An Empirical Study On Judicial Dissolution Of Corporate Deadlock

As the most important and active commercial entity in the liberal market,companies play an immeasurable role in the healthy development of national economy.Although the Company Law of PRC endows companies with extensive rights of autonomy and fully respects their autonomous status,a company,as a fictitious legal entity,may inevitably encounter autonomy failure,just like natural persons.The most typical case is a corporate deadlock.There are generally two ways of relief:judicial remedies and non-judicial remedies.The latter mainly includes mediation,arbitration and articles of association.However,when a company is deadlocked,the above non-judicial remedies are often unable to play a practical and effective role.To be specific,in the case of mediation and arbitration,it's almost impossible for parties concerned to reach a consensus due to lack of trust while articles of association often fail to provide a solution to the corporate deadlock due to insufficient foresight.Therefore,the author believes that we should focus more on judicial remedies to explore solutions to corporate deadlock.This paper applies the legal empirical approach to summarize and examine the practical effect of China's judicial dissolution system of corporate deadlock,through quantitative statistics and practical analysis.It also attempts to put forward suggestions on problems revealed,in a bid to make a meaningful exploration towards system improvement.Chapter 1 firstly describes the samples selected and research methods adopted and then summarizes eight key factors under three broad categories regarding the 100 sample cases,focusing on the conditions for judicial dissolution.The three broad categories consist of overview of the defendant company,plaintiff shareholders and judicial adjudication,while the eight factors cover company type,company size,the number of shareholders,the company's business conditions,the plaintiff shareholders ownership,the posts held by the plaintiff shareholders,the trial level of courts concerned,applicable procedures and types of case adjudication.The empirical analysis reveals a number of practical characteristics of judicial dissolution system of corporate deadlock,which enables us to thoroughly understand the actual effect of the system.Chapter 2 studies,through an in-depth analysis of typical cases,how the courts understand and apply Article 182 of the Company Law and relevant judicial interpretations in judicial practice from the following aspects:first,how to understand the essential connotation and identification criteria of operation and management where there are"severe difficulties in operation and management";second,how to understand the interests of shareholders in the case where"continued existence will cause significant losses to the interests of relevant shareholders";third,how to understand the nature and concrete meaning of the case where"problems can't be solved otherwise".The author summarizes the currently constructive suggestions and practices on judicial dissolution of a deadlocked company.At last,the author tentatively comes to a tendentious conclusion based on her own understanding of the above contents.Chapter 3 analyzes the judicial dissolution system of corporate deadlock from both shareholder and corporate perspectives.Most scholars believe that China's existing judicial dissolution system of corporate deadlock is developed and maintained in favor of shareholders,and therefore deemed as a minority shareholder protection mechanism or shareholder exit mechanism.This is not the only explanation of the system though it is rational to some extent in reality.It seems that the features of the Company Law as a group law can be better reflected if analyzed from corporate perspective.Therefore,the author attempts to interpret relevant provisions of the judicial dissolution system of corporate deadlock from the corporate perspective,in such aspects as"loss to shareholder interests"and"major losses and operational difficulties",etc.Chapter 4 reveals,as a starter,defects of the system through empirical analysis.On one hand,claimers granted by the dissolution system is narrowly restrained;on the other hand,there is a contradiction between the identification of corporate deadlock as the only cause of judicial dissolution and the fact that there are usually two cases after the failure of corporate autonomy in practice;what's more,there is presence of judicial resources waste and malicious litigations;in addition,different courts may make completely different judgments on the same case,causing damage to the judicial authority.In the next,the author attempts to propose corresponding countermeasures and contributes her inputs on the establishment of a comprehensive and three-dimensional judicial dissolution system of corporate deadlock.