Dormant Investment Law Studies

Due to the present economic and legal circumstances, dormant investment has long been common in our country. In a long period there are no clear rules which can guide dormant investment and there are a range of views about the understanding of the legal nature of it. However, the newly promulgated legal representation "The Provisions of the Supreme People’s Court on Some Issues about the Application of the Company Law of the People’s Republic of China (III)"(herein after referred to as "the Provisions III) has provided rules for dealing with dormant investment from the perspective of contract validity and property rights, as well as the relationship between the parties of the dormant investment. But the research on the study of dormant investment shall not reach a standstill here because the rationality of those rules above is still subject to further tests in the practice. In this paper, the author starts from the basic theories and divides it into two types, according to which different legal designs are planed respectively.This paper mainly contains four chapters.Chapter one introduces the basic theories of dormant investment, including the concept and legal characteristic, the reasons and the different types according to various standards. Then the authors evaluate the rationality of dormant investment from the perspective of law and economics.Chapter two analyses the legal relationship between the parties of dormant investment and proposes different legal designs for different situations.Chapter three deals with the current laws and rules that regulate dormant investment. The major ones related are Article25to Article27of the Provisions Ⅲ. The guiding and modeling function of the Provisions III has been admitted and its shortage on logics is also criticized in this chapter. Trust applied in dormant investment as another effective resolution is also analyzed in this chapter.Chapter four discusses the issue of the termination of dormant investment relationship, in another word, the issue of the transformation from dormant investors to the qualified significant shareholders. First the interest-driven reasons are listed, then the issues of the approaches for the transformation are analyzed.