A Study On The Identification Of The Shareholder’s "Improper Purpose"

In modern corporate governance,the separation of ownership and management rights has become the norm.Due to the human nature and closed nature of the limited liability company,the legitimate rights and interests of small shareholders are often violated by large shareholders.The law allows shareholders to exercise the right of inspection in order to safeguard their legitimate rights and interests,but the inspection of account books by shareholders must be restricted by "proper purposes",otherwise the company can refuse the shareholders for "improper purposes".Article 33 of China’s "Company Law" restricts the right to inspect books by the identification of "improper purpose",but the "Company Law" does not specify its standard of identification."Improper purpose" is a description of the internal subjective psychology of shareholders.It is difficult for others to know shareholders’ true meaning.However,the true intentions of shareholders can be expressed by objective actions.Some objective behaviors of shareholders can infer their subjective "improper purpose." Article 8 of the "Interpretation of the Company Law(IV)" in 2017 refers to comparative law rules and adopts enumerated legislation to provide specific conditions for "improper purposes".It aims to provide courts with clearer judgment standards.The law provides for operability in judicial practice and eliminates inconsistencies in practice.However,whether the Article 8 of the "Interpretation of the Company Law 4" can effectively resolve the conflict between the right of shareholders to inspect the accounting books and the protection of the company’s interests needs further study and analysis.From the perspective of legislative technology,China’s "improper purpose" has adopted an enumerated legislative model.There is no clear identification standard and it has no applicable generality.If the general standard of "improper purpose" can be abstracted theoretically,it can make up for the shortcomings in legislation and better improve the determination of "improper purpose" in China.In combination with the purpose of China’s company law legislation and extraterritorial experience,the "improper purpose" identification criteria should focus on three aspects: the existence of bad faith by shareholders,damage to the company’s interests,and the necessity of consulting.In terms of specific identification rules,Article 8 of the "Interpretation of the Company Law(IV)" provides guidance for the identification of "improper purpose",which has an important role and significance in solving the "improper purpose" determination in practice,but the "Company Law Interpretation(4)of Article 8 does not completely solve the problem of determining "improper purpose".Some provisions of Article 8 of the "Interpretation of the Company Law(4)" are not appropriate.At the same time,due to the ambiguity of some provisions,new problems have arisen in judicial application.First,Article 8(1)of the Interpretation of the Company Law(4)excessively restricts the right to inspect the account books of shareholders who have a competitive relationship with the company.The right to inspect the books is an inherent right,and even if there is a competitive relationship between the shareholder and the company,basic protection should be given in law.Some courts are uncertain about the relationship between operations and investment,and there are still deviations in the determination of substantive competition relationships.In practice,it is necessary to strictly grasp the determination of substantive competition relations.Specifically,in the determination of substantive competition relations,comprehensive judgments must be made from the business scope,business area,product types,and customer scope.relationship.Secondly,the second paragraph of Article 8 of the "Interpretation of the Company Law(4)" is not very operable.In practice,most of these cases are rejected by the court because they cannot prove the evidence.The court can grasp this type of content and use the highly probabilistic objective behavior in practice to speculate on “possibly harming the interests of the company”,such as when shareholders’ relatives have a substantial competitive relationship with the company or shareholders may leak trade secrets in their books.In general,shareholders can be found to have "improper purposes" based on these.Third,the third law presumption in Article 8 of the Interpretation of the Company Law(4)is unreasonable.The presumption that the shareholder’s current behavior is negated by the past behavior of the shareholder is not logical,and improperly expands the scope of the legal restriction of the right of inspection.Empirical research shows that very few companies have raised this defense,and this content has almost no effect in practice.It is suggested that this item can be considered to be deleted when the law is revised in the future.Fourth,Article 8(4)of the "Interpretation of the Company Law(4)" stipulates the "improper purpose" provisions of shareholders,but the specific content of this provision is too general.Based on the comprehensive draft and judicial practice,this paragraph can be modified to "other facts that can prove that shareholders have the purpose of abusing inspection rights,obstructing the company’s business,harming the company’s interests or the shareholders’ common interests." Finally,Article 33,paragraph 2,of the Company Law only requires shareholders to indicate the purpose of inspection,but there is no requirement on how to state the purpose.In practice,some shareholders often explain the purpose in a general way when they apply to check the books,which makes the company unable to provide specific evidence and increases the burden on the company.Therefore,shareholders should be required to specify the purpose of the check.The "improper purpose" is regarded as the main way to restrict shareholders’ exercise of the right to inspect the books,which actually reflects the balance of the interests of shareholders and the company.The legal restrictions on the right to inspect the shareholders ’books must be within a relatively reasonable range.If the restrictions are too strict,the shareholders may not be able to exercise the right to inspect the books and shareholders may not effectively participate in the company’s management.If the right to inspect the shareholders’ books is too loose,then May cause damage to the legitimate interests of the company.Therefore,it can be said that the identification of "improper purpose" is essentially a balance between the interests of shareholders and the interests of the company.Especially when the existing rules are not perfect,the court needs to adhere to the basic principle of balance of interests to accurately identify the "improper purpose" of shareholders.