On The Judicial Relief Of Small And Medium Shareholders Under Improper Related-party Transaction

In recent years,China has continuously improved the legislative regulation of related party transactions through judicial interpretation,amendments and other ways.Whether it is to grant shareholders the right to institute derivative actions,or to introduce the litigation cost compensation mechanism,it has focused on ensuring the judicial relief of lower-middle shareholders in the case of improper related party transactions.From the legislative level,its legal norms system is gradually improving,but through the analysis of the current situation of judicial practice,we can see that the principled and systematic legal provisions still face practical difficulties,and the problems of applicable standards in judicial adjudication need to be settled urgently.Therefore,this paper will carry out a specific study on the judicial remedies of small and medium-sized shareholders under improper connected transactions from the following three parts:The first part is to conduct a practical investigation on the judicial remedies of small and medium-sized shareholders under the unfair connected transactions.First of all,combine the legislative provisions and theories to clarify the concept of improper connected transactions;Secondly,it summarizes the common,typical and novel forms of improper connected transactions in China’s commercial market;Finally,focusing on the current judicial remedies that small and medium-sized shareholders can adopt,namely,disputes over the effectiveness of corporate resolutions,disputes over liability for damages in connected transactions,disputes over liability for damages to shareholders’ interests,and disputes over the effectiveness of connected transaction contracts,this paper combs the judicial documents of China in the past three years and analyzes the current situation,and studies the practical problems faced by small and medium-sized shareholders when they conduct prosecutions,which is the most prominent problem in the prosecution of related transaction damage compensation,and put forward suggestions to improve them.The second part discusses the plight of the judicial relief of small and medium-sized shareholders under the unfair connected transactions,mainly involving three aspects: first,the difficulties of small and medium-sized shareholders in starting the judicial relief procedure,including the limitation of the main qualification of small and medium-sized shareholders,and the high cost of derivative litigation;Second,the judicial review system of unfair connected transactions is incomplete,including the issue of whether the disclosure procedure is a necessary procedure and the substantive fairness review standard is not uniform;Third,there are defects in the civil liability mechanism for damages,including the unclear subject of damages,the heavy burden of proof of small and medium-sized shareholders,and the inconsistent standard of the scope of damages.The third part,in view of the judicial relief problems faced by small and medium-sized shareholders in China’s improper connected transactions,should be improved and adjusted from the following aspects: First,lower the threshold of judicial relief for small and medium-sized shareholders,expand the scope of small and medium-sized shareholders as qualified plaintiffs,and refine the compensation mechanism for litigation costs;Second,to improve the judicial review system of improper connected transactions,we should not only implement the provisions on the reporting obligation of connected transactions,but also unify the substantive and fair review standards;Third,improve the civil liability mechanism for damage compensation,including further clarifying the identification criteria of the subject of liability,adjusting the burden of proof in the case of damage compensation,and conditionally bringing the loss of available benefits into the scope of damage compensation.Providing the rights and interests protection for small and medium-sized shareholders in the judicial relief dimension is conducive to squeezing the illegal operation space generated by the subject of connected transactions based on natural advantages,standardizing the improper connected transactions,reducing the investment risk of small and medium-sized shareholders to a certain extent,and promoting market development.