Research On Disqualification Of Shareholders In Limited Liability Company

In order to promote the establishment of enterprises and facilitate the development of economy,the Limited Liability Act permits LLCs to pay their subscribed capital in installment,thus,LLC plays an indispensable part in today's business activity.LLC is a combination of human and capital,it has superior requirements over capital contribution and subscribed shareholders.In order to implement shareholders' duty,restrict their dishonest behavior,law set out corresponded regulations of the change on shareholders and capital.In 2011,the Provisions of the Supreme People's Court on Several Issues concerning the Application of the Company Law of the People's Republic of China(III)has promulgated,it firstly introduced the regulation of disqualifying a shareholder(hereinafter referred to as” Regulation”),it grants company the right to disqualify a shareholder if he fails to pay of refund the capital contributions within a reasonable period after being notified by the company,thus further promote the stability of company's capital contribution,guarantee the interest of the company's counterparty.However,law is always later than the pace of company,so the Regulation cannot fit for the current problems now,rather,the judges extraordinarily used their discretion to give justified judgments,so,for the sake of unified operation and provide justified reason for judges,I am going to analyze all the cases I found about this Regulation and make a conclusion about the realistic problems,thus further perfect the Regulation in reality.The first chapter will define the Regulation,use the data collected from 82 cases to conclude the status quo about the Regulation,the main points are:1)reasons forcompany to disqualify a shareholder,I found the many cases where the company disqualify a shareholder with regard to an article set out in their articles of association,the main reasons are “shareholder failed to fulfill his duty” or “shareholder refuses to update the shareholder's list”;2)company and normal shareholders file lawsuits to expel dissenting shareholders,I found there are still some shareholders stay at the company even though they are disqualified;3)the courts refuse to support companies' resolutions,and this is mostly because the companies didn't follow due process or the legal ground is not valid;4)the procedures used by companies to disqualify a shareholder,turns out that companies all use different kind of prior notice,voting rate and share allocation.After concluding the status quo of the Regulation and explain the legitimacy of it,I focused on the following points:1)reasons caused disqualification;2)procedures of the Regulation;3)the effective time of the resolution.During my elaboration,I contrasted some typical thoughts of judges to extrude the main points of the problems and draw a basic picture of the whole Regulation.The second chapter will mostly analyze the applying reasons of the Regulation on the basis of concluding the aforementioned cases.I divided the reasons into three parts: legal reasons,AOA reasons and other temporary reasons and focusing on three points:1)the legitimate reasons of companies to disqualify a shareholder because he failed to fulfill his obligation of capital contribution or withdrawal all the capital he has contributed;2)illustrate the legitimacy and reasonableness of reasons set out in the AOA and its amendments;3)explain the reasons adopted by temporary shareholder meetings cannot disqualify a shareholder.The third chapter deeply analyze procedures of the Regulation,and respond to the problems found out in the second chapter,as to procedural problems,there are three thoughts:1)the time of prior notice is contingent and it's improper for law to set standards;2)the disqualified shareholder shall be exempted to vote to reduce the cost of agency problem;3)the price of shares shall be settled between company and the shareholder and shall be legitimate.As to the effective regulation,I think the shareholder is not disqualified until he received the reasonable consideration of his shares,and then I'll elaborate the approaches of shareholders to seek for remedy.