The Analysis Of Shareholders' Derivative Right To File Disgorgement

How to protect the power of directors,supervisors,and senior executives in the modern corporate governance model,where ownership and control are increasingly separated,is a challenge.Shareholder's right to file disgorgement on behalf of the company is an important system that effectively restrains the power of company executives,and ensures the reasonable exercise of power within the company.Therefore the system needs to be taken seriously.Based on co-benefit right,shareholders can protect the interests of the company by filing a disgorgement on behalf of the company.The disgorgement system in our country is still immature.Subject qualification of plaintiff being heavily questioned,scope of defendant being overly narrowed,confusing application of pre-action procedures,expensive litigation costs,and high level of difficulty in providing proof are the top problems in the current system that are yet to be resolved.It is necessary to draw lessons from the existing foreign disgorgement systems to improve ours.The United Kingdom refined the system of sharehold ers taking derivative actions from several aspects.Those include the conditions,procedural policies,and split of litigation expense.The United States has expanded the scope of a shareholder's derivative actions on behalf of the company's interest,specified in details the qualifications of litigant,and established mechanisms to prevent abuse of the system.And in order to encourage shareholders to take reasonable derivative actions,the plaintiff shareholders are compensated for part or all of the litigation costs.Japan interpreted the shareholder derivative action system through a special section,introduced the U.S.litigation cost compensation policy,and established pre-action procedure rules on shareholder derivative actions.The established systems in these countries on shareholders filing disgorgement on behalf of company are available for our reference.The litigant policy in our existing system can be improved by relaxing restrictions on the plaintiff's eligibility,and by expanding the scope o f defendant and clarifying the status of the company when shareholders file disgorgement on behalf of the company.An incentive mechanism for such actions can also be formed by implementing case acceptance fee preferential policies and litigation cost comp ensation policies.The constraint mechanism of the system can be refined through specifying the pre-action procedures that a shareholder needs to take to file disgorgement on behalf of company,and establishing the guarantee system of litigation costs.Las t but not least,the disgorgement system can be further improved by clearly defining the status of the court when shareholders exercise the right of filing disgorgement on behalf of company,clarifying case jurisdiction,granting appropriate extension of litigation,reversing the burden of proof,determining the court's res judicata,and allowing retrials.