Shareholders On Behalf Of The Plaintiff Eligible To Explore

Shareholder's derivative action is an important system in the Company Law, an exception to proper plaintiff principle and majority rule principle. It is always the key to derivative action that how to maintain a balance between company's efficiency and minority shareholder's benefit. And it is the key to prevent abuse and neglect of litigation by shareholders that how to define the plaintiff's qualification of Shareholder's derivative action. In theory, majority shareholder's expropriation of minority shareholder is because of the large holders'monitoring cast and the use of majority rule principle. So taking a derivative action is for the independent personality and the financial benefit of the company , and we need keep a balance between judicial adjusting and company autonomy when we define the criteria required for plaintiff. Through comparative study of other countries'Company Law and Company Law of PRC, we can find some problems: 1, the shareholding ratio required for plaintiff is too high. It can be reduced as the shareholding ratio of majority shareholder increases; 2, when the plaintiff gets share as of the company's foundation or because of the rights stated by the law, the shareholding consecutive days required for plaintiff's can't be counted; 3, the procedural rule of the Company Law of PRC for instituting derivative action is similar to Principles of Corporate Governance Analysis and Recommendations by ALI. But we don't demand judicial scrutiny to the directors'or supervisors'decision whether to bring a lawsuit. We will refuse a economic decision subject to the business judgment rule, not require the demand after that the shareholder directly lodges a lawsuit in an emergency, not have an internal organization like the special litigation committee in American, and not provide the procedural rule under liquidation. In judicial practice, there are more restrictions to the criteria required for plaintiff in the joint stock limited company than in the limited liability company, and the people's courts admit the demand-no-required cases against with the law. In china, the shareholders have a negative mind to the derivative action. To counter these problems, the writer suggests that derivative action in china can be improved step by step. First we must improve legislation of the procedural rule, then reduce the shareholding ratio and consecutive days required for plaintiff, finally reduce the burden of proof and the legal fees.