The Alternative Remedies Of Judicial Company Dissolution

In 2005, the judicial dissolution of a company was introduced during the revision of the "Company Law", as a last resort to solve the corporate deadlock. By the court-ordered-dissolution, judicial dissolution safeguards the interests of the shareholders oppressed, prevents the loss of company assets and has opened up a new path for dissenters to withdraw funding and the company to withdraw from the market. However, the essence of this judicial remedy is death command imposed by the judicature. It is recognized as the most extreme and the most drastic means, which causes great external damage for shareholders, companies, other stakeholders and public interest. What’s more, judicial dissolution does not achieve its aims in judicial practice. It is the lack of legislation and the court’s prudent attitude in the litigation of company dissolution that lead to the failure of judicial dissolution both in the protection of shareholders’ equity and in the safeguard of public interest. Besides, there are some risks of the judicial dissolution, such as being made use by minority shareholders, even litigation abusing, and corruption of public power. Therefore, the court is usually reluctant to take such drastic measures. Instead, the court needs to provide a more moderate alternative remedy for beleaguered minority shareholders. In building the judicial dissolution system, some foreign countries set up a series of alternative remedies in order to avoid dissolution of the company, such as remedy of unfair prejudice system in UK, provisional custodian system, the provisional director system, compulsory transfer of share rights system in the USA, withdrawal right and expulsion right system in German, etc. Nevertheless, there is no legislation on alternative remedy measures to judicial dissolution. And it is also difficult to make a breakthrough in juridical practice. Under the existing legislative framework, the author thinks that some mechanisms, such as the pre-litigation mediation, shareholders derivative lawsuit and dissenters’ withdrawal, can be used to solve corporate deadlock; if breaking through the existing legal framework, we can take the provisional director system, the provisional custodian system, compulsory transfer of share rights system, and withdrawal right and expulsion right system, etc., as reference for legislation to improve legal system of alternative measures to judicial dissolution.By the methods of historical analysis, comparative analysis, economic analysis, the dissertation discuss the following three parts:Chapter Ⅰ reveals the defects of the judicial dissolution of a company, and then illustrates the necessity and significance of introducing alternative measures to judicial dissolution. The main purpose that the court pronounces the dissolution of company is to resolve the company’s human joining barriers, such as corporate deadlock and shareholder oppression. But juridical practice shows that, instead of safeguarding shareholders’ interest, the judicial dissolution actually causes tremendously external impact. In addition, the imperfect legislation of judicial dissolution and the disunity of judicial judgment standards may be abused by minority shareholders, and even lead to power rent-seeking in China. Alternative remedy measures, such as the other mechanism of disputers’withdrawal, contribute to resolve the barriers of shareholder-joining on the basis of maintaining the company’s presence, and to avoid kinds of issues caused by the defects of judicial dissolution system at the same time. In Chapter Ⅱ, the author investigates the legislative and judicial experience of foreign alternative remedy measures to judicial dissolution, for instance, remedy of unfair prejudice system in UK, non-judicial conciliation, arbitration, the appointment of a provisional custodian, the appointment of a provisional director, compulsory transfer of share rights in the USA, withdrawal right and expulsion right system in German. In Chapter Ⅲ, some suggestions are given for constructing alternative measures to judicial dissolution in China, based on the empirical analysis of the legislation and judiciary of alternative measures to judicial dissolution and the comparison of the advantages and disadvantages of many alternative remedy measures.