The Protecting Of Minority Shareholders Of Subsidiary Company In Affiliated Companies

Affiliated companies is a kind of forms of enterprise organization, whichemerges to conform the development of economy, that reduces the cost and the risk ofbusiness deals. It could enhance the market competitiveness of the company, and isadvantageous to the company to expend its scale of operation, to meet the need of thelarge-scale socialized production. However, there is a huge challenge to thetraditional company law comes from the control-relationship between holdingcompany and subsidiary company. Due to the existence of the control-relationship,holding company has the privileges of control to subsidiary company, that overthrowsthe supposition,"The company has an independent personality", according to thetraditional company law. The rights and interests of minority shareholders in thesubsidiary company are always exposing to the privileges of control of the holdingcompany, because of the limitation of the traditional company law, the current legalsystem could not provide the minority shareholders of the subsidiary company with astrong protection, when their rights and interests being damaged by the abuse of theprivileges of control by the holding company. The balanced system of interestsbetween companies is destroyed, and that causes a series of problems, which are notconducive to the healthy development of the market economy. Therefore, it is ofrealistic meaning to research the protection for minority shareholders of subsidiarycompany. This paper starts with the above problem, and is divided into four parts asbelow.In the first part, we clear and analyze the conceptions related to the affiliatedcompanies. In this part, we define the conceptions related to the affiliated companiesfirstly. Through summarizing conceptions of affiliated companies in differentcountries, the affiliated companies could be defined as union, which forms bycompanies, arming at achieving a control-relationship by particular method. Secondly, it analyzes the conceptions of both the holding company and the subsidiary company,and relationship of them also reveals the conflicts between the control rights and thebase principle of the traditional company law, and the weakness of the protectionoffers to the minority shareholders of subsidiary company by current law system. Atlast, we analyze the present situation of the harming of the rights and interests ofminority shareholders in subsidiary company; it displays the necessity of protectionfor the minority shareholders in subsidiary company obviously.The second part is mainly about the law and practice experience on theprotecting of minority shareholders of subsidiary company. We take The UnitedStates and Germany for example, which are separately represent the counties with thetwo different genealogy of law, to comb the relevant legal system. In The UnitedStates, it protects the rights and interests of minority shareholders in the subsidiarycompany mainly by setting fiduciary duty to holding company and the shareholdersderivative suit. In Germany, they make a special legislation against the affiliatedcompanies, and through making a distinction between non-contract affiliatedcompanies and contract-based affiliated companies to take different protect measures.In the third part, we analyze the present situation of our country’s legislationabout the protection of minority shareholders of subsidiary company. There is nolegislation specific to the affiliated companies. All the protections for minorityshareholders in subsidiary company are exist in disperse laws. It is obvious to see thatthe protection of minority shareholders in subsidiary company in our nationalcompany law is not comprehensive, through the research of the specific rules. Theproblems are mainly expresses in the follow aspects, conceptions are not distinct,rules are not detail, legislation is less of systematicness, adjustment range of currentrelevant regulations is limited, and so on.In the last part, this article put forward some suggestions about the protecting ofminority shareholders of subsidiary company in our country. As to legislation model,writer considers that the German model, which mainly takes the concentratelegislation, is more fit our traditional law and our current situation. What’s more, thismodel is better to highlight the particularity of the affiliated companies, and ispropitious to the protection of minority shareholders in subsidiary companies. Meanwhile, we could adopt the classification between non-contract affiliatedcompanies and contract-based affiliated companies, to protect the minorityshareholders on the basis of their respective peculiarity. As to specific system, weshould complete the existing legislation in the first place, such as related shareholderaversion system, shareholders derivative suit, stock repurchase. In the second place,rules and regulations should be drafted according the particularity of the affiliatedcompanies, for example, to limit the forming process of the non-contract affiliatedcompanies, to make sure that the holding company undertaking a fiduciary duty to theminority shareholders of subsidiary company, and so on.