Study On The Legislation Of Shareholder Expulsion System

The shareholder expulsion system, which does not stipulated by Chinese Company Law, play an irreplaceable function in maintaining normal operation of the company and guaranteeing the common interests of shareholders. Although the Provisions of the Supreme People’s Court on Certain Issues Concerning the Application of the “Company Law of the People’s Republic of China"”(Ⅲ), stipulates the rules to lift the shareholder qualification in special circumstances, but the articles are very simple, so the task of building and perfect the shareholder expulsion legal system in China is unfinished. In order to develop Chinese expulsion system, comparative analysis, interest analysis, empirical analysis and normative analysis are adopted in this study. The text is divided into six chapters with introduction.The introduction part focuses on the motivation, framework and methods of the research, besides the research status of the shareholder expulsion system. Now we have been generally recognized the special function to solve the company internal interest conflicts of the shareholder expulsion system. But there are still controversial in the choice of that which kind of shareholder expulsion system is the best, the rules, particularly in the type of company suitable for the expulsion of shareholder, and in whether the expulsion of shareholder must be approved by the adjudication. Therefore, the related research needs further development, various schemes of the need for further screening perfect.In Chapter I, the paper talk about the basic theory of the shareholder expulsion system. The shareholder expulsion system is the one which deprive of qualification of shareholder according to specific procedures. compared to the transfer of shares system,dissenting shareholders’ appraisal system, and the company judicial dissolution system, the shareholder expulsion system has a unique value in the maintenance of the company and the common interests of shareholders, in improving shareholder exit mechanism. But in the system design, it need to establish the guarantee measures of interests of company creditors, and justice expelled shareholder. The legal theories for establishing the shareholder expulsion system, mainly included self-discipline, expulsion right legalization and termination of the contract rights and so on. Combined with various theories of rationality and limitations, this paper proposes that the articles of association stipulate the shareholder expulsion rules for the purpose of safeguarding the common interests of company and shareholders, maintaining the cooperative relationship between them. The articles of association should constraint related parties. Rooted in defect of the autonomy of private law such as the consideration not week and autonomous high cost, expulsion rules help the parties to eliminate the unfavorable factors influencing the management of the company, keep practicing the principle of enterprise maintenance.In Chapter II,the paper focuses on legislation comparison of the shareholder expulsion system in different country. By means of studying the historical development and current situation of the system in various countries, we can find that the shareholder expulsion system is resulted from exploring more appropriate measures to relieve the plight of the shareholder and the company. Chinese shareholder expulsion system also should play a special role based on making up for the deficiencies of existing company system. Also the Provisions of the Supreme People’s Court on Certain Issues Concerning the Application of the“Company Law of the People’s Republic of China"”(Ⅲ), have provisions on such system in certain situations, but it is not appropriate to develop the shareholder expulsion system in the form of judicial interpretation which there is a lack of the normative content compared with other countries and judicial practice needs. The main problem is at present expulsion of shareholder applies only to fails to perform the obligation of capital contribution and withdrawing all capital, its scope is too narrow; the expulsion procedures exist omissions and ambiguities; the provisions of the legal consequences of expulsion of shareholder is not perfect. There are still controversials on whether expulsion of shareholder apply only to a limited liability company.In Chapter III, the paper discusses how to legalize applicable range and causes of the expulsion system of shareholder. Generally, the common autonomous nature of personality of limited liability companies makes such kind of company relies more on shareholders to run the company, but the basis of trust within the company will suffere damage by individual shareholders, so when individual shareholders endanger the survival of the company, effective method to resolve internal crisis is to expluse them from the company. While common incorporated company is rooted on capital, individual shareholders will not affect the company. With equity transfer channel, it is not necessary for common incorporated company to relieve the parties through the expulsion system of shareholder. However, incorporated company which initiate the establishment, directionally collect Share, has common natures with the limited liability company in the business management and corporate governance, such as, company is established on mutual trust and cooperation between few shareholders. The expulsion system of shareholder also applies to incorporated company which initiate the establishment, directionally collect Share. The shareholder expulsion causes can be determined by the style of listing and summarizing of legislation, meanwhile should also acknowledge the validity of the cause of expulsion stipulated in the articles of association, to meet the personalized needs of company autonomy. Based on effective cohesion with other systems and balance of the interests of all parties, serious breach of the obligation of capital contribution of shareholders and uncorrected after a reminder, severely breach of duty of prohibition of business strife, seriously seize company property,seriously violating other obligations to the company, can be legal reasons for the expulsion of shareholder. How to record the shareholder expulsion causes in the articles of association relies on the autonomous decision of shareholders, as long as the autonomous not deviate from justice. In general, health problem and the loss of specific qualification, can be recorded as shareholder expulsion causes. But due to the different status of the autonomy of company, more stringent requirements are necessary for subsequent articles of association.In Chapter IV, the paper focuses mainly on procedures and legal effect of the expulsion of shareholders, which should be made by the general meetings of stockholders. In some countries the procedures are guided by judges, however, it would be better for the company to do it independently. Because judges cannot make choices for shareholders, while shareholders, rather than judges, are actually best persons to take care of their own interests. Besides, judicial proceedings will greatly increase the cost of company governance and therefore reduce the efficiency. Unfortunately, in the Provisions of the Supreme People’s Court on Certain Issues Concerning the Application of the“Company Law of the People’s Republic of China"”(Ⅲ),the regulations about the expulsion of shareholders are not good enough. As a result, China’s company law should be modified to perfect such rules. Specifically, whether to lose the qualification of shareholders should depend on such a fact that it has been published or not. To the third person, the qualification of shareholders change, only when it has been corrected in the industrial and commercial registration authorities. For the company itself, it depends on whether the register book of stockholders has been changed or not. However, if the third party has learned that the shareholder has been expulsed, then it should be considered as valid, even though the register has not been changed. Expelled shareholder can’t enjoy rights of shareholders duo to the shareholder qualification loss, but still enjoys the property rights of its investment when be expelled. The liability of expelled shareholder for damage compensation is not removed and immunity duo to the improper behavior to the company.In Chapter V, the paper focuses on the rules on the conflicts of the expulsion of shareholders. Obviously, the shareholder, who is improperly expulsed, could claim that the decision is invalid or revocable. If the judge believes the decision is invalid or revocable, the recovery of the qualification of shareholders depends on whether there is need to protect the third party. When the shareholders are expulsed, they can also sue the company to buy their shares as a fair price, when they cannot sell them to others or the company. The value of the shares should be determined by experts, who are absolutely independent from the company and the shareholder. However, when it has been regulated by the articles of association, the determination method should be respected. The sixth chapter is the conclusion and suggestion of legislation.