The Protection Of Minority Shareholders' Right In Share Capital Increase Process Of Limited Liability Company

Due to its smaller scale and lower establishment threshold, there is no doubt that limited liability company holds an absolute advantage in the number of two kind of legal company shapes. At the same time, featured by collaboration of human resource and closely-held, the trust between shareholders is of great significance to the operation management of the company, and it also makes the interests of majority shareholders and minority shareholders collide tenser. Comparative to the controlling shareholders, due to asymmetric acquisition of the company's information and the weak ability to negotiate with large shareholders, the majority of small and medium shareholders are more likely to become the object of plunder in limited liability company. Capitalism developed countries have long been awared of the need of special protection for minority shareholders and both legislation and judicial precedent provide various remedies for them, which makes the relief of minority shareholders' right gradually perfect and mature. United Kingdom has established a basic rule in Foss v. Harbottle in 1843 that barred an action by a minority shareholder. This interpretation or extension of Foss v. Harbottle requires a minority shareholder to demonstrate that wrong-doers have sufficient ownership control over the company to preclude the possibility of legally effective ratification of the conduct or transaction challenged by the minority shareholder. This rule actually aims to protect majority shareholder's rights. Then as a result of the popular of democratic idea, there gradually formed the system of cumulative voting and shareholder's information right. Measures and ways of protection of the rights and interests of minority shareholders are increasingly rich.Traditionally the difference between controlling shareholders and minority shareholder is distinguished by shareholding ratio. That is to say,shareholding more than 50% stock is controlling shareholders, then as equity scattering, even if the shareholder who holds lower equity ratio can realize the actual control of the company by being the chairman of directors, electing board officers or signing the control agreement to make his will becomes company's. The controlling shareholder in this article refers to a narrow sense, that is shareholders holding the majority or relative larger ratio of the stock by the way of voting direct control of decision-making and management of the company. So in this article, despite the calling diversity, the meaning of controlling shareholders and the nature of majority shareholders are same. Namely their equity ratio can play a controlling role in the company. Comparatively, minority shareholders are non-controlling shareholders who take smaller proportion of shares different from shareholders with control and dominance.Domestic research on protection of the rights and interests of majority shareholders are more and more, no matter from the revision of company law and the research of scholars, it can be seen that the protection of the rights and interests of minority shareholders has been deeply rooted in the hearts of people. But more attention is paid on the protection of rights and interests in joint-stock company especially the Public company. As for limited liability company, relieves are still insufficient and are on the way to sufficient. It is even fewer from the aspect of capital increase and share expansion. Therefore the author aims to probe into how the judiciary can protect the minority shareholders during this process in order to prevent the majority shareholders' mala fides damage.This paper will be divided into three parts:The first part: Introducing of the case and the focus of dispute. Firstly, the origin of the case is briefly introduced, then disputes are extracted and purified so as to reveal to the center of the argument in this paper.The second part: Analyzing of case. This part mainly discusses the following three issues: The first is a brief introduction to the legal mechanism of capital increase and stock expansion, which leads to the second part that judicial intervention should be cautious to deal with equity capital increase of limited liability company. The analysis of this part is mainly on the basis of the benefits balance between the interests of the whole company and shareholders, the majority shareholders and minority shareholders. The third part is to explore the majority shareholders in limited liability company owe a fiduciary duty to minority shareholders. The last part mainly explores whether the business judgment rule can be applied in the limited liability company, as well as the balance of the business judgment rule and capital majority rule.The third part: Through the analysis of the judgment of the court, combining with China's practice and the analysis of above foreign precedents, the author try to figure out how to provide judicial remedies to the minority shareholders more powerful to protect their equity interests.