On The Legal Basis For Regulation Of The United States Shareholder Oppression

This article is about the foundation of regulation of shareholder oppression in American corporate law and its importance for the study and research on the issue in China. Shareholder oppression is a phenomenon inherent in the majority rule. It involves the unfair treatment of and prejudice to minority, getting worse with the special nature of close corporation. Shareholder oppression is in some degree subject to regulation in most of the states in U.S.A. But the theoretical basis, practicality and modes of such regulation are still under debates. This article is consisted by eight parts. The first part is about the practices in the regulation of oppression by statues and case laws. The second part is about how to define oppression. The third part is about the reason why oppression would get worse in close corporation context. The fourth part is about the losses caused by oppression. The fifth part will discuss the fiduciary duty doctrine applied to common law oppression. The sixth part is about reasonable expectation standard applied to statutory oppression. The seventh part will discuss oppression in Chinese companies and various special contexts in which shareholder oppression tends to arise. The eighth part will examine the legislations concerning shareholder protection and in this part I will advance my advice about solution to shareholder oppression by legislation.The first part is about the regulation of shareholder oppression in America. In this part I will discuss regulation by statutes and by case laws separately. Most of the oppression statutes follow the MBCA model, reflecting in MBCA§14.30. The regulation in case laws is in the form of direct cause of action of breach of fiduciary duty.The second part is about definitions of shareholder oppression based on duty of fair dealing, or fiduciary duty, or reasonable expectation of shareholder. Then I will show the desirability of the definition based on reasonable expectation standard.The third part explains why oppression would worsen in close corporation context. In this part I will show how the traditional corporate norms operate as seeds of oppression. I will discuss how the absence of contractual protection contributes to shareholder oppression.The forth part is about loss caused by shareholder oppression. In this part I will show the loss to minority and to American economy in respects of capital formation and employment.The fifth part is about the fiduciary duty doctrine as an important theoretical basis of regulation of oppression. Centering on several important cases, I will analyze the evolution of fiduciary duty between and among shareholders, which is direct and enhanced in close setting. I will show what the mandate of the duty is. I will explain why courts impose such a duty on shareholder, linking to the special nature of closecorporation.The fifth part is about the reasonable expectation standard as another important theoretical basis of regulation of oppression. Beginning with discussion on cases, I will discuss the justifications and grounds for the statutory protection of reasonable expectations of shareholders in close corporation against oppression.The seventh part is about the reality of shareholder oppression in Chinese companies and special contexts in which shareholder oppression probably arise. Emphasis is put on the effects on protection and oppression of minority by three types of share-holding structures.The eighth part, as the last part, undertakes the examination of Chinese legislation about shareholder protection. In this part I advance my advices on solution to the shareholder oppression issue by legislation.