The Judicial Relief Of The Dividends In Close Corporation

Despite the theory of company law in the United States are advanced, our company law theory also had been studying the United States’, but there are many differences between China and the United States, the issues China’s company law need to solve also are very different from the United States. So during the study of company law theory of the United States, we must be aware of these different, otherwise we cannot use the theory to solve the problem of China. The author knows the differences, and wants to use the appropriate theory to solve China’s problems.This article is divided into seven chapters, in the first chapter, the author introduces the theme in this article, in the second chapter, the author introduces the structure of this article, in the third chapter, the author introduces the fiduciary duty of the executive directors, in the fourth chapter, the author follows the train of thought in the third chapter to introduce the controlling shareholder’s fiduciary duty, in the fifth chapter, the author presents the regulations of the controlling shareholder in American law, in the sixth chapter, the author introduce the relief of shareholder’s oppression, in the seventh chapter, the author presents the content of the Chinese law, in the eighth chapter, the author makes a simple introduction of the new ‘Company Law Judicial Interpretation(4th)’.In the first chapter, the author introduces the importance of dividends for the shareholders in close corporation, and the lack of protection of the dividends in Chinese law. This gives the theme of this article a special meaning. And, the author thinks most research did not reveal the nature of the problem very well, by resorting to the papers researching this article. This makes this paper meaningful.In the second part, the author uses the key words in the topic as the clue, so this part can be divided into three parts, which are ‘close corporation’, ‘relief of dividends’, ‘the judicial relief’. Through the three parts of this paper, the author can get a clear conclusion. The author believes that close corporations have characteristics of its inherent closure, majority rules, relational contracts; and the receive dividends disputes results in ‘the board of directors did not develop the company’s profit distribution plans’ and ‘the shareholders’ committee did not consider and approve the company’s profit distribution plans’. The judicial relief in the commercial field has its unique restraint, but this does not mean that the judicial relief will always respect the autonomy of the company.In the third part, this article first introduces the general theory of fiduciary duty and then introduces the business judgment rule, and some issues not associated with this article, it is about how shareholders can get a rid of boards. The small shareholders’ request to dividends is difficult to secure; but because of ‘the board of directors did not develop the company’s profit distribution plans’. The small shareholders can request the directors to develop the company’s profit distribution plans. So we must consider the fiduciary duty of directors, the directors’ business judgment. Of course, the business judgment rule cannot protect any business judgment.In the fourth part, this paper discusses the controlling shareholder’s fiduciary duty. This issue makes a great number of controversial in China; so far, we cannot form a unified conclusion. Someone doesn’t agree with the controlling shareholder’s fiduciary duty, because the fiduciary duty is talking about the executive directors’ obligation. The analogy to the controlling shareholders will make some obstacles in theory structure; and someone agree with the controlling shareholders fiduciary duty, because the shareholders’ committee generally controls the power of the company in the Chinese law. In this article, the author first puts forward the standard of this argument, the behavior of shareholders in a company can be divided into three levels, and then points out that if the fiduciary duty of controlling shareholders exists basically depends on how the power of company is distributed; in the second part, this paper demonstrates that in Chinese law there is a very powerful shareholders’ committee; in the third part, this paper demonstrates that the weakness board under Chinese law leads to some shareholder disputes; at the end of this part, the author points out the scholars at the early time had discussed the controlling shareholder’s fiduciary duty, and this problem has caused some disputes at that moment. The author finally finds that many scholars agreed with controlling shareholders fiduciary duty, because of problem solving. The theory is based on the need of solving practical problems, rather than the theory of coherence.In the fifth part, this paper refers to foreign laws. In the closed corporation in America, the separation of controlling and owning is not obvious, the roles of board are not so important, so the American law must also deal with some special problem, for example the struggle between the shareholders. And how the American laws solve the issues in close corporations? The author finds that the some courts in United States use the words ‘fiduciary duty of controlling shareholders’, and a lot of Chinese scholars use these cases to prove that the term ‘controlling shareholders fiduciary duty’ have also been admitted in America. But when carefully study these sentence, we will find the different from controlling shareholders fiduciary duty and executive director fiduciary duty, so, even if American law admits the fiduciary duty of controlling shareholders, its meaning is not equal to executive director’s fiduciary duty. Later, this paper introduces the importance of shareholder agreement in closed company, both in China and America the scholars all agree with the importance of shareholders’ agreements. Moreover, in American law the board of directors in close corporation is not in a dispensable position. So the foreign law developed ‘shareholders reasonable expectations ’, used to solve the problem of oppression of shareholders.In the sixth part, this paper points out that the shareholder oppression and executive directors fiduciary duty are actually different, litigation mode for example, the American law developed a lawsuit pattern, different from the derivative action, designed to solve the problem of oppression of shareholders. At the same time, the reliefs methods in American law are worth learning.In the seventh part, this paper will talk about Chinese law. The author will use the results from previous research to make a comment about Chinese law. This paper argues that Chinese legislation in 2005 didn’t put too much consideration in the questions about oppression of shareholders, so that we once met questions about the good faith, we always involuntarily think of fiduciary duty, resulting in the theory of chaos. At the same time, because the theory itself isn’t clear, it also led to the lack of relief in Chinese law. At the same time, the defects of legislation will naturally affect the judicial work, while the author find some cases, we can find out the way Chinese courts deal with dividends disputes are too simple.In the conclusion part, this paper makes comments to ‘dividends disputes relief’, which is a part of the latest ‘Company Law Judicial Interpretation(4th)’.