Shareholder Representative Litigant System Research

Shareholder representatives’lawsuit system is an important system in modem company law. It has a significant meaning for maintaining the interests of minority shareholders and improving the administration structures of corporation. It is necessary to carefully study the system and regulations due to lack of specified provisions since the system of shareholder representatives’lawsuit of our country is still in its beginning phase, though we have made some achievements in judicial practice. Among which it is particularly important to confirm the position of parties from shareholders derivative litigation. If done properly, it could be an effective tool for well-meant shareholders to maintain the deserved interests of company and themselves, otherwise it could also be a tool for the immoral shareholders to interfere the management of company and chasing their own interests. This paper aimed to propose some suggestions for discussion by further studying from the content of shareholder representatives’ lawsuit system and foreign advanced legislative experience combined with practical cases occurred in our country. This paper is divided into five parts.To have some sensible understanding of shareholder representatives’lawsuit system from the macro perspective, the first part of this paper mainly talks about its basic theory from its origin and development. Followed from two characteristics of shareholder representatives’ lawsuit system to discuss the theoretical basis why it was widely spread and adopted worldwide--to protect the equal rights of minority shareholders under the principle of pursuing efficiency and equal. Finally, pointing out that shareholder representatives system of our country is still unsound on the basis of former discussion. There are so many aspects need improvement, such as the qualifications of plaintiff, scope of defendant and status of the company and other shareholders.The second part of this paper discusses the qualifications of plaintiff among the shareholder representatives’litigation system. First study and research will be made about the juridical practice of different countries from four aspects--shareholders’identities, stock holding period, quantity of holding stock and subjective request. Then discussion about stipulations and defects of shareholder representatives’lawsuit system of our country would be made. Finally improvement of plaintiff system would be discussed, proposing that holding quantity and proportion of stock should be diminished proportionally while the capital stock is increasing, and also some exceptional rules could be applicable, e.g. plaintiff holding quantity of stock or proportion is not enough, they can apply some appropriate guarantee; long time holding stock is inadvisable, and the definition of continuous holding time must be clear; subjectively some the typical cases which belong to well-intention or spiteful intention could be legislated, in addition, the court could be endowed with the right of making judgment according to the specific circumstances of each case.The third part of this paper comes to the discussion about the scope of defendant. First, study will be made about different legislation models of some countries, mainly consist of the following models, U.S. model (Freestyle legislation), Japanese model (constraint legislation), British model (strict constraints legislation). Then analysis about the scope of defendant in our country’s system of shareholder representatives’lawsuit would be made, finding the main existing problem is the unclear definition scope of "others" in the third provision of article152of the Chinese Companies Law from the perspective of legislation and real practice. Finally, this part proposes improvement of definition scope of defendant. Interpretation of "others" should be clearly given by the Supreme Court of China, and this paper suggests applying the Japanese strict constraint legislation model aimed at limiting the defendant from the company internal group which violated law or company regulations and infringed corporation interests.The fourth part of this paper discusses the legal status of company in the system of shareholder representatives’lawsuit. First from research we find out that the legislation about legal status of companies from different countries is also different. Next we carry out research about the viewpoints from academic perspective. There are also many different opinions which are listed as following, co-plaintiff, co-defendant, a third party with independent claim right, a third party with no independent right to claim and new third party. Then the operation of our country’s judicial practice will be investigated, from collection cases, most court in China take the company as a third party, only in very few cases that companies were treated as the defendant when amendment was not made to the Company Law. Finally, it is suggested that the legal status of company should be shall be a new third party with independent right for claiming.The fifth part of this paper discusses the status of other shareholders during the litigation. First, the United States and Japans practice will be studied, both of them allow other shareholders to participate in the ligation, but some certain restrictions were given due to the requirement of efficiency. Then some suggestions are given according to the real judicial practice, proposing that the legislation shall encourage other shareholders to participate in the lawsuit, meanwhile the court could refuse some shareholders from the perspective of high efficiency and low cost.