Shareholder Representative Litigation System Research

Shareholders Derivative litigation system, known as a genius invention of law countries, originated in the Anglo-America legal practice. With a history of more than100years, this system has developed into a mature and effective litigation system adopted in the America countries. It is conducive for small and medium shareholders to effectively safeguard the legitimate rights and interests of the enterprise from being infringed on by the senior officers or controlling shareholders or other third parties and to promote their enthusiasm and creativity to supervise the operation of the enterprise as an external power through monitoring the conduct of the senior offers and controlling shareholders. Thus, it Can improve the management and administration mechanism of the company.Despite of the important roles the Shareholders Derivative Litigation system plays, danger still exists for it to be abused. Because the independent personality of the company may, to a large extent, be ignored by the shareholders as a plaintiff instituting under their own names a claim on behalf of their company directly against the senior officers or members of the board with the iudicial power to peel the veil of the company. And also, this system may negate the principle of majority prevailing over the minority when some shareholders may exercise the litigation rights of the company while the majority of the shareholders are reluctant to do SO. These factors may, in a sense disturb the smooth operation and management of the company.As all expectation, Chinese legislators introduced with great wits and courage the shareholder system to the Chinese land in the revised2005Company Law for the first time. But on the other hand, attention should be called to the issue that this system in China is still open to be further improved for some potential isolation of its theory from the practice and some legal loopholes existing.In terms of these issues, this paper introduces and briefly analyzes the descriptions and precedents on the shareholder derivative litigation system in relevant countries and puts forward some suggestive amendments o Which may be helpful to improve this system in China to make it more manageable, under the guideline of removing, with restriction of power abuse from the shareholders, the obstacles of restricting due shareholder derivative litigation in company legislation in light of the description in the newly revised Company Law of the PRC. The paper has four pans in addition to the introduction and the onclusion.