Discussion On Theory Construction Of Shareholder Expulsion For The Limited Liability Company

As an important system for the company to adjust internal relationship, theshareholder expulsion has been confirmed in the legislative practice of many countries.The purpose for its establishment is to eliminate the severe influence of the individualshareholder on the company and other shareholders, and avoid greater loss throughexpelling this shareholder from the company. For our country, although there is nospecific provision that definitely stipulates the shareholder expulsion in CompanyLaw, the stipulation of China’s Company Law Judicial Explanation III Article18confirms the shareholder expulsion rule for the first time from the layer of applicationof law. Its establishment needs in-depth theoretical support. The core of this paper isto demonstrate the legitimacy of shareholder expulsion system on theory, i.e. why thecompany can expel the shareholder.Focusing on this core, this paper is divided into two parts except for theintroduction and conclusion.The first part is mainly to solve the problem “what is it”, i.e. the basic concept ofshareholder expulsion, law attribution and applicable company types. The expulsionof shareholder refers that, the behavior of the company to expel the shareholder anddeprive of the qualification through the resolution of shareholder meetings under thecondition suitable for the law stipulation or constitution for the sake of the commoninterest of the company and other shareholders. It defines the right of expulsion as right of formation, with the punitive and strong personal attribution. Therefore, theshareholder expulsion system is appropriate for being established on the companywith human joining. In our country, such system is only appropriate for beingestablished on the limited liability company.The second part is to solve the problem “why”, i.e. why the limited liabilitycompany is allowed to expel the shareholder. First of all, it is necessary to clear up theinternal relationship involved in the expulsion of shareholder. According to thecontract theory of the company, it is believed that there is wide contract relationbetween the shareholder and the company, shareholder and shareholder, whichbelongs to the scope of “Relationship Contract”. Compared with the traditionalindividual contract and due to the constant change of contract expect, the contractrelationship is changing continuously. However, this contract relationship is alsoappropriate for the general principle of Contract Law. When the contract expectcannot be achieved, there is possibility for terminating the contract. As there is nodirect relationship similar to the bilateral contract between the shareholders, theimplementation subject of the expulsion right is only the company. Through thecomparison with the contract dissolution right, the expulsion of shareholder isappropriate for the general principle of the dissolution of contract, and the setting ofexpulsion reason can refer to the standards of the rescission of contract. The“Fundamental Breach of Contract” on the Contract Law is regarded as theestablishment standard of the expulsion cause of the legal shareholder. Theconfirming of “Fundamental Breach of Contract” takes subjective fault condition andobjective degree condition into consideration. On the setting standards of the cause,this paper shows that the corporate charter can stipulate the cause. However, duringthe big event of the expulsion of the shareholder, the confirmed cause of corporatecharter cannot have conflict with the principle and specific content confirmed by thestatutory circumstances, and meanwhile, it cannot do harm to the benefit of the thirdparty instead of the company or shareholder. The standard confirming of expulsioncircumstance finally completes the construction on the legitimacy theory of the whole shareholder expulsion system. The reason for the shareholder being expelled is thatthe company and shareholders can apply the rescission of contract based on theviewpoint of contract theory. We hope this paper can provide some theoretical supportfor establishing perfect shareholder expulsion system.