Judicial Intervention To The Disputes Of Dividends From The Perspectives Of Limited Liability Company

Right to require dividends is not only the core of the beneficial rights of shareholders, but also the embodiment as the owner of company. Distribution from the company is almost the only way to gain return on investment, especially for minority shareholders. Shareholders of listed companies obtain investment income mainly through stock appreciation. The gradually improvement of China securities exchange market makes it possible that the shareholders of listed companies could avoid hindrances of exercising distribution of profits and damages through free transfer of shares. As we all know, the limited liability company is characterized by human character preempertive and encapsulation. As a result, the assignment of the equity is limited to a greater level. When it comes to non-distribution or insufficient distribution, Judicial Intervention to the disputes and provides legal remedies is of vital important for the limited liability company’s shareholders. The dissertation emphatically focuses on the right to dividends of limited liability company’s shareholders. Although there is a widespread challenge over the distribution over the world, but there is no country like China faces rights violations that is so common and serious.According to the relevant provisions of the company law, apart from the company is qualified of distribution, resolutions to distribution made by the shareholders’ committee is necessary. In other words, shareholders’ right to distribution is only a kind of expectation right and hard to enforce without resolutions of shareholders’ committee. Controlling shareholders extracts arbitrary provident fund excessively or gain executives bonuses as company executives in the form of self-enrichment through shareholders’ committee resolution, which jeopardize the interests of minority shareholders. Also, the relevant provisions of the company law do not provide direct remedies, that is to say, minority shareholders may only seek remedies through indirect ways, such as “compensation resulting from abusing shareholders’ rights”(article 20), “void or revoked resolutions made by the shareholders’ committee”(article 22), “transferring shareholders’ shares”(article 71), “right to demand company repurchase of shares”(article 74), “dissolution of the company”(article 182). Those indirect ways could not protect shareholders’ rights of requiring allocation and could not satisfy the needs of minority shareholders.At the same time, corporate governance follows the business judgment on the basis of the principle of "Majority Capital Speaks", the majority of the Court follows the principle of "judicial intervention business judgment prudently ", which take repulsive attitudes to judicial intervention. The balance between them is the key to smooth operation of the company and protect the shareholders’ rights. The prior judicial precedents reflect the tendency of the courts to this issue that the courts refer to be reluctant to support the shareholders petition without resolution of shareholders’ committee. However, surprisingly enough, it also noted that some courts began to intervene modestly by balancing business judgment rule and judicial discretion intervention. However, this attempt does not likely to make judicial determination of unity, even in the same area. Once the legal reasoning has great divergence with the corresponding sense of justice, there may appear legitimacy crisis of law and order.Existing literature to study the right to distribution of shareholders mostly remains at the aspect of theory, focusing on the judicial of distribution right, and few analyzing China’s judicial practice on the empirical aspect. some of the few articles involving right to distribution of shareholders from empirical analysis only focus on a few typical cases, which is difficult to make a relatively comprehensive description, nor to reveal the attitude and degree of judicial practice and judicial intervention of contemporary China. In view of this, the dissertation takes judicial Controversies as the main investigation object and collects cases through two databases of Pkulaw and Lawyee, guide cases of the courts at all levels, the court proceedings on publication, to carry on the comprehensive analysis by empirical research, hoping to extract issues with abstract theoretical value. The dissertation aims to demonstrate the protection and practical drawbacks of legislative status from positivist perspective, expound the legitimacy and path of Judicial Intervention, in an attempt to find reasonable solutions to this problem by balancing the judicial power and the company autonomy. The dissertation explores the following issues in five chapters:Chapter One generalizes and explains the definition and basic properties of right to dividends, and discriminates the potential ambiguity between profit distribution right and right to request distribute. The later part of Chapter One takes the mainstream discipline of Company Law scholars that the right to request distribute can be divided into abstract right and concrete right as lessons. To analysis the right level can be helpful to explore the ways to solve the issue.Chapter Two is the highlight and innovation of the whole paper, by rectifying and analyzing the 625 cases over the last decade since the revised company law in 2005 has been implemented which relating to disputes over the distribution of shareholders, in order to glimpse changing trends of tort style and number of cases, attitudes, reasons and limits of judicial intervention to the issue. The distribution of year and space goes to trial is demonstrated by a set of diagrams. The dissertation crosses out several kinds of cases that makes it necessary to analysis the reasons to make a reasonable explanation to statistics change. The second part using typed tables to demonstrates a total of 214 cases which left after the second filtration of over the last decade since the revised company law in 2005 has been implemented which relating to disputes over the distribution of shareholders, summing up systematically five sorts of cases which contains "allocation disputes over the identity of shareholders", "allocation disputes of concrete profit allocation", "allocation disputes of abstract profit allocation", "allocation disputes involving allocation resolutions", "did not allocate to some shareholders". To be more detail, " allocation disputes over the identity of shareholders" also contains five sorts which are "allocation disputes of requesting allocation on condition of identification of shareholders", "allocation disputes involving equity transfer of shareholders ", "allocation disputes involving the hidden shareholders", "allocation disputes involving the employee stock holding committee". The judicial practice reflected from the cases is enough to demonstrate status quo of this issue and the view and tendency of courts.Chapter Three mainly introduced the current provisions of law for limited liability company of profit distribution, including the principle rules and procedural rules and five kinds of indirect remedies. Principled regulations entitled the shareholders to enjoy the assets income. While the procedural rules set premise conditions of the exercise of shareholders for the distribution of profit. The generality and precondition of regulations make it harder for minority shareholders to realize the right to request profit distribution. The second section use bigger space to elaborate the provisions, exercise styles and drawbacks for protecting minority shareholders of five indirect remedies. It is of vital imminent to give minority shareholders other remedies in terms of the weakness on protection.Chapter Four discusses the legitimacy and rationality of the judicial intervention to disputes of allocation. On the one hand is the harsh infringement situation, on the other hand is the court’ s exclusive manner to the disputes and autonomy theory strongly recommended by scholars. Meanwhile, China with the written law system, compare with the USA and the Britain, cannot develop a system of applicable rules adapting to the development of market economy, which block up the shareholders that had nowhere else to turn. The analysis of this chapter shows that judicial intervention is endogenous demand for company autonomy and is conformed with internal logic of its own. Analyzing the generation and purpose of the famous Business Judgment Rule, judicial practice abroad to break the rule, the paper expounds that the courts should not be superstitious in the rule and should make substantial judgments, which has say for sure of the possibility and certainty of judicial intervention.Chapter Five discusses the solutions to the problem,. For one thing, the dissertation acknowledges that judicial intervention should possess premise and reasonable boundary. Weather the internal remedies had been exhausted should be the first consideration when shareholders face the infringement of allocation. For another, the paper refines the proposals to the five types respectively. Also, for the allocation disputes of abstract profit allocation which is the most controversial, the courts shall make judgments on the basis of the situation when it comes to the reality that internal remedies are far-fetched to apply to the Business Judgment Rule nor achieve reasonable expectation of shareholders.