On The Defects And Improvement Of The Demanded Procedure Of Shareholder's Representative Action

The shareholder's representative action is a unique action in the company law,which provides opportunities for minority shareholders to raise a lawsuit in their own name to supervise the internal company governance.In order to prevent the occurrence of minority shareholders to seek personal gain by raising a lawsuit,all countries have provided the demanded procedure to match the system.However,the shareholder's representative action in the new "Company Law" of China is too general and lacks many content,which brings many inconveniences to judicial practice.In order to improve the shareholder's representative action and judicial practice of our country,this paper put forward some suggestions which based on the extraterritorial advanced legislation and practice and combines China's corporate governance structure,the company's development statues and the status of China's judicial practice.This paper consist of four parts:The first part is the foundation of this article,which discusses the legal principle analysis of the demanded procedure of shareholder's representative action.The demanded procedure not only has the procedural value of linking litigation preparation and formal litigation,but also has the important significance of balancing corporate internal governance in substantive law.In essence,the demanded procedure is the ultimate consideration of whether the company abuses its personality and it is also the ultimate test of whether the company violate the majority decision rule of capital.That reflects the fundamental respect for the theory of personality independence of fictitious persons and the fundamental respect of majority decision rule of capital.The demanded procedure has two system value.Its general value is reflected in the balance of fairness and efficiency and its direct value is reflected in the balance of the company's internal governance structure.It plays a buffer role in the event that the operator's control bureau leads to an imbalance in the internal governance structure of the company and prompting the company to re-examine its own behavior and governance structure.Currently,China's shareholder representative lawsuit faces two major dilemmas:excessive valueless litigation and insufficient value litigation.Therefore,we should start from these two points to complete the demanded procedure of our country.First,we need adopt a looser legislative tendency and encourage the minority shareholders to bring a shareholder's representative lawsuit and refine the specific rules at step of review.The second part analysis and reconstructs the application of the demanded procedure.In essence,the right to bring a shareholder representative lawsuit comes from the supervisory right,which belongs to the shareholders' rights.There are two major defects in China's regulations for applicants:First,judging from the contractual relationship theory and the stakeholder theory that our company law stipulate only shareholder has the right to raise a shareholder's representative action.That ignores the interests of others who also has the supervisory rights.Secondly,according to our company law that only shareholders of a limited liability company and shareholders of a limited company which accord with the legal provisions of company law can raise a shareholder's representative action,which not only ignores the equity principle but also cannot achieve the purpose of preventing abuses.So,the "shareholder"should be expanded to explain and we should remove the requirement of shareholding ratio and time.In the selection of the respondent,I think based on the dual structure of the company in China that the board of supervisors should be determined as the principle respondent and the respondent should be determined flexibly according to the different reasons for the application,instead of introducing the special litigation committee system of the United States.The essence of the Special Litigation Committee is to restrict the board of supervisors.Our priority is not to introduce a new system,but how to rescue the board of supervisors independent from the board of directors.The third part analysis and reconstructs the step of review.The review deadline of our company law is too simply to deal with complex situations of real life.When the shareholders meeting as the respondent,the 30 days review period is obviously too hasty.Under special circumstance,the 30days review deadline is too short to achieve the goal of self-government review.Thus,the review deadline shall be more flexible and confirm different review deadline according to different reasons for applying.It also should allow company to apply for an extension of the review deadline under specific circumstances.As for review decision,we can introduce the system of Japan that the institution who make the decision should refer a document to applicant which contain the reasons not to prosecute.This system can urge the respondent to perform its duties diligently and inform the review structure reflects the respect for the rights of shareholders and effectively prevent the lawsuit which gain private interests.As for review efficacy,we should not blindly introduce the America's practice that the review decision can prevent the shareholder's lawsuit.First of all,the America has set up this system to prevent the frantic growth of abuses.The applicability of the shareholder representative lawsuit in China is still scarce.Second,the system relies on the judge's greater discretionary power.At present,China's judicial practice cannot be realized.Finally,the purpose of the demanded procedure is to exhaust the company's internal remedies.The fourth part is to improve the exception of the demanded procedure.First of all,China's current legislation adopting a single universal request model is not in line with the reality in China.Article 151 of the "Company Law" establishes the respondent's arrangement on the basis of relatively perfect corporate governance structure.But in fact,most companies in China do not have a sound internal structure and there are numerous companies that lack a board of supervisors.In addition,the"Company Law" lacks provisions on the respondent in many special circumstances,resulting in shareholder cannot find the respondent.Therefore,there is an urgent need to introduce the system that the applicant can also raise a lawsuit directly when a company loses its independence.Secondly,Our company law stipulate that only under emergency circumstance can applicant pass the demanded procedure and raise lawsuit directly.But as for which circumstance belongs to certain circumstance that law did not stipulate.That increased the uncertainty of judicial practice.So,It is necessary to make clear what is the "emergency circumstance" and the examination authority should be determined as court,and the judge should be given a certain amount of discretion.