Study On The Shareholder’s Expulsion System Of Limited Liability Company

Shareholders expulsion system plays an important role in resolving contradictions in LLM and maintaining its human joining. While we don’t have provisions of shareholders de-listing system in Company Law, Article 18 in judicial interpretation III of corporate law is considered to be the beginning of the establishment of expulsion system, but some scholars have different views.They hold the view that the Article 18 is actually a provision of the system of the loss of shareholder’s rights. This paper presents the dispute of the nature of Article 18 as beginning. The first chapter introduces the basic theory of expulsion system, including the concept of Shareholders expulsion, the relationship between the human joining of the LLM and Shareholders expulsion. Chapter I also puts forward that expulsion system plays a major role in the establishment and operation of the LLM and then analyses the effect of the expulsion system in repairing the cracks of human joining of LLM. After that, Chapter I makes a comparison between the expulsion system and the system of the loss of shareholder’s rights in aspects of the function and purpose, the applicable conditions, applicable legal procedures and legal consequences of the foregoing two systems. At last, Chapter I proposes that Article 18 is actually a beginning of the establishment of shareholders expulsion system.Although the shareholder’s expulsion system has been initially established in our country, but there are still some significant deficiencies in its substantive and procedure. The second chapter discusses how to integrate the substantive stipulations of the expulsion system. Chapter Ⅱ firstly discusses the overall guiding principles in integrating a sound expulsion system including exhausting other remedies and maintaining the balance between the human joining and capital integrity of LLM. Then this paper analyses the substantive deficiencies of Article 18 in detail, concerning about the narrow applicable scope and not giving company’s articles autonomy explicitly. The last part analyses the subject of expulsion right and the major causes of expulsion as well as the deposition of shares and the liabilities of the expulsion shareholders. The subject of the expulsion right shall be limited liability company. The major causes include statutory causes and causes stipulated by the articles. Statutory cause is the defect of capital contribution. The causes stipulated by the articles can be summarized as shareholders’ own factors and misconduct. Shareholders’ own factors include poor health conditions and the loss of capacity for civil conduct,the lost of eligibility required by the articles. Improper behaviour can be summarized as a violation of loyalty duty, abuse of shareholders’ rights, and other serious violations of the Articles of Association. At last,Chapter Ⅱdiscusses the deposition of the expulsion shareholders’ shares and the liabilities of the expulsion shareholders to the companies and the creditors.Procedural justice is a requirement for substantive justice. Only when the proper procedures are ensured, can the value of the expulsion system be protected. The third chapter discusses how to perfect the procedure of the expulsion system.Chapter III firstly discusses the deficiencies in the procedure of expulsion system,mainly including the pre-removal procedure, expulsion resolution procedure, the procedure of entering into force and the deposition of the shares of the expulsion shareholders.Then Chapter III puts forward solutions for the foregoing problems including clarifying the form and reasonable period of the summon procedure and expulsion resolution for the formation of the program, the start of the expulsion procedure, the right to defend for the expulsion shareholder and the right to vote for other shareholders. The voting rules mainly concerns about suffrage-avoiding rules and a combination of two-thirds capital majority and a simple majority by the number of the shareholders. Chapter III discusses different academic views about the procedure of entering into effect.By refuting different views proposed by the scholars, Chapter III proposes that the resolution of the expulsion of the shareholders cannot come into effect except that it is admitted by the decision of the court. In the procedure after the expulsion resolution came into effect.