On The Protection Of Shareholder Inspection Rights

As an important component of the system of Right to Know,shareholder inspection rights are deemed as an essential channel forshareholders to acquire major financial and business information, andappropriately perform voting rights on corporate affair and profitdistribution and fulfill the equity of owners, thereby reversing theunfavorable situation due to information asymmetry. China’s CompanyLaw (revised in2005) adds the specific provisions of shareholderinspection rights, which include that the expansion of the scope ofinspection right, restrictive terms for the inspection of ledger, preliminaryjudicial remedy measures. Compared with the Law of Company issued in2003, this revision emphasizes the important role shareholder inspectionrights have played in the whole corporate legal system and strengthens itsexercisable feature in the judicial practice. However, the current legislationdoes not result in an instant effect, since the simple and general provisionson shareholder inspection rights pale in comparison with complex disputesof right to know in the real life.The new Law of Company on one hand provides the system ofprocedural protection and judicial remedy, making shareholder inspectionrights no longer as a vague and abstract concept, on the other hand, how todefine and apply the principle of “proper purpose” in the judicial practicealso reflects the legislators do not deeply dig into the boundary ofinformation right. Therefore, this paper intends to draw on advancedlegislation and study on the China’s protection of right of inspection usingmethods of empirical and value analyses, so as to provide theoreticalsupport and reference for the practice. In particular, it can be divided intofour chapters: Starting with the basic theory of shareholder inspection rights, the firstchapter discusses specifically its basic concept, nature and thread ofdevelopment, and explore theoretical foundation of inspection right fromthe perspective of Institutional Economics and Law and Economics, inorder to justify the necessity of the protection of shareholder inspectionrights and support the specific provisions in the following paragraphs.The second chapter, as a focus of the entire paper, underlines the ruleto exercise the right of inspection, including the subject, scope andprocedure. Instead of elaborating the whole content, it chooses a fewcontentious issues and extracts typical judgment of courts in China, withview to identify flaws of our legislation and come up with reasonablesuggestions.The third chapter solves the problem of how to give remedy toshareholders when they are unable to protect their rights with their ownefforts. It includes prepositive procedure before suit, burden of proof andpreservation of ledgers and litigation cost.The fourth chapter is primarily about the restriction of shareholderinspection rights, in essence, to avoid the abuse of right is the other side ofthe coin. Accordingly, this chapter analyses theoretical foundations ofrestriction and imposes restrictions, namely, proper purpose, the proportionof shares and time limit. Ultimately, the writer suggests that it shall preventthe abuse of right in the respect of concluding confidential agreement,setting restrained conditions by the court and filing suits againstshareholders, etc.