On Judicial Review Of Related Party Transactions

As a kind of market transaction, affiliated transaction has been universally applied. Initially, in the west developed countries, it was used to reduce costs and avoid duty reasonably. But, with the serious competition and the development of enterprises, the negative influence of affiliated transaction has been more and more conspicuous, even be used to whitewash the achievement by some companies.In our country, affiliated transaction as a two-edged sword, also widely exist in the daily operation of companies. It is not be prohibited by official order, in view of its neuter attribute. Whatever, it is necessary to take reasonable measures in case of unfair affiliated transactions. Right now, we regulate affiliated transaction mainly by preliminary prevention, mid-event supervision and relief afterwards. System of Voting Elimination and Information Disclosure System can be used in the progress of preliminary prevention; the mid-event supervision organizations are the board of Censors and Independent Director inside the company and CSRC (China Securities Regulatory Commission) outside the company. This essay discusses the judicial review from the stakeholders of an affiliated transaction submit to the court for relief afterwards, and include three parts:The first part: mainly analysis the necessity of the judicial review of affiliated transaction. After a brief introduction and discussion of the relationship between judicial review and company autonomy, this essay elaborates on the meaning of judicial review.The second part: design the related rule when the judicial review is started, such as demand requirements, the subject, the time and the appeals.The third part: deals with the standard of judicial review abroad, it includes two aspects: procedure examination and substance examination. In procedure examination, the court mainly reviews whether the affiliated transaction meets the requirement of Information Disclosure and Approval; in substance examination, Business Purpose Test and Entire Fairness Test are two important examination standards. The forth part is the point of this essay. After theoretical analysis and learning other countries'experience, according to the present situation of affiliated transaction in our country, in my opinion, a kind of relatively strict model of judicial review should be established: combining the procedure examination with substance examination, with substance examination base. Procedure examination is divided into three aspects: disclosure, avoidance and approval. And, Entire Fairness Test is the only one standard in substance examination.While standing for setting up a system of judicial review of affiliated transaction, I have learned that it can not be accomplished just by establishing a model of judicial review, it still in the eating and needs many accessory systems to improve and perfect. We can do no more than keeping on working, striving for something learned, gained and applied. Much still remains to be done!...