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The Restraint Mechanism of Shareholder Derivative Action in China

Author: WuRuiJuan
Tutor: EXiaoMei
School: Inner Mongolia University
Course: Civil and Commercial Law
Keywords: Shareholder derivative action Restraint mechanisms Malicious litigation Business Judgment Rule
CLC: D922.291.91
Type: Master's thesis
Year: 2010
Downloads: 86
Quote: 0
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Abstract

Amendments to the Companies Act 2005, China finally the law clearly stipulates the protection of the interests of minority shareholders shareholder derivative litigation system. Shareholder derivative litigation system in China is still simple provisions, including on how to constrain the plaintiff shareholders unfair proceedings, to prevent the plaintiff shareholders abusive lawsuits legislation does not make clear provisions and shareholder derivative litigation system is unfair, is likely to occur in practice use or abuse. Problems caused due to the defects of the system itself, shareholders sometimes be induced by self-interest or others can not properly use the system to resolve disputes, shareholder derivative litigation system deviated from the right track \must be solved in time. Shareholder derivative litigation constraint mechanism is the best way to abandon the shareholder derivative action is improper use or abuse. The shareholder derivative litigation restraint mechanism is not an absolute limit shareholder to bring a derivative action, but in order to balance the company and shareholders, established by the size of the interests of shareholders. In order to better play the advantages of the shareholder derivative litigation system should be set more stringent constraints to prevent the occurrence of speculative litigation or malicious litigation. The establishment of a shareholder derivative action constraint mechanism and improve shareholder derivative lawsuits against conflict of interest and the protection of minority shareholders interests play of great significance. This article will mainly as the background of the Companies Act \The first part introduces shareholder derivative litigation system. Derivative Lawsuit historical development, awareness and understanding of the connotation, to clear the established role of shareholder derivative litigation system before they can be further recognized that the establishment of shareholders to derive importance of litigation constraint mechanism. The second part discusses the need to create shareholder derivative litigation constraint mechanism. The purpose of the shareholder derivative action is to protect the interests of minority shareholders, but we can not expand the rights of minority shareholders, should be to find a balance in the constraints and incentives, to reasonably supervise use of small shareholders under specific conditions, the interest of the derivative litigation established for the purpose. The third part, discussed by the termination of the proceedings right from the law and company shareholder derivative litigation constraint mechanism. First small part, combined with state-of-the-art of States legislation, practical experience, discusses the the plaintiff shareholders constraints in our shareholder derivative litigation constraint mechanism, and to explore how to perfect it. First of all, from the plaintiff shareholders that qualification explore sue the three eligibility criteria: First, the plaintiff is related to the litigation interests of the company's shareholders; plaintiff's motivation to be in good faith; Third, the plaintiffs will fairly and adequately represented the interests of the company. Secondly, the judgment interests vested clear of constraints in favor of the plaintiff shareholders rights and clearly losing plaintiff shareholder's responsibility, limit plaintiff reconciliation, the withdrawal of the suit to prevent shareholders filed unfair litigation or speculative litigation or collusion with the defendant lawyer declared collusion malicious reconciliation, the withdrawal of the damage to the company's interests. Finally, for the perfection of the security system of the cost of litigation, requiring the plaintiff shareholders to provide security for costs to the company in the pre-litigation, plaintiff shareholders with caution due to the excessive amount of security for costs proceedings. Second small part of the company Autonomy premise to explore how the company's internal constraints shareholders to bring a derivative action. The constraints of the company to shareholders of the right to appeal, there are two main ways: First, the plaintiff shareholders to exercise their rights of pre-program, the program constraints shareholders abusive lawsuits, unfair litigation from pre-litigation effectively. First, by the business judgment rule to protect directors and other senior management staff to give the company the right to a termination of the proceedings. The business judgment rule is a manifestation of the company meant autonomy, the Company believes that the behavior of the directors and senior management in line with the business judgment rule, to the court to request the termination of the proceedings, the court based on the different causes of action applicable standard of review, and The decision on whether to allow the plaintiff filed a derivative action ruling, to strengthen the checks and balances of the plaintiff.

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