On The Exclusion Of Shareholder Of The Limited Liability Company

The limited liability company (hereinafter referred to as “LLC”), with itscharacters based both on capital and shareholders, is welcomed by the medium andsmall investors as of the beginning it was created by the jurists of Germany, andbecame instantly a very important company structure. In nowadays, the LLC plays asignificant role in the social economy. However, the special structure and legalattribution has decided the unique company governance of LLC, so as a hot spot tothe law theory and pragmatic jurisdiction. The western countries with advancedlegislation, such as Germany, have established and perfected the system of companygovernance due to the law theory research and jurisdiction practices, among whichincluding the exclusion of shareholders (hereinafter referred to as “Exclusion”).Although the Chinese Company Law in effect has entitled autonomy to some degreeto the LLC, a comprehensive system of company governance has not been establishedyet. For instance, the Exclusion is not stipulated in the Company Law, which is aregret hereof. Therefore, the paper is dedicated to, by reference with the advancedoutcomes of foreign countries, demonstrating the reasonability of the Exclusion andits necessity in China starting from the investigation to the basic theory of theExclusion. In addition, the paper aims to propose a series of suggestions to structurethe Exclusion in China according to the LLC practices circumstances.The paper consists of three parts, including introduction, main body andconclusions.The introduction mainly explain why the author picks the Exclusion as the topicof the paper, introduces the related documents domestic, and summarizes the currentsituation of the research on the Exclusion in China. The main body is composed of four chapters.The first chapter mainly analyses the basic theories on which the Exclusion isbased, in order to explain the reasonability of the Exclusion. In addition, the chapterfocuses on the principles the Exclusion shall hold in China in order to meet the needsof our country, including three aspects: Firstly, how to balance the characters based oncapital and characters based on shareholders. Secondly, coordinate properly therelationship between control and autonomy of LLC. Thirdly, the mistake we maymake during the process of structuring.The second chapter moves forward to the analysis of the conditions of exclusion.After the investigation of the stipulations of foreign legislation and theorydevelopment, the paper has divided the conditions of exclusion into two types: typeone is the stipulation from the law, type two is the agreement reached in the bylaws ofthe LLC. In addition, the criteria of the conditions of exclusion shall be based on thethreshold for the “significant conditions”.The third chapter mainly focuses on the procedure design of the Exclusion,including the entity to start the procedure, the pre-procedures and so on. Furthermore,this chapter highlights the approaches to conclude the exclusion decision, and holdsthe view that the resolution of shareholders’ meeting regarding the Exclusion shall bethe main path. Meanwhile, the relative judicial procedures shall be established toprotect the lawful rights and interests of the excluded shareholder. Besides, thechapter briefly analyses the legal consequences of exclusion of shareholder.The fourth chapter is for the protection of the lawful rights and interests of theexcluded shareholder, including two major aspects: Firstly, disposal of the sharespossessed by the excluded shareholder, the fair value of the shares and the timeline tohave the value served on the excluded shareholder. Secondly, the judicial approachesfor the protection of the excluded shareholder when his or her lawful rights andinterests are in hazard.The conclusion is the summary of previous parts of the paper, and restates themain views of author.