Study On The Expulsion Rule Of Shareholders In The Limited Liability Company

In2011, the supreme court issues Provisions of the Supreme People’s Court on Certain Issues Concerning the Application of the "Company Law of the People’s Republic of China". The17th provision regulates the expulsion rule of shareholders. But after a study of the nature of the limited liability company and the shortage of the system to resolve the conflict of the inner relationship in the company, we will find that this regulation of the17th provision is not very good.In the perspective of substantial law, the only reason for expulsion in the17th provision is failing to perform all the capital contribution. Since the goal of the rule of expulsion is to solve the conflict of the inner relationship in the company, the reason for expulsion should be extended to conclude two situations:the first is failing to perform the capital contribution whatever the contribution is all or just a part, the second is that the shareholder’s inequitable conduct which leads to the severe crisis of the trust between the shareholders. Otherwise, the law should also regulate that the company’s articles of association can have its own regulations of expulsion of the shareholders.In the consideration of the procedure, the17th provision is not very detail. And if we extend the reasons for expulsion, different reasons may have different procedures. First, based on the level of difficulty of the judgement of the different reasons, different reasons should be regulated by different procedures. In the reason of failing to perform the capital contribution, a shareholder can be expelled just by a resolution of a shareholders’meeting. But if it is the shareholder’s inequitable conduct which leads to expulsion, it should be judged by the shareholders’meeting and also the court’s judgement. Otherwise the resolution of the shareholders’meeting will be in effect in the support of at least2/3shareholders. Second, the17th provision regulates two ways to deal with the capital after the expulsion:trasfering to other shareholders or the third party, or capital reduction, but considering the principle of maintainance of the corporation capital, we should first apply the method of transfering to other shareholders, the second method is to transfer to the third party. Unless the capital can not be transfered to thers, the company can not come into the procedure of capital reduction. Then if the expulsion is made by the reason of failing to perform the capital, the incomes of transfering should be used to form the corporation capital. The insufficient part should be expelled through the procedure of capital reduction.