On Legal Protection Of The Right Of Dividend Distribution

Right to dividends distribution is Shareholders’right to request company to pay dividends, which is based on Shareholders’qualifications and status. In essence, Right to dividends distribution is Shareholders’right of claim, possessing nature of association. The holders of right is the shareholder, the subject of obligation is the company. The subject matter of the right is the dividend, including dividends and bonuses. Form dividend is adopted by our company law, refers to the profit distribution or distribution of surplus. Dividend distribution of entity conditions and procedure conditions need to be satisfied. A company should adhere to the principle of "no profit no dividend ". Substantive conditions require companies to have after-tax profits, and then dividend distribution should meet the provisions of the law and articles of association. Procedure condition is the shareholders’ committee dividend distribution resolution. A company’s formation of dividend distribution decision is business judgment process. According to the right of dividend distribution meet or not meet the procedures, right to dividends distribution is divided into two levels of abstract right and specific right. Meeting the procedures is the judicial intervention boundary to the company autonomy. Court only tries the disputes of dividend distribution, which meet the procedure conditions. Justice does not interfere with the abstract right to dividends dispute. This classification method is logically flawed, resulting is that judicial refuse referee is like a flood. The right to dividend distribution should be divided into three levels. Right to dividend distribution with substantive conditions but not procedure conditions should stand out. Allow the court to intervene on this phase.In the current dividend distribution legal system of China, the shareholders’right to dividend distribution of both listing Corporation and non-listed company are seriously infringed. Large Shareholders infringe the right to dividend distribution by preserving large amount of after-tax profit in the company in accordance with the resolution of the shareholders’meeting of the non dividend or symbolic dividend, or by paying a significant amount of compensation to dilute the available profit. The current situation of dividend distribution right infringed is jointly caused by interests conflict between different groups of shareholders, large shareholders’abusing the capital majority rule and "semi mandatory dividend" regulatory measures to listing corporation.The law provides protection for the right to dividend distribution, which should follow the principle of encouraging distribution and balance the interests of different groups of shareholders, company creditors and the state. The legal system of protecting the right to dividend distribution should include prior protection, relief and incentive system and dividend-tax system. Our laws have included these systems but afterwards direct relief system. China’s existing laws and regulations need to be improved, and, afterwards direct relief system also needs to be established. Suggestions on the protection system in advance are as follows:1. Giving shareholders the right to participate in the activities of dividend distribution proposal, giving small shareholders the right to deny and resubmit the dividend distribution proposal.2."Dividend distribution method"should be stated in the articles of association of LTD., and necessary matters items should be further specified.3.Set maximum limits for reserved funds and ratio of drawing discretionary reserved funds.4. Pay more attention to take the non mandatory incentive policy and lead listing Corporation to make dividend policy, which is in favor of minority shareholders. Take the difference between dividend policy and promote the listing corporation formed a perfect internal governance system. Suggestion on afterwards relief system is to establish forced dividends distribution proceeding. Suggestions on dividends-tax system contain:exempting from economical double taxation on dividends and transferring the " MOF&SAOT [2012]85" to the shareholders of the listing corporation dividends income from "reprieve" into a normalized, and extending it from the listing Corporation to the non-listed company dividend income field.