Theory Of Corporate Deadlock Judicial Settlement Mechanism

Our country’s ‘Company Act’ was promulgated in1993, but at that time,due to historical and practical reasons, it did not specify the petition rights ofshareholders to dissolve a company. So the incidents of companies reachingimpasse, major shareholders abusing the use of capitals and shareholders’interests suffering continuous losses had happened from time to time. When theinterests of small and medium shareholders had sustained grave losses, they hadno place to seek redress due to the lack of protective legislations.Clause138of the new ‘Company Act’ enacted in2006stipulates:‘In theevent of the operating management of a company is suffering from seriousdifficulties, the continuous maintenance of its exixstence will incur heavy lossesto the shareholders and all solution avenues had been exhausted, theshareholders holding more than10%of the company’s total voting shares canpetition for the dissolution of the company in a people’s court.’. This regulationfor the first time ensures the petition rights of shareholders in our country todisolve a company, it offers legislative authority for the protection of the rightsof small and medium shareholders and this is a breakthrough on the legislationsof our country’s ‘Company Act’. However, this regulation appears to be inprinciple only, it will encounter many problems in actual judiciary operatingprocedures. For examples, the conditions required to place the case on file, therecognition on the qualification of the litigants, the determination on the existence of serious difficulties in the operating management of the company,etc.This thesis analyses the legislation situation in our country by attaching itsemphasis on the existing problems in juridical practice during litigation of acompany dissolution, and by referring to the regulations and actual applicationsfrom abroad in the protection of shareholders’ petition rights to dissolve acompany in our country, it discusses the relevant problems with the objective ofoffering some references to juridical practice.