Researches On The Legal Regulations On The Abuse Of Resolution Revoked Lawsuit

The shareholders' abuse of the resolution revoked claims has become an emerging issue in the practice of corporation law in China.It reveals that the present rules of resolution revoked lawsuit incorporate factors that facilitate the abuse of lawsuit and need to be improved.There are some deficiencies in the current law.First of all,the low requirements for plaintiff make the shareholders whose rights are not infringed by the resolution can also sue for revocation of the resolution.Second,rules of act preservation of defendant and the potential invalidity of external contracts together impose huge pressure on the company,and as a consequence of which the company has to reach a settlement with the shareholder(s).Meanwhile,the law does not regulate the amount of the settlement,which permits the shareholder(s)to request a large amount of settlement.All these factor combined constitutes the foundation of abuse of the resolution revoked lawsuit.The law stipulates a number of measures to suppress the abuse of resolution revoked lawsuit,but these measures have some shortcomings in theory and/or practice.The discretion of rejection of the complaint lacks a standard for operation.The security in litigation not only have difficulty in application,but also leads to unequal obligations of the two sides in lawsuit.Moreover,retrieving the defect can to some extent help prevent shareholders from abusing their right of action.However,the law only states two methods to retrieve the defect(the excess of time limit for commencement and the exempt from convening procedure),which is far from meeting the actual needs.From the perspective of current law,the function of resolution revoked lawsuit is dislocated.It cannot bear the function of confirming the resolution's legitimacy and ensuring the company's legitimate operation.It can only serve as a remedy for shareholders.The legitimacy control result is nothing but a collateral effect.Therefore,according to its function of shareholder protection,the rules should be modified as following:first,the scope of plaintiff should be constrained to those shareholders whose rights have been harmed by the resolution;second,the act preservation rules should adopt a dynamic standard of proof in regard to the preservation condition;third,the resolution ratification and the resolution withdraw shall be introduced to the law as methods to retrieve the defects;fourth,the settlement shall be limited to the total of the shareholder's damage and expenses in litigation;fifth,the discretion of rejection of the complaint should adopt the"relevance" standard in its application;last,the damage compensation liability shall be established,especially the damages of the company caused by the abuse of resolution revoked lawsuit.The origin of the abuse of the resolution revoked lawsuit is that the law provides improper remedy to shareholders.According to Ronald H.Coase's theory of efficient allocation of conflict rights,a reasonable way to design rules is:where the resolution's defect is serious,shareholders shall be entitled with the right to revoke the resolution;where the defect is less serious,shareholders shall be guaranteed with the compensation for the damage while the resolution's validity shall be maintained;where the defect is so slight that its influence on shareholders can be ignored,the law need not provide any remedy.Nevertheless,this theory requires legislation to treat the modification of current rules seriously,so a more practicable suggestion is that the court settle the disputes through mediation and reconciliation to achieve a fair outcome of the case.