An Exploration Towards Legal Affairs Around Corporate Dormant Investment

With the rapid growth of the economy, the enlargement of the investment space and the diversity of the investment channels, dormant investment comes up to be a ubiquitous legal phenomenon. Due to the secrecy and the complication, dormant investment not only makes the interior and exterior corporate relationship ambiguous and even out of order, but also causes disputes between shareholders themselves, shareholders and the corporation, dormant investors and significant partners as well as trading partners.Because the current national laws lack systematic and definite regulations regarding to dormant investment, the identification of dormant investors gets confined in an awkward situation, and moreover, the relevant stakeholders involved in dormant investment find no means to protect their own rights and interests, and it is not unusual to be confronted with disputes concerned with lawsuits and court decisions in this regard in theoretical and practitioners’circles.From a perspective of safeguarding investment and trading, balancing the rights and interests of the related parts and maintaining the justice of the law, this paper dwells its exploration upon the qualification of the partners in dormant investment, the protection of relevant stakeholders and the perfection of the laws regarding to dormant investment and so on.Besides the introduction and the conclusion, this paper consists of altogether four parts:Part1is basic theories on dormant investment. Starting from the definition of the terms of dormant investment and dormant investors, this paper combs and analyzes the cause and existing patterns and general features of the dormant investment.Part2is the qualification of the partnership of the dormant investors. This paper begins with the commentary on the three viewpoints held by the theoretical circles towards the qualification of the partnership, i.e. the discussion from the essence, the discussion from the patterns and the discussion from the compromise of the former both. Then, on this basis, the paper puts forward the general principles and means regarding to the qualification of the partnership. Finally, in combination with concrete cases, this paper carries out a typological research of the qualification of the partnership of the dormant investors in the context of such three companies as ordinary limited corporations, state-owned transformed corporations and foreign-invested corporations.Part3is the protection of relevant stakeholders. Guided by the current law, this paper incorporates the judges’regulations in practical sentence-making and makes an investigation into the protection of the rights and interests of the dormant investors, bona fides third party, significant shareholders and other shareholders of the corporation.Part4is the perfection of laws-making in this regard in our country. Through the analysis of the current legislation mechanism and the necessity of making the law of dormant investment, this paper offers thoughtful suggestions on the perfection of law-making in this regard.The major innovations of this paper lie in the following aspects:1. to have broken through the traditional viewpoints, i.e. the discussion from the essence, the discussion from the patterns and the discussion from the compromise of the former both, this paper puts forward that in terms of the qualification of the dormant investor’s partnership, it is necessary to distinguish from the be and the should be and accordingly takes up the corporation law, the contract law to define the rights and duties respectively, along with stock rights transference and alteration procedures, in order to realize the investor’s partnership in reality and in name;2. to have combed thoroughly the subjective and objective factors in the origin of the dormant investment, this paper offers an efficient cause analysis which is commonly lacked in general studies and provides a useful reference for judging the validity of contracts involved in dormant investment and tackle with their related disputes;3. to have carried out the research with special emphasis upon the typology of corporations, which is hardly seen in current studies, this paper distinguishes the qualification of the partnership of the dormant investors in specific types of corporations, i.e. ordinary limited corporations, state-owned transformed corporations and foreign-invested corporations, laying great emphasis upon that only if different judgment principles be applied to different types of corporations, the disputes involved in dormant investment can be solved successfully and legal justice be maintained.4. to have consulted the newly-issued The Supreme People’s Court Prescriptions on Problems on trials of Disputes Concerned with Foreign-Invested Corporations (1), while most of the current studies on the issue of dormant investment are carried out without any reference of the legal regulations.Admittedly, against the author’s wish and efforts, there are still flaws in this paper, such as, due to the limited reference material from abroad, the author has little chance of benefiting from the foreign theoretical studies on this issue and realizing a comparative study of dormant investment; despite the full store of case descriptions collected by the author, there is great difficulty in the access to their written decisions, hence comes the limitation in face of the thorough analysis of specific cases; and moreover, as the author tends to care more about dormant investors and bona fides third party than significant shareholders and other shareholders of the corporation, this paper needs to be furthered in these aspects.