The Majority Shareholder Right Abuse In China And Its Solutions

The main research objects of this paper are: the current situation of shareholderright abuse, the causes and elements of shareholder right abuse and the analysis ofgovernment policies which influence shareholder right abuse. Based on the specificforms of major shareholder right abuse, this paper outlines two main causes ofshareholder right abuse: the irrationality of corporate structure and the functionalweaken of external governance mechanism. The irrationality of corporate structureincludes: the majority principal causes the result that the major shareholdersmanipulate general meetings of shareholders; board of supervisors and board ofdirectors causes the abuse of shareholder right; the lack of efficient regulations; etc.The functional weaken of external governance mechanism includes: the lack ofrelated policies and relief methods; the flaw of administrative supervision; etc.Moreover, this paper covers the theoretical basis of shareholder right abuse whichcontains the alienation of the majority principal, the conflict of shareholder interestsand the cost-benefit theory. Efficient regulations for shareholders are thereforedemanded. Besides constitutions and shareholder agreement, three litigation reliefmeasures which includes share repurchase rights system, judicial dissolution of thecompany system, the system of stockholder’s derivative action according to laws inChina are analyzed. Apart from the abstract and the conclusion, there are three mainparts in this paper.Chapter One outlines the typical examples of shareholder right abuse in China.For example, related transactions; the resolutions made by manipulations of generalshareholder meetings; the manipulations of board of directors、board of supervisors and managers; the fraud during stock issue. On based of this, chapter one analyzed thecauses of major shareholder right abuse.There are two main sections in Chapter two. Section One focuses on thedefinition of shareholder right abuse and analyzes the key components of shareholderright abuse; the protection of minority shareholder rights. Section two starts with thetheoretical basis of government policies and its necessity.Chapter three analyzes the solutions of shareholder right abuse. On one hand,shareholder right abuse damages interests of companies; on the other hand, it damagesthe legal rights of minority shareholders and other creditors. The necessity of legalcountermeasures includes three litigation relief measures are confirmed in this chapter.In addition, the deficiencies of above are explained. Finally, the precaution stepswhich include constitutions and shareholder agreement are added. In conclusion, thewriter’s opinions on solutions to majority shareholder right abuse are illustrated.