Research On Legal Regulation Of Shareholder Oppression In Limited Liability Companies

The majority of capital is a fundamental rule in corporate legislation of every country.However,controlling shareholders may abuse majority rule that unfairly prejudices minority shareholders,resulting in shareholder oppression.Shareholder oppression is a governance difficulty in limited liability companies,law has the necessity to regulate.This article is divided into three parts.The first part of this paper provides a theoretical analysis of shareholder oppression.This part first introduces the meaning of shareholder oppression,which is an act by which controlling shareholders use their superior position to infringe on the rights and interests of other minority shareholders by abusing the majority of capital,crowding out and oppressing minority shareholders and making their investment expectations fall through.Then,in conjunction with relevant cases in judicial practice,this paper analyzes the typical behavior of shareholderoppression in our country,those are restriction or deprivation of the inherent rights of shareholders,special cases of restriction or deprivation of the rights of shareholders and restriction or deprivation of other interests of shareholders,respectively.Finally,the theoretical basis for the legal regulation of shareholder oppression is analyzed and presented.The second part of this article analyzes the regulation and inadequacy of the current company law on shareholder oppression.As for the shareholder oppression,advance prevention by Articles of Association has many limitations.Therefore,it is urgent to be regulated by law.The rights and interests restrained and infringed by shareholder oppression are very extensive and the regulations on them in the Company Law are scattered in various articles.First,when the shareholder oppression infringes upon the shareholders' legal rights,the Company Law may regulate the behavior through specific rules related to legal rights.However,Article 43 and Article 74 of the Company Law,from the perspective of shareholder oppression,still have some inadequacies.Then,when the shareholder oppression infringes upon other interests not specified in the Company Law,Article 20 of the Company Law provides for prohibiting shareholders from abusing their rights and the relevant legal consequences,which provides extensive space for interpretation of the identification and remedies for shareholder oppression and serves as a general provision.However,the subjectsregulated by this Article are only shareholders and do not cover the decisions made by directors with shareholder status,and the remedies provided by this Article are limited to damages and fail to respond to the varied needs for individual cases in practice.Finally,the legislation would have provided the suppressed shareholders with final exit relief,but the application of dissenting shareholder repurchase rights are stringent and the scope of application does not cover all shareholder repression,nor does the right to request judicial dissolution cover all shareholder repression.The third part of this article proposes to improve the legal regulation of limited liability company shareholders oppression in China.First,the Company Law shall refine and improve the specific rules relating to shareholders' statutory rights: Consider amending Article 74 of the Company Law so that if the articles of association compel or prohibit the transfer of shareholding from shareholders,it shall not be binding on shareholders who oppose the article;and add a rule on capital reduction in Article 43 of the Company Law to distinguish capital reduction into equal and unequal capital reduction,unequal capital reduction shall require the unanimous consent of all shareholders.Then,the finding of "abuse of shareholders' rights" under Article 20 of the Company Law should be made in two steps by means of the doctrine of Fiduciary Duty and the Reasonable Expectation standard to encompass all acts ofshareholder repression;and the legal consequences of violation of the Article should be interpreted in an expansive manner,with "damages" encompassing not only monetary compensation but also a range of restitutionary consequences,including restoration of the validity of the resolution.Finally,the scope of application of share buybacks should be expanded and shareholder oppression should be included as one of the circumstances of judicial dissolution to provide final relief for suppressed shareholders.