Research On The Reform Of British Shareholder Derivative Action

With the evolution and development of the structure of corporation, a lot of systems have been formed aiming at the protection of the rights of shareholders, and the shareholder derivative action system is one of the most important means, which is very precious and even can be said to be the last barrier to protect the company and the minority shareholders’ rights. As we know, England is the birthplace of this system, and it came from the famous British case of Foss v. Harbottle as well as some other related cases in 1843. During the late century, the UK emerged a large number of related cases, forming a huge and complex case law system. But what we should pay attention to is that the UK does not stay in this case law, but makes effort to carry on the statute law reform of many corporation legal systems including the shareholder derivative action with the promotion of the wave of the statute law reform, in order to create a more modern, more flexible derivative action.The effort become a reality when Companies Act 2006 and Civil Procedural Rules 2007 were enacted. As a case law country, it is a very interesting to make the provisions of the shareholder derivative action system which has a long history by the form of statute law. So what is the connotation and characteristic of the British system of shareholder derivative action? What is the difference between with other systems of protection of rights? What is the relationship between statute law and case law? How dose the substantive law connect to the procedural law? And whether the system formed by statute law is a correction to the British original case law “Foss rule”? So I hope that through this paper, I cannot only find these answers but obtain the relevant experience of the statute law reform,which can help to provide some suggestions for our country in the relevant legislation.In this paper, there is four chapters as following:Chapter I, the definition of the British shareholder derivative action.This chapter carries on the elaboration from two aspects: one is to illustrate the development and characteristics of the system’s concept. The early Shareholder derivative litigation appeared as the form of equitable, and the litigation to the interests of the company was not known as the derivative action, but was described as "a minority shareholder litigation and shareholder litigation" or "the shareholder relief". In fact, the derivative action as a proper noun the legal concept of this kind of litigation, is created by the American case law. The concept was first imported from the United States to England in 1975 to express the derivative action, and it was defined by Supreme Court Rules in 1994 as: "it is a litigation brought by one or more shareholders of the company,the cause is attributable to the company, and on behalf of the company to seek relief." This concept reveals the nature of the proceedings clearly, namely individual Shareholders exercise the right does not come from himself, but "derived" from the company. So it is suitable for the principle of the exception, and has the feature of "substitution" and "representative", stay in the different states of the law.The other is to explain the difference between the system of shareholder derivative action and direct action, as well as representative action.As is based on "substitution" and "representative" of the shareholder derivative action,if the shareholder filed derivative action, while he is the only one of the company’s shareholders,the distinction of the Individual action and the shareholders derivative action is blurred; and the representative of the shareholder derivative action makes it easy to confuse with the representative action, so it is extremely important to make a clear distinction between these systems. And finally we can understand the characteristics of this system more deeply compared by these similar systems.Chapter II, the shareholder derivative action in British case law. This chapter begins with a brief introduction of Foss v. Harbottle case, to extract the Foss rule as the origin of the shareholder derivative action.The Foss rule says when the company’s interests are damaged, only the company itself has the right to bring a lawsuit,and the court shall not interfere in the majority shareholders. In fact, "Foss rule" is a very clear attitude restricting the minority shareholders’ right to judicial relief. But in this way, when the company’s control against the interests of the company, because the company under the control of the offender, the minority shareholders can not sue in his own name, the interests of the company and minority shareholders would not be protected. Therefore, the court had to find a way out from the equity law, so the Equity developed the exception of "Foss rule", it has created four exceptions to the rule after several generations modified the rule,Mainly including(1) relates to the litigation of unauthorized or illegal transaction behavior;(2)individual shareholder rights;(3) require majority trading action;(4) constitute the minority shareholder action fraud transaction.Chapter III, the Statute law reform of the British shareholder derivative action.This chapter is divided into four parts, the first part describes the statute law of the British shareholder derivative action, including the background of the transformation from the to the statute law, Mainly because the shareholder derivative action in case law is not only stiff, lack of system, but also fuzzy, and lack of unified case guidance,as for it is difficult to adapt to the development of modern economy.At the same time, other common law countries have also carried on the comprehensive reform in order to adapt to the development trend of company law, the shareholders derivative action, company law.The 210 th in "company law" in 1948, the 75 th in 1980 and the 459 th in 1985 can be said to be the prototype of the development stage.Since 1995, the British began to carry out a comprehensive reform of the relief system including the shareholder derivative action, and formally incorporated it into the legislation suggestions and report. Finally the CA 2006 and the CPR 2007 have been published, since then the basic law system of the shareholder derivative action has been formed.The second part is the specification of the shareholder derivative action in the CA 2006, to show the changes in the new law of the shareholder derivative action from two aspects from entity and procedure, in order to show the advantage of the statute law. The third part is the stipulate of the derivative action in the CPR 2007, introducing the revised content, including the lawsuit mention, lawsuit told, expenses and compensation system as well as the suspension and reconciliation, and also the relevant jurisdiction content.Chapter IV, the assessment and inspiration of the reform of British shareholder derivative action statute law.This chapter is divided into three sections, the first section discusses the implementation of the current shareholder’s derivative action after the new CA being promulgated. Through the study of the latest case in 2009-2013 years,we can analyze how dose the judge understand the new shareholder derivative litigation system, in order to show whether is the new statute law of shareholder derivative action better than the derivative action case law under the original.The second section makes comprehensive evaluation of the legislation of shareholder derivative action system, analyzes its advantages and shortcomings, in order to show whether the cultural reform in the end is the fundamental changes in the rules of the law or just a correction, and make my own interpretation of the prospect of this system. Through the analysis, I think that the UK is still virtually in the process from case law to statute law with a lot of problems, so how to get rid of the case law is the development direction of the shareholder derivative action in the future.The third section summarizes the experience from the historical evolution.By combining the reality of our country, put forward some macroscopic and the direction of the legislation enlightenment, including: 1. to stick to the road of the development of statutory law, 2.to take legislative idea with the combination of substantive law and procedural law, 3.the combination of legislation and practice, to prevent going without the reality.