The Application Of Shareholders Expulsion System In China

In the modern market economy, companies accompanied by the complex internal relations play a increasingly important role. To keep the benign operation, an effective resolution mechanism of interest conflicts is essential for companies to eliminate conflicts of interest between benefits corpuses. Shareholder expulsion system is one of the important mechanisms to resolve the company internal conflicts. The superiority of the system is the effectiveness of conflicts resolution without prejudice to the companies’ continuing operation and development. It protects the common interests of companies and their integrity shareholders and conforms to the principle of maintaining enterprises advocated by commercial law. Nevertheless, regulations of shareholder expulsion system in China still stay on the level of judicial interpretation with simple and monotonous content and institutional framework, which are not enough for judicial practice. Therefore, the subject of this paper, expounding from the following three aspects to research the application of shareholder expulsion system in China.Firstly, the paper introduces the theoretical origin of shareholder expulsion mechanism. It is considered that shareholder expulsion mechanism compared with other conflicts resolution mechanisms is essential with its unique advantages and application scope. In view of its serious legal consequences, the paper deeply analyzes the theoretical basis of shareholder expulsion system and comes to the conclusion that the system is in line with the inherent requirement of theories,such as company autonomy, corporate contract, shareholders’ duty of loyalty and the nature of equity. Then the paper discusses the good development of the system in Germany and the United States and differences and similarities between two of them. China shall draw lessons from these two countries combining with its own national conditions.Secondly, in accordance with the present state of legislation and the problems of application in China, it is obvious that the legislative stipulation is fall behind judicial practice. The sole legislation about shareholders expulsion mechanism is Article 18 of the third Judicial Interpretation of Company Law. Considering the application of the article hereinabove in judicial practice, there are predicaments, for instance, the strictly limited triggers of expulsion reasons, the fuzzy regulation of application and the lack of follow-up system.At last, in view of application problems of shareholders expulsion system, the paper concludes several improvements. It is studied that the system should be explicitly legislated in Company Law and supplemented and detailed in articles of association under company autonomy. Furthermore, it is suggested that the triggers and legal process of expulsion should be legislated and the follow-up system should be consummated from all aspects.