A Legal Study On Shareholder Derivative Litigation Pre-program

Shareholder derivative action as an important tool for shareholdersto protect their own interests is actually a double-edged sword, for onething it can protect the interests of minority shareholders and it canbe abused sometimes for another, from which derived the pre-program ofthe shareholder derivative action is particularly necessary. Shareholderderivative action has been introduced in the company act2005of ourcountry as well as the pre-program of the shareholder derivative action,however, due to Chinese judicial practice is not mature enough and thelegislation is not exhaustive that pre-program is difficult to play itsdue role in the shareholder derivative litigation system. In this articlethe value analysis has been used to investigate the real nature and whatit ought to be of every stage of the pre-program, and the comparativeanalysis has been used to form a more complete system to applyto China’s national conditions in the basic of analysis and discussionof foreign-developed legislative and institutional.The whole idea of the article is in accordance with the pre-programprocess, including application, acceptance and review to build the general structure and then discuss and analysis on specific issues in eachprocess.The first part is introduced on the interpretation of the shareholderderivative litigation pre-program. In this part, the author haveelaborated the value and risk of the shareholder derivative action to laya theoretical foundation for the construction of the pre-program andfurther clarified the significance of the existence of pre-program.The second part is about the application of the pre-program. Thisprocedure may be waived in exceptional circumstances, while in other casesit belongs to the necessary process of shareholder derivative litigation.This section mainly includes the applicant, the reason for the request,the application form and legal effect.In the third part the author analyzes the admissibility ofpre-program to address the question of who accept the file in behalf ofthe company. In U.S. legislation the board of directors and speciallitigation committee mainly accept the application, while in Japan on thebasis of sophisticated monitoring system, the acceptance authority is theboard of supervisors and without which is the meeting of shareholders.On the basis of a comparative analysis of both legal systems, the authorfurther investigated the accepting authority of Chinese pre-program, theorder of admissibility of the infringement of a third person and theapplicant space in China for the independent litigation committee.The last part is about the process for the company authorities to reviewthe application. First, the author discussed whether it is reasonable toset the review period of thirty days. Second, the author analysis thebusiness judgment rule in shareholder derivative litigation. Last, theauthor discussed the results of the review that may occur and discussed in more detail about whether the decision of the company can negate thelitigation.