Research On The Protection Of The Interests Of Dissent Shareholders In The Share Repurchase Of LLC

The appraisal right of dissent shareholders for share repurchase,prescribed in Article 74 of Company Law of the People's Republic of China and the relevant judicial interpretations,was established in 2005.More detailed prescriptions can be found in provisions by High Courts of Jiangxi and Shandong.This appraisal right is aimed at protecting the interest of dissent shareholders to give them a chance to exit the company when there is a major decision.Defects exist in relevant Chinese laws,of which the company take advantages to harm the interests of the shareholder.Also,the incomplete application of laws and lacking unified legal norms both lead to common case of different judgments.The academic keeps doing researches around this area and proposes some opinions of revision,but the Company Law of the PRC completely reserves those prescriptions in amendments of 2013.This paper herein puts forward some measures for improvement through the analysis of the legal provisions and the legal practice about protection of the interests of the shareholders in the share repurchase.This dissertation is divided into four parts apart from the preface and epilogue,and the length is about thirty thousand words.The first part is a brief overview towards the appraisal right of the dissent shareholders itself and germane issues.The partnership lied in limited liability companies is illustrated below.The dissent shareholders are the shareholders who vote against the company's major decisions,such as the transfer of the main property,merger and separation and the appraisal right is the right of the dissent shareholders to claim the company to repurchase their shares and exit the company.And then this part analyzes the origin and the legal provisions of the repurchase of dissenting shareholders from the perspective of historical evolution.It primarily concludes that the dissent shareholders are disadvantaged resulting from information asymmetry,the abuse of capital majority decision,the proportion of stock ownership determining the right to speak,the closure of the limited liability company itself and the situationwhere small and medium shareholders are scattered individuals.The second part is concentrated on the flaws in Article 74 of the Company Law.For instance,the subjects of claims and buyback are too narrow;the provisions are obscure in stipulations like the vague definition of distribution objects and proportions of “the company has not been distributed its profits to shareholders”,the identification of “its major property”;due to the shareholder's meeting held ahead of schedule,the application of the provisions faces the quandary about extending the business time before its deadline;whether the negotiation is the necessary procedure before entering into lawsuits and how to determine “90 days” remain to be unsolved.The third part elaborates on the difficulty of the protection on the dissent shareholders.Few provisions on the right to repurchase and the lack of operability give rise to problems in legal practice,such as protection on the rights of defective shareholders as the dormant shareholders,non-voting shareholders,the shareholders,the origins of buyback capital,the effectiveness of the buyback negotiation and remedies to circumstances when shareholders are not notified to attend the shareholders' meetings.The fourth part offers some advice on improving the system of protection on the appraisal right.In practice,the buyback subjects and capital,the criteria of the price should be specified while in the procedure,the duty of notice by the company,the treatment of the shares shall be stipulated explicitly and the supervision by the public and the creditors shall be established.Negligence shall be kept with the protection to avoid the abuse of rights.This paper points out the defects in the legal provisions by virtue of examining relevant Chinese laws and regulations on the appraisal rights,make analysis of the cases in the practice as to using legal defects against dissent shareholders,give advice on completing the norms on the main property and price around repurchase and improving relevant laws and regulations with the aim at the flaws in laws and the practice and in combination with reality of China.