Study On The Exercise Of Dissentient Shareholder Appraisal Rights

Dissentient shareholder appraisal rights means when thecompany want to implement some specific behavior, theshareholder who do not agree with it and unable to preventit, has the right to request the company to purchase theirshares at a fair price, and thus out of the company. Essentially,Dissentient shareholder appraisal rights is the tool ofbalancing the interests of majority shareholders and minorityshareholders, improving the system of authorized capital,preventing the majority tyranny. While most shareholders wantto achieve its own interests by implementing specific actions,it is unjust for minority shareholders who had to face majorchanges which beyond the excepted investment risk of companyor be marginalized, therefore fair to minority dissentingshareholders repurchase price away from the company is theprotection of the interests of both sides.Dissentient shareholder appraisal rights originated in the United States, and now is used in many countries of theworld, China also introduced this right when amended theCompanies Act in2005.However, due to the lack of relevantlegislation, That right in the face many difficulties in theprocess of the actual exercise. How to exercise the dissentientshareholder appraisal rights is very important to protect theinterest of minority shareholders and promote the economicdevelop healthy and orderly. In this paper, the authordiscussed the important issues of the exercise of the rightcombined with today’s extraterritorial legislation andjudicial practice, and proposed individual prematurerecommendations for future legislation, except to be able todo something good for China’s legal construction.This paper is divided into four main parts:At first, this paper describes the basic theory of thedissentient shareholder appraisal rights. First of all, theauthor explored the right-balance nature and the principle ofexercising of the rights by analysis the generation process of the dissentient shareholder appraisal rights and thelegislation of the United States, Japan, and Russia. Secondly,I expounded the real value and the theoretical value of therights. Although the original purpose of that right is to driveshareholder voting system change, but its main role now isreflected in the protection of interests of minorityshareholders, breaking the deadlock,,and carrying forward thespirit of contract freedom.Then this paper discusses the specific conditions of theexercise of the rights. The author discussed this question fromthree parts, including the type of the company, the subjectand the specific situations. First, consider of thelegislation of China and other country, dissentientshareholder appraisal rights only apply to limited liabilitycompany, and not necessary to the company Limited. Second, ourlaw provides only for the subject of rights as "shareholders",but there is much more complicated situation in the realexercise, such as voting rights, dormant shareholders, defective capital contribution, acquisition shareholders andso on, the author discussed the questions above. Finally, thespecific circumstances for the exercise of rights is acontroversial issues in theory and practice, the authorconsidered the existing regulations and other country’slegislation, discuss the situation of the right to exercisefrom the point of view of the theory and practice, and pointedout that the law authorizes the Company or the Board itselfto determine the practice of the right to exercise is not adaptwith China’s actual.The program is the focus of this article and is thedifficult part, the paper presented the program of the rightexercise in chronological order. Specific program include:company inform all shareholders the issue before theshareholders’ meeting; dissent shareholders issue possiblerequest repurchase meaning and make opposition vote at theshareholders meeting; after the adoption of the resolution ofthe company, the company shall issue a notice of objection to shareholders, the dissenting shareholders received notice inthe legal issue a repurchase request company during that period,and begin to consult about repurchase price and specificmatters with company; when company and the shareholders agreedto enter into repurchase agreements, shareholders should beshares held by the company to guarantee the program carry outsmoothly. The determination of the fair price is the difficultyof this chapter, the author discusses it in two phasesrespectively: self-negotiation phase and judicialintervention phase, and proposed the Chinese way of assessment.The execution stage after the agreement reached plays asubstantial role in protection of shareholders’ rights, butit is extremely easily overlooked, I elaborate on therepurchase monies paid and sources of funding; processingafter the share repurchase; the costs burden incurred in rightsexercised, and form a complete exercise program.On the basis of the discussion in the precious parts, Iput forward suggestions for improvement on the legislation. First, the author made a brief description of our legislativeprocess to seek legislative missing historical reasons; Second,I points out the shortcomings of current legislation from thesubject of rights, the right to exercise conditions, the pricedetermined way, restrictive conditions and specific exerciseprogram; finally, I make specific suggestions from theperspective of legislative thinking, substantive norms,procedural norms to improve the legislation in the future.At the conclusion part, I further summarized the logicalstructure and the main point, emphasized the significance ofthe exercise of the dissentient shareholder appraisal rights,and suggested that China should combine the judicial practiceand gradually improve the dissentient shareholder appraisalrights system.