Research Dormant Shareholders’ Right To Know

In real economic activities, dormant shareholders are not uncommon especially at thebeginning stage of the founding of a company, and their influence on the target company isquite substantial. However, the current legislation on the issue of dormant shareholders isnot clear with only two judicial interpretations, which are far from enough to regulateissues concerning dormant shareholders. Moreover, experts and scholars fromjurisprudential circle have not yet formed a consistent understanding on whether thedormant shareholder is the real shareholder of a target company, let alone the problem ofwhether it can enjoy the right to know.This paper mainly focuses on the theoretical analysis about qualification and judicialrelief of dormant shareholders. The2013revised “Company Law” and relevant contents ofregulations of Supreme People’s Court on several issues concerning the provisionsapplicable to “Company Law of People’s Republic of China"(c)” show that: The SupremeCourt holds a positive attitude that the dormant shareholders may be qualified to beshareholders, but there is no applicable rules in specific legal provisions about the dormantshareholder related issues, or no clearly defined rights that can be exercised by dormantshareholders. Based on this, under the premise that “dormant shareholders are shareholdersof the target company indeed”, this paper advocates that dormant shareholders should begiven the right to know and puts forward concrete proposals to protect right to knowenjoyed by dormant shareholders from the judicial explanations. This paper conductsempirical analysis, comparative analysis and document retrieval methods. Based on legaltheory with law, regulation and judicial interpretations, in the perspective of fiduciaryrelationship, this paper carries out a specific analysis on the scope of the rights and judicialrelief enjoyed by dormant shareholders as the subjects enjoying the right to know, whichultimately highlights the particularity of dormant shareholders compared with apparentshareholders as the subjects having the right to know.On the right to know enjoyed by dormant shareholders, this paper holds the view that:first, regarding the qualification for dormant shareholders as real shareholders of a company,this paper tends to apply “the doctrine of substantial requirement” because it better reflectsthe purpose of private autonomy. Second, it holds that dormant shareholders should begiven the right to know because: the right to know is a fundamental right of shareholders;rights and obligations should be unified and follow the principle of fairness and justice; thecompany should expand its investment and promote development to ensure the interests ofinvestors. Third, the rights and restrictions of dormant shareholders in terms of the right to know should be almost consistent with that of the significant shareholders, and differencesare reflected in subjectivity of dormant shareholders, that is to say, only those dormantshareholders with goodwill can enjoy the right to know. Fourth, as for the right to requestand elect enjoyed by examiners, this paper holds the attitude that dormant shareholdersshould not enjoy this right because this right has external attributes. Different from theinspection right, right of reproduction and the right to question, once it is enjoyed bydormant shareholders, the legitimate interests of companies, other shareholders as well asbona fide third party could be easily infringed, and this view is the first innovation of thispaper. Fifth, judicial relief, this paper holds the view that judicial relief can be realized bythree means: contract-based lawsuit, non-contract lawsuit and claim-confirming proceeding.Regarding contract-based lawsuit, dormant shareholders, based on the agency relationshipand the relationship of trust contract, can sue significant shareholders and require actualperformance or default compensation from them. Non-contract lawsuit means the lawsuittaken by dormant shareholders based on an oral agreement between dormant shareholdersand significant shareholders instead of a direct contractual relationship established in thesetwo parties. This lawsuit has greatly expanded the judge’s discretion and is unfavorable toprotecting the interests of dormant shareholders. In this regard, this paper introduces theconcept of “constructive trust” into trust law, which improves the relief ways for dormantshareholders in the case a non-contractual relationship and this is the second innovation ofthis paper. With regard to claim-confirming proceeding, this paper holds that if dormantshareholders meet refusal from the company when they require to exercise the right toknow, they can sue to become real significant shareholders in order to exercise the right,which will save judicial costs greatly.