Research On The Comprehension And Application Of Article 33 Of The Company Law Of The P.R.C

In order to protect the interests of the limited liability company shareholders' information, the Company Law of the P.R.C issued on July 1, 1994 had provision for shareholders' right to inspect. The amendments of the said Company law revised on January 1, 2006 in shareholders' right to inspect state: “A shareholder shall be entitled to inspect and copy the bylaw, the minutes of the shareholder meetings, the resolutions of the board of director meetings, the resolutions of the board of supervisor meetings and the financial reports. A shareholder may demand to inspect accounting books of the company. Where a shareholder demand to inspect accounting books of the company, he or she shall give the company a written notice of his request, in which shall state his purposes. If the company, has the legitimate reason to deduce that the shareholder's demands to inspect accounting books has an improper purpose and may lead to significant damage to the legitimate interests of the company, it may refuse the demand to inspect accounting books and shall, within in 15 days after the shareholder submits a written notice, give the shareholder a written respondence, which shall include an explanation. If the company refuses the demands of any shareholder to inspect accounting books, the shareholder may plead a people's court to demand the company to provide the books for his inspection.” While there have been disputes on the application of the clause of shareholders' inspection rights, including the identification of "shareholders" identity, the scope of inspection, the understanding of "improper purpose" and the legal validity of procedural prerequisite, among people's courts in judicial practice.The shareholders who shall possess residual claim in the company and acknowledged agent relationship with the company management board are qualified to inspect, so the hidden shareholders and former shareholders do not enjoy the shareholders' inspection rights. The scope of inspection shall not be confined to the listed content in clauses, which can be extended by extavagant interpretation, extending to accounting documents, company announcements and other information related or unrelated to listed items that is of significance to the interests of shareeholders' information. How the typical controversies the horizontal competition and shareholders' prejudicial behaviors in the understanding of "improper purpose" affect the assessment of shareholders' purpose. Overall, the horizontal competition shall not be construed as limiting for shareholders' inspection rights, and prejudicial behaviors may be construed as limiting for shareholders' inspection rights. The procedural prerequisite is considered as prcoedural restriction on shareholders' inspection rights shall not be dismissed for the avoidance of litigation exhaustion, otherwise the restriction function will be meaningless. Other issues on the comprehension and application of Article 33 should pay attention to are: the nature of inspection provisions and its impact on the application; the value supplement of uncertain concepts in Article 33; to find the equilibrium between the interets of shareholders' information and company trade secrets in conflict, and the legitimate interests of the company shall be taken into account at the same time of protecting shareholders' inspection rights, putting more weigh on the later guarantee of the legitimate interests of the company.