A Review of the Provisions Supplied By recently Amended PRC Company Law to Protect Shareholders’ Interests
谢杰
【关键词】PRC Company Law;Shareholders’ Interests
【全文】
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I. INTRODUCTION
II. SUBSTANTIAL RIGHTS AND DUTIES TO MAINTAIN BALANCE
A. Majority Rule and Reasonable Restrictions
B. Majority Shareholders’ Duties
C. Dissenting Shareholders’ Rights
D. Corporation Deadlock
E. Shareholders’ Rights to Know the Insider Information
F. Independent Directors in Listed Companies
III. IN-COMPANY PROCEDURAL RULES AND MECHANISMS
A. Mechanism of Cumulative Voting
B. A Right to Convene a Temporary Meeting and Deliver Drafts
C. Restrictions on Majority Shareholders’ Voting Rights
IV. REDRESS FOR GRIEVANCES
A. Shareholders’ Derivative Suits
B. Shareholders’ Direct Suits
V. CONCLUSION
I. INTRODUCTION
The recently amended PRC Company Law (CCL) has not only adopted substantive legislations and theories of other countries, but also calculated mechanisms and practices of corporate governance with Chinese characteristics seriously. One of its basic spirits is to perfect legal protections of shareholders’ rights and interests.
It is believed that majority shareholders and minority shareholders should be protected coequally, according to the doctrine of shareholders’ equality.
But now the corporate governance system in China is flawed, that many boards of directors are heavily influenced or dominated by majority shareholders so that most companies is not managed with the goal of maximizing wealth of all shareholders. Therefore, our legislators ought to focus on providing a good balance between the rights of majority shareholders to control PRC companies and the protection of minority shareholders from abuses of those rights, which means we need comprehend majority rule
completely and check it reasonably. Have the recently amended CCL done a good job on this aspect? My answer is: yes
, but not enough. It still has some blemishes. Compared with CCL (1993), the new one does have a substantial progress.
It, however, fails to design plenty of brand-new provisions accurately and incorporate them into the philosophy of the whole corporate law systematically.
II. SUBSTANTIAL RIGHTS AND DUTIES TO MAINTAIN BALANCE
A. Majority Rule and Reasonable Restrictions
The ultimate purpose of all companies is to maximize shareholders’ interests. Equality is based upon “capital” rather than “person”. Therefore, it is indispensable and just that all decisions should be made according as shares. Majority rule in the corporate law was established in a famous case, Foss v. Harbottle.
The Passage of resolutions must be approved by shareholders who own more than half or two-thirds of all voting rights, depending upon their characters.
A company can move smoothly with an effective management controlled by majority shareholders if there is no dissimilation of majority rule. Majority stockholders bear more risks and gain more profits. Therefore, generally speaking, their decisions are accord with the company’s interests.
However, it is an everlasting verity that anyone who has a power is inclined to abuse it.
Majority rule has a danger: minority shareholders will be squeezed, cheated, or kicked out of the process of decision-making, especially in the field of misappropriating fund, recombination of assets, or unlawful guarantees etc. Sunshine is the best disinfector while lamplight is the best policeman.
