Research On Expansion Of The Parent Company Shareholders’ Rights Under The Framework Of Parent-subsidiary Companies

With the growing number of companies, more and more institutional shareholder appears and thanks to the rights that any institutions and corporations can invest allodially, the companies with the structure which are held by other institutions have become common. However, the conventional corporation law only focus on the protections on rights and benefits of the individual shareholders. Therefore, the appearance of institutional shareholders reveals the absence of the protections on the institutional shareholders. First of all, because the shareholders of the institutional shareholders do not have the rights to know the information of the subsidiary corporation, they can hardly comprehend the operating conditions the subsidiary corporations, consequently, the asymmetrical information between the managers and the shareholders of the institutional shareholders may cause the moral hazard which may be harmful to the protections on the shareholders of the institutional shareholders. This problem can be solved only by giving the shareholders of the institutional shareholders the rights to check the operating information of the subsidiaries, because, given the real operating relationship between the subsidiaries and the institutional shareholders, expanding the existing rights of the shareholders of the parent corporations shows the respect to the legislations and it is also judicial. The writer refers to the American and Japanese legislations which allow the shareholders of the parent company to check the recording of the operating conditions of the subsidiaries, and analyses the existing obstacles and the legislations, then puts forward the theory of the professional assistants in order to improve the system of the managements of the parent and subsidiary companies subjectively and objectively. Therefore, the right to know of the parent companies is protected. On the other hand, though this may make it possible for the shareholders of the parent firms to supervise the managements of the subsidiaries, it is not enough to only protect the rights to be informed, because this supervision cannot recover the lost the shareholders of the parent companies have suffered. The article states that it is better to give the right of double derivative suit to the shareholders of the parent firms on the base of expanding the rights to check the financial statements of the subsidiaries. In fact, double derivative suit is the consequence of the current conditions where the shareholders of the parent companies cannot get enough protections by the conventional and it is a lost that there is no double derivative suit in China’s legislation. Refer to the bibliography, Chinese scholars hardly discuss this problem, however, the foreign scholars hold different opinions with each other. The opponents believe that it is not necessary to build double derivative suit because the exist of other substitution and double derivative suit cannot obey the continuous ownership requirements. However, the supporters insist the importance of double derivative suit in aspects of its social value and legislative value by common control theory, piercing the corporate veil, double fiduciary theory, specific performance theory and agency theory. The writer believes that though the scholars may hold different opinions, this system can lower the cost of managing companies, improve the operations of the companies and protect the shareholders, therefore, it must be indispensable to the corporations in the future.