporate controlling rights rightfully,and also wants to provide the institutional guarantee for the corporate, especially forthe minority shareholders. The paper consists of five parts as follows.Part one is the basic analysis on the controlling rights and the controllingshareholders. Corporate controlling rights consists three aspects. Firstly, on ontologyof the controlling rights, this paper argues that control (right) is a state of fact, whichhas the quality of power and rights，and claims that through the way of "descriptivedefinition" to understand the corporate controlling rights, and acknowledges andmaintains its "open structure". Secondly, this paper argues that the content ofcontrolling rights is the power to decide major matters of the corporate. Thirdly, thispaper believes that controlling rights can be divided into two categories, legalcontrolling rights and fact controlling rights. Legal controlling rights arecorresponding to the quality of power or rights of controlling rights, and factualcontrolling rights are correspond to the factual state of controlling rights.The aspect of recognition of controlling shareholders firstly discusses therelationship between controlling shareholders and the environment of corporategovernance. It points out that the distribution of the ownership structure is the resultof comprehensive factors. The improvement of legal environment is the key issue tosolve the problems of corporate governance. Combining legislative and judicialpractices of different countries, this paper argues that we should combine the formalstandard and the de facto standard to identify the controlling shareholders. Part two mainly discusses the capital majority decision rule. Firstly, this partbriefly discusses the development of the capital majority decision rule. Secondly, thispaper discusses its rationale and disadvantages from positive and negative sidesrespectively.Part three is the motives and regulation approaches of controlling shareholdersabusing the corporate controlling rights. This part argues that private benefits ofcontrol is the original factors, on the path of regulation, in order to regulate thecontrolling rights comprehensively, we should establish a systematic legal protectionmechanism. Based on the applied legal philosophy, this paper selects fiduciary dutytheory as the analytical framework.Part four mainly discusses the three aspects. Firstly, by comparing the differentfunctions among the principle of good faith, the principle of prohibiting from abusingrights and fiduciary duty, this part explains the reason to choose the fiduciary duty asthe analytical framework. Secondly, combining international legislative and judicialpractice, this paper focuses on the content of fiduciary duty and the standard ofviolating fiduciary duty. This paper argues that we should take damage as thestandard of breaching fiduciary duty.Traditionally, duty of care and duty of loyalty respectively take “incompetent"and "self-serving" as the regulation contents. As the willful misconduct and the slackproblems appear, the accountability mechanism gradually voids. Then, as theextension of fiduciary duty, duty of good faith timely emerges. On one hand，thispaper argues that we should incorporate willful misconducts and the like into theregulatory range of fiduciary duty, and regulate it by the duty of good faith; on theother hand, we should improve the evaluation standard, using legislative standard to"explain" or "request" the corporate controlling rights.Part five mainly discusses how to realize the function of fiduciary duty in thebackground of China. From the operation of the law，firstly we should establish thestandards about how to the identify the controlling shareholders and the articles offiduciary duty concerning the controlling shareholders. Secondly, in order to enhancethe effectiveness and ensure the operation of judicial practice, this paper argues that,in combination of judicial interpretation and case guidance system, we should make the standard of the fiduciary duty more accurately, more specifically and moretypologically. All discussed above aims at realizing the regulatory function of thefiduciary duties, and balancing the interests of the corporate.