A Comparative Study Of Corporate Participation In Shareholder Derivative Litigation Between The U.S. And China

As an important system for protecting the legitimate rights and interests of minority shareholders,the shareholder derivative litigation system plays an indispensable role in corporate law.As early as the 1850 s,the U.S.Federal Supreme Court created the shareholder derivative litigation system in judicial practice in equity,and the system has matured through subsequent additions and developments,in addition to the detailed provisions of the shareholder derivative action system found in Rule 23.1 of the current U.S.Federal Rules of Civil Procedure,the U.S.Model Business Corporation Act,which serves as a reference for state legislatures,also contains provisions regarding this institution,and has been applied by many states.Before the 2005 amendment to the PRC Company Law,this institution had been absent in China,and although the amended Company Law confirmed the existence of the shareholder derivative litigation system for the first time in the legislation,it only provided provisions regarding basic matters,with a series of problems emerged and left behind in the judicial practice since then,especially the imbalance of interests caused by the marginalization of the company’s status.Although the company refuses or neglects to prosecute in its own name the wrongdoers who harm its interests when the shareholders file a request,it is still the owner of the substantial rights in the shareholder derivative litigation.Therefore,although the shareholder derivative litigation system was originally designed to better protect the rights and interests of the company’s minority shareholders,it still cannot ignore the basic premise that the company is the real party in interest.In order to achieve a balanced situation between the best interests of the company and the legitimate rights and interests of shareholders,it should be ensured that the company can participate in the derivative proceedings brought by the plaintiff shareholders to play its role.In addition to the introduction and conclusion,the main body of this thesis is divided into the following four parts.In the first part of the paper,this thesis will discuss the justification of the company’s participation in the derivative shareholder lawsuits.From the perspective of the company itself,firstly,based on the company’s independent legal personality,which is the most basic principle of the company law,this thesis will analyze the necessity that company in the case of inconsistent or conflicting interests with the plaintiff shareholders should participate in the shareholder derivative litigation as “supervisor”;secondly,on the basis of penetrating the plaintiff shareholders’ apparent right to sue,the essential features of the company’s substantive rights to shareholder derivative litigation are revealed.From the perspective of litigation procedure,firstly,this thesis analyzes the important role of the company in reducing the difficulty of proof and speeding up the investigation of the facts of the case from the perspective of assisting the plaintiff shareholders to investigate and collect evidence,and secondly,this thesis argue that the company has the right to participate in the litigation procedure as the injured party.The second part of this thesis focuses on the practice and doctrine of different legal status given to the company in the shareholder derivative litigation system,introducing the dual status of the company in the U.S.shareholder derivative litigation and the various doctrines in the theoretical community in China respectively.Firstly,in the introduction of the legal status of the company in the U.S.shareholder derivative litigation,this thesis explains the origin and causes of the status of “nominal defendant and substantive plaintiff” in the light of the historical jurisprudence and the current relevant legal provisions.The second half of this part introduces and reviews the existing theories of co-plaintiff,nominal defendant,third party with independent claim and third party without independent claim in China,and then explains the legal status of the company adopted by the judiciary in China by interpreting the relevant judicial interpretations.The third part of this thesis discusses two specific litigation rights of the company in the shareholder derivative litigation system,including the right to defend whether a lawsuit should be filed and the right to intervene whether the litigation process should be ended by way of settlement.The first two sections of the part analyze the above two litigation rights that companies should enjoy respectively,both of which will be discussed based on the introduction of the relevant legislative provisions and judicial practice in the United States,in light of the current legislative and judicial gaps in China,followed by the third section focusing on the analysis of why these two rights should be granted to companies or be improved in the shareholder derivative litigation system.The fourth part of this thesis focuses on critically analyzing the significance of the U.S.model in light of the current situation in China.The three sections in this part propose the localization scheme in China for the adjustment of the legal status of the company and the improvement of the corresponding two litigation rights respectively.In the specific system design,first of all,the construction of the litigation rights system as the starting point,through the analysis of the mainstream view of the United States and China,this thesis argues that the legal status of the company in the shareholder derivative litigation lawsuits should be determined in accordance with the different circumstances in conclusion.In the second two sections of this part,through further comparative analysis,specific suggestions are given for granting or improving company’s right of defense and the right of intervention in settlement,including increasing the pre-trial judicial review procedure,improving the notification procedure of settlement matters,clarifying the boundary of the right of defense and the right of intervention in settlement,and giving the court the right of formal review and the right of substantive review.