A Case Analysis Of Dissolution Dispute Yu V.A Co.Ltd.

Company deadlock is a common problem encountered by limited liability companies based on the harmonious cooperation among shareholders in their operation management process, which problem is manifested in the company decision-making malfunctioning and the management and operation becoming stagnant. Legislation concerning company deadlock has been absent in China for a long time. China's Company Law introduced the judicial dissolution system for the first time in 2005, offering a solution to settle the problem of company deadlock.Article 1 of the Provisions of the Supreme People's Court on Some Issues about the Application of the Company Law of the People's Republic of China(II) expressly lists three common situations of company deadlock. Although this series of stipulations preliminarily form the framework of the judicial dissolution system of companies, it is still difficult to deal with the cases relating to company deadlock at present. This is because company deadlock appears in various forms in practice and China's existing legislation is still defective in many aspects.In the dispute case of Yu versus Zhou on company dissolution, the analysis of the focus of dispute and the trial result leads to the conclusion that under the situations where a company is to be dissolved, the operation in the same business as approved at the meeting of shareholders should not be identified as violating the “duty of loyalty”of shareholders but should testify the consensus reached by shareholders on dissolving the company. In addition, since Article 182 of the Company Law gives an ambiguous definition of company dissolution and it cannot be fairly applied in judicial practice, the situations where “any severe difficulty occurs to the operation management of a company”, “the interests of the shareholders may suffer heavy losses if the company continues to exist” and “there is no other way to solve the problem”should be defined more clearly in legislation. A limited liability company is established on the basis of harmonious cooperation which stands for “trust”. Only when there is no trust among the shareholders of a company can the company be dissolved. At present, there are still numerous problems in China's judicial dissolution system of companies, which system should be improved in terms of the substantiveprovisions, procedure stipulations and other remedies of company dissolution on the basis of learning from the legislative experience of foreign laws.