On Settlement In Shareholder’s Derivative Action

The shareholder’s derivative action is a unique design in the civil litigationsystem. On the terms of cause of action, the procedures settings, ownership of thewinning interests and the involved subjects, it is obviously different with a generalcivil suit, in which the parties may motion to settle. Same as a general civil action, theshareholder’s derivative action is a method of dispute resolution. The very questionsare in which proceedings the parties may settle the action and what the effects willoccur after the settlement. There are no express provision on this matter in PRCCompany Law, and few scholars start to make researches on this filed. The above isthe study background for the author. By using the related theories and methodology ofcompany law, civil procedural law and civil law, the author has taken acomprehensive analysis on the mechanism of settlement in shareholder’s derivativeaction. At the end of this thesis, the author proposes on the grounds of the situations ofChina some suggestions for the legislation on the settlement in shareholder’sderivative action. The paper is divided into three chapters except the introduction andepilogue.Chapter One: Analysis of the Definition and Nature of Settlement inShareholder’s Derivative ActionThe author focused on the definition and the nature of settlement in shareholder’sderivative action in this part. The settlement in shareholder’s derivative action is theprocess in which the plaintiff and defendant engage the agreement to termination the action after negotiations and compromises, and both of the parties submit theagreement to the court for approval. After the examination and approval, the contentsof the agreement shall be filed in the courtroom record or the conciliation statementshall be issued. Usually, the settlement is initialed by the plaintiff or the defendant.The company and other shareholders get involved in the settlement through theirratification of the agreement between the plaintiff and defendant. The authorconcluded that the settlement in shareholder’s derivative action by nature andlitigation activity rather than a civil activity.Chapter Two: A Comparative Study on the Legislations on Settlements inShareholder’s Derivative ActionIn this part, the author made a comprehensive comparative research on thelegislation on settlements in shareholder’s derivative action between America andJapan. In the first place, the author summarized the contents of the provision on thesettlement in the two countries. Then the author gave insight of the formation of thesettlement systems respectively. Similarities and differences of the provision ofsettlements in the two countries were summarized. The author worked out thefunctions of the similarity between the two countries, namely the settings notice andobjections.Chapter Three: Suggestions to the Formation of Settlement System ofShareholder’s Derivative Action in ChinaThe author recalled and summarized the practice of settlement of shareholder’sderivative action in China, and analyzed the proper foundation of the settlementsystem of shareholder’s derivative action. At the end, the author make somesuggestions on the formation of the settlement system in shareholder’s derivativeaction in China, covering the aspects of initiation of the settlement, agreementengagement, notification and objection process, and the effects of the settlement.