Research On Mandatory Distribution System Of Corporate Profit

Return on investment through profit distribution is shareholders' motivation for investing and also their inherent right.However,in reality,substantial shareholders often abuse their rights to manipulate the company's non-distribution and symbolic distribution.On the other hand,they also distribute in disguised forms through various illegal means,and even directly transfer or encroach on the company's profits,which infringes medium and small shareholders' rights to share profits.In fact,since corporate profits are vested in the company rather than the shareholders when there is no resolution according to the Company Law,the shareholder meeting should determine fairness and whether to distribute autonomously in terms of the majority rule.The court often refuses the small shareholders' request of force distribution yet.It violates fairness and justice for Substantial Shareholders' abuse power without restraint,but minority shareholders' rights were damaged without relief.According to Article 15 of Provisions of the Supreme People's Court on Several Issues concerning the Application of the Company Law of the People's Republic of China(IV)implemented on September 1st,2017,if the shareholders fail to submit a resolution of the shareholders meeting or the general meeting of shareholders specifying the specific allocation plan and request the distribution of the company's profits,the people's court shall reject the claim,except for the abuse of shareholder rights causing non-allocation or losses for other shareholders.This provision provides a basis for forcing companies to distribute profits when necessary.However,Article 15 is lack of operability and abstract for the compulsory distribution of corporate profits.There is no words for judicial methods,the determination of quota and force and enforcement of judgement in it.What's more,relevant cases and literature,practice and theoretical circles have not formed a reasonable and operational consensus on the above issues.It remains to be seen when and how to force companies to distribute profits.Mandatory distribution of corporate profits is an exception to correct the drawbacks of the absolute autonomous profit distribution.Therefore,the judicature forces company to distribute profits should pay attention to these following situations:First,shareholders abuse their rights to implement the oppressive distribution policy,and the small and medium shareholders can't obtain relief after putting all irons on the fire.Second,the oppressiveness of company's distribution policy should be judged by fiduciary duties.When the controlling shareholder violates the fiduciary duties,infringes the profit distribution right of the small and medium shareholders directly or indirectly by encroaching on the company's property interests,the company's non-allocation or symbolic distribution should be negatively evaluated.The behaviour of violating fiduciary duty can cause forced distribution of profits,it mainly includes: unfair distribution policy;exorbitant paid or position-relevant expands of controlling shareholders or their representatives;encroaching,transferring or concealing company property;unreasonable long-term non-distribution.In order to effectively relieve the profit distribution rights of small and medium shareholders and give play to the function of compulsory distribution of corporate profits,the burden of proof should be allocated reasonably first.When minority shareholders provide prima facie evidence to prove that the controlling shareholders violate fiduciary duties,then the controlling shareholders need to prove their reasonableness.As the controlling shareholder violates the fiduciary duty has been confirmed,the company's profit should be submitted to the company as a negative element.Secondly,for achieving compulsory distribution,on the one hand,it is allowed that the controlling shareholders to be regarded as the joint defendant of the company under the circumstances of controlling the transfer of company assets,and to take complementary liability.On the other hand,the company should be judged to distribute profits rather than make resolutions.For the allocation quota,it should be encouraged to be determined by the resolution and reviewed by the court.Meanwhile,in order to balance the interests of small and medium shareholders,the protection of creditors' interests and the survival of the company,the court may determine with reference to the assets and liabilities ratio standard of the California State Company Law,and adjust according to the evidence of the parties simultaneously.Thirdly,avoiding the mandatory allocation of judgments violates the principle of equality,the object of litigation should be understood as the company's distribution of profits,and then allow other shareholders who did not participate in the lawsuit to apply for enforcement.Finally,in the case of mandatory regulations that may lead to bankruptcy of the company or violation of capital maintenance,the judgment should not be fully implemented.The responsible controlling shareholders and directors should compensate the losses of the small and medium shareholders.