Study On The Expanding The Voting Right Of Shareholder Of Holding Company

Shareholder is the initial owner of the corporate contribution and the ultimate undertaker of the corporate risk.Under the framework of “ownership-running division”,shareholder engages in corporate governance,controls the corporate indirectly,supervises the directors and protects his own rights by appointing directors and exercising voting right on major decisions.With modern business model evolves into corporate group,the identity of shareholder changes from citizen into corporate.The exercise of corporate shareholder voting right is regarded as business judgement and therefore belongs to the right of board of directors instead of board of shareholder.Thus,even if the major assets transfer,merger and split,capital increase and other activities of important subsidiary would seriously influence the corporate group,the shareholder of holding company would not have any voting right due to the independent states of holding company and its subsidiary.Compared with the fact that major decisions shall be permitted by board under single layer corporate structure,the scope of voting right of shareholder of holding company retrenched substantially and in turn.control of board of directors of holding company expanded.This structural effect will increase the agent-principal cost of the shareholder and undermine “insider control”,along with the fact that current remedies available are effective only to those single layer companies,the shareholder of holding company is in a rather vulnerable circumstance.“Pass-through Voting” theory arise as to resolve this problem,,noting that certain important decisions shall be within the scope of voting right of shareholder of holdingcompany,and further contending that such voting right shall be exercised directly upon the subsidiary layer by shareholders of holding company together with the shareholders of subsidiary.However,defining the scope of voting right of shareholder of holding company involves the allocation of power of corporate organ,independence of corporate structure and the mechanism of corporate operation.In addition,whether protecting minor shareholders is sufficient to justify the breach of corporate independent principal and transfer mechanism of corporate will,needs cautious contemplation.Given that,this article rises the concept of “expansion of voting right”,refining the limitation of shareholder protection as expanding the issues to be decided by shareholders meaning that the voting right shall only be exercised on the holding company layer,which is different from “pass-through voting',without challenging the independent form of holding company and its subsidiary.This article will use jurisprudence and case study to examine the justified interests of shareholder of holding company on corporate governance and the appropriate mechanism to realize such interests,in order to prove the justification of expansion of voting right and give concrete advises on rules establishment.Precisely,this article will go with three parts:Chapter one,the genesis of holding company shareholder voting right,first introduces the shareholder voting right retrench effect,its mechanism and limited remedies available under current legislation,then rise the necessity of restoring the controlling scope of shareholder.The next section introduces the concept of“expansion of shareholder voting right” and compare it with familiar concept of“pass-through of shareholder voting right”,then summarize the actual application of the two.Chapter two demonstrates the justification and moderation of expanding shareholder voting right from three aspects: principle of allocation of corporate organs power,limited denying independent legal personality of corporate and the logic of commercial organization law.Chapter three studies when shall the voting right be expanded and to what issues.