On The Legal Issues Of Coercive Profit Distribution In Limited Liability Companies

Although the profit distribution belongs to the scope of the company’s autonomy,it is decided by the company itself and enforces itself.However,the company’s autonomy has its limits,and the company’s autonomy is in danger of being manipulated and controlled by major shareholders or insiders.The combination of a highly concentrated equity distribution of a limited liability company and a capital majority decision has resulted in a small number of people holding majority capital,which has a natural willingness to distribute profits.The majority shareholder actually grasps the decision on the company’s profit distribution.When major shareholders abuse shareholder rights to manipulate the company to avoid profit distribution or directly reject profit distribution,and its own disguised distribution and exclusive distribution through high wages,bonuses or other marginal interests,based on the principle of corporate justice,prohibiting abuse of rights Principles and reasonable expectation principles,the court has the legitimacy of the shareholder’s lawsuit to force the company to distribute profits,and company autonomy is not the reason for refusing the court’s intervention.The provisions of Article 15 of the Judicial Interpretation of Company Law(IV)on the mandatory profit distribution are too vague and operability is not strong.The judicial practice of compulsory profit distribution of limited liability companies highlights the inconsistent application conditions of compulsory profit distribution.Issues such as unbalanced distribution of burden of proof,mode and effect of judgment are not clear.The applicable conditions for mandatory profit distribution should be clarified,the burden of proof between shareholders and companies should be reasonably distributed,and the judgment method should be clarified to balance corporate autonomy and judicial intervention,and achieve a balance between corporate autonomy and minority shareholders’ rights protection.In addition to the introduction and conclusion,this article is divided into three parts,about 30,000 words.The first part discusses the legal basis of the mandatory profit distribution of limited liability companies.Combining the relevant provisions of the Company Law and the Judicial Interpretation of the Company Law(IV),from the aspects of the limits of corporate autonomy,the principle of corporate justice,and the principle of prohibiting the abuse of rights,discussing the judicial intervention of corporate profit distribution has its jurisprudential basis.At the same time,it is pointed out that extraterritorial countries also have provisions for mandatory distribution of corporate profits.Although the profit distribution belongs to the scope of corporate autonomy,but when the major shareholders,by virtue of their voting advantage or dominant position,control the company to avoid profit distribution or refuse profit distribution,while themselves receive profit distribution in disguise through high salaries,bonuses or other benefits.The pattern of interests among shareholders has been seriously unbalanced,and it is no longer a matter of corporate autonomy.Mandatory profit distribution is a powerful measure to correct the imbalance of interests among shareholders.The second part discusses the status quo and existing problems of the mandatory profit distribution of limited liability companies.The author sorts out the cases of profit distribution disputes in judicial practice.Under the resolution of the shareholders’ meeting that specifies the specific allocation plan,the court usually supports the shareholders’ request for the distribution of profits according to the resolution.However,under the resolution of the shareholders’ meeting without specific allocation plan,the court has different treatments for the mandatory profit distribution of shareholders.Some courts simply do not support the reasons for company autonomy,and some courts do not support the reasons why shareholders cannot provide evidence.Some courts support shareholders to force the allocation of petitions,but the reasons for the different.This highlights the problems of unclear application conditions of forced profit distribution and unbalanced distribution of burden of proof,and so on.The third part elaborates the perfect suggestions for the mandatory profit distribution of limited liability companies.In response to the problems in the second part of the limited liability company’s mandatory profit distribution,the proposed recommendations are made from the entity and procedure.Explicitly clarifying the applicable conditions of forced profit distribution is an important boundary for balancing corporate autonomy and judicial intervention,and is also an inevitable requirement for balancing corporate autonomy and minority shareholders’ rights protection.The existence of distributable profit is the precondition of forced profit distribution.The existence of “abuse of shareholder rights” in profit distribution is the substantive condition of forced profit distribution.The exhaustion of the company’s internal remedies is an inevitable requirement for respecting the company’s autonomy.Reasonably distribute the burden of proof between shareholders and companies,clarify the manner and effectiveness of judgments,and actively exert judicial initiative to focus on mediation and resolve disputes in order to achieve a balance between judicial intervention and corporate autonomy.