Study On Causes Of Expulsion Of Shareholders

The limited liability company plays a vital role in market economy. Shareholders are thecompany’s ultimate owners, the credit worthiness, interest relationship and other factors ofshareholders deeply affect the company’s development. The limited liability company is asocial organization with high degree of autonomy, with close relations among the company’sshareholders. Therefore, the system of expulsion of shareholders is also applicable to thelimited liability company.Causes of expulsion of shareholders are the core and essence of the system of expulsionof shareholders and should correspond with the theoretical basis and value orientation of thesystem of expulsion of shareholders.“a shareholder who fails to perform capital contributionobligation or withdraws all the contribution made” is our current rule on the causes ofexpulsion of shareholders. But the provision does not fulfill the theoretical basis and thecomplex needs of the practices.Therefore, in order to satisfy the needs of the exercises of theexpulsion of shareholders, it is necessary to design legal and reasonable causes of expulsionof shareholders which are based on the human joining theory.Capital contribution obligation and duty of loyalty of shareholders give full expression tothe human joining theory of the expulsion of shareholders. Capital contribution obligation isthe obligation of shareholders to perform his/her capital contribution obligation timely and infull accordance with the agreed manner. The duty of loyalty is that the behavior of anymember should not deviate from the company’s ultimate development goal and should notjeopardize the legitimate interests of other shareholders. That a shareholder appears suchserious behaviors which are in breach of funding obligations and duty of loyalty is the rootcause why he/she is expelled.The theory of the responsibility of breaking a contract and tort are theoretical tools todesign causes of expulsion of shareholders. The design of causes of expulsion of shareholdersshould uphold following macroscopic clues:(1) The shareholder breaks the contract soseriously that it is unnecessary to keep the shareholder qualified;(2) The shareholder appearsserious torts which produce grave and irreparable damage to the company or othershareholders. Under such circumstances, the company has the right to expel the shareholder.Using the experience of other countries for reference，based on the legal basis andconsiderations, combined with the judicial practices, where, the shareholder has any of thefollowing acts, the company has right to expel the shareholder:(1) failure to perform his/her capital contribution obligation, false investment, withdrawing all his/her capital contribution;(2) a serious violation of non-compete obligations;(3) misappropriation, embezzlement ofcompany enormous property;(4)malicious collusion with a third party to cause serious injuryto the company or other shareholders;(5) controlling shareholder abuse controlling position;(6) other serious violations;(7) as stipulated in the articles of the limited liability company.