The Right And Responsibility Of Shareholder Representative Action

Shareholder representative action，also called “shareholder derived litigation”，was oriented from Equity Law，consummated in the U.S Law. Nowadays, to establisha corporate becomes easier， this system becomes a good tool to complete thecorporate governance，to supervise the behavior of the directors，supervisors andexecutors，and to protect the right and interest of minority shareholders. In2005，thissystem was enacted into Chinese Corporate Law. But in the law，there are only2articles (Article150,152)involved. So all I can say is we have this system，but there isno good examples in our country to show how to use this system. And no laws andregulations can help the minority shareholders to protect their rights. There are somesituations that controlling shareholders use this system to get unjust enrichment. Thereare some details in this system designed to help us reach the target that protecting theinterest of minority shareholders and preventing the controlling shareholders abusethe right.The logic of this paper: introducing details of this system in foreign law——analyze our regulation——raise the problems in practice——make the legal advice tosolve these problems. Practice of foreign countries has been very mature，especiallyAmerica. The laws of Japan, German all belongs to civil law system, which are betterthan us. As their national conditions are similar with ours, their systems are valuablefor us to reference. Second, keeping the view on PRC Corporate Law, and focusing onthe Article150.152, we can get knowledge that what does our system look like, andcompared with the foreign systems to find out the problems. Third and also the most important one is to lead my own legal advice which method may help us to completeour system, what details should be designed so that the system can be operatedcorrectly to reach the target.The paper can be divided into4parts to show how to design the details to reachthe target of this system. The first problem is to ensure the nature of the right based onthis system. According to my research，I find a phenomenon that in practice，differentjudges have different considerations on the nature of this system which leads todifferent results of cases. To enlarge the usage of this system so that we can exceedthe power on protecting the minority shareholders，we must know the nature of theright. Second one is who can use this right，whether we should design somelimitations in our system to make sure which kind of shareholders should be protected,so that to reach the target of the system.The limitation in our system is useful or notstill need to be discussed. The third one is how to operate this right. Our system isonly based on two articles. It can’t show the content of this right completely，so that inpractice,less shareholders use this right，as they don’t know what the right is and howto use it. So it becomes important for us to complete the content of this right to let theshareholders know what it is and how to do. The last part is the result of using thisright. As a lawsuit was raised, there might be two possibilities in the case, one is theshareholder win the case，and then how to protect the interest of the corporate? whoshould cover the cost of litigation? whether we should design some details toencourage shareholder using this right to supervise the behavior of the directors，supervisors，and executors. But if the shareholders lose the case，whether should theyget some punishment，and take some penalty compensation.