On Cai V. Cheng Du Zheng Zhong Company About Surplus Distribution

The specific law regulation of the shareholder surplus distribution is based on the 34th article of the Corporation Law (2013 amendments) in our country. According to the 34th article, "Shareholders shall get dividends in proportion to their actual investment ratio; shareholders have a pre-emptive right to subscribe capital when a company increases its capital. However, this doesn't include the situation that all shareholders agreed not to distribute dividends or adopt the pre-emptive right to subscribe capital according to investment proportion." Besides the 34th article, the 166th article of the Corporation Law (2013 amendments) also has relevant regulation. But, the law does not clearly defined how to identify qualification of shareholders and how to determine whether the company has an earning distribution conditions. Meanwhile, judicial practice and legal theory have different views. As for the profit distribution right dispute case happened between the Cheng Du Zhen Zhong Electric Co. Ltd and the Cai Company, there are four main disputes:(1) Whether all the "shareholders" on the dividend table have shareholder qualification. (2) Whether the company holds a shareholder meeting to discuss the company's surplus distribution plan. (3) Whether the company meets the requirements of applying the profit distribution plan. (4) Whether the process of the profit distribution has some flaws. After analyzing the above four points, we can easily find out that the four dispute points reveal some deep problems:how to identify the shareholder qualification; how to organize the surplus distribution plan; what's the basic requirements if the company wants to apply the surplus distribution plan; how to regulate the basic process of the surplus distribution. After analyzing this case and its relevant evident, we can get such conclusions:the appellee failed to offer evidence to prove Zhen Zhong Electric Co. Ltd conform to the requirements of the surplus distribution, so the request of the company's surplus distribution is unreasonable.Our judicial practice of shareholder surplus distribution system is clearly insufficient, and the institution is also flawed. This will absolutely lead to problems such as shareholders'rights can't be protected and shareholders can't get any help. In this regard, we should complement shareholders'surplus rights and the supported rights along with fully learn from abroad rich legislation and practical experience and treat the current social environment as the basis, the legislative purpose as the guide. Only this can protect the shareholders' rights.