Research On The Legal Regulation Of Controlling Shareholders

The company is not only a tool of investment,financing and wealth creation,but also an aggregate of investors.Corporate governance is actually to solve the conflicts of interests among shareholders and the agency cost between shareholders and management.The operation of capital majority decision makes the equal equity relationship gradually turned into the controlling shareholder’s dominant power over the company,while the highly centralized ownership structure,the lack of external market restraining factors and means of legal regulation lead to the frequent abuse of control rights.A good institutional arrangement for minority shareholder protection is the key factor for limited companies and even the whole market economy to get long-term development,and is also the core requirement for building a law-based and international business environment.Therefore,the legal regulation of controlling shareholders has become one of the key contents of corporate governance.The empirical study on the shareholder abuse litigation in China shows that shareholder abuse lawsuits are mainly brought against controlling shareholders in the current judicial practice,and the abuse of corporate control is widespread.With the frequent abuse of power by controlling shareholders,minority shareholders’ consciousness of safeguarding rights is constantly improving.In addition to actively using shareholder representatives to protect the interests of the company,they also have an increasingly urgent need to safeguard their own rights and interests.However,China has not yet established a complete and effective legal regulation system of controlling shareholders,which is faced with a huge contradiction between institutional demand and normative supply.First of all,the current "company law" article 20 due to provision of abstractness and vagueness of the standards caused the confusion of judicial application,in this case,the court for infringement behavior standards adopted,has the burden of proof to the minority shareholder’s predicament,cause it is difficult to safeguard their own rights and interests through lawsuits way.Secondly,based on the separation of control rights and equity rights,the legal norms of dominant stockholders are not fully applicable to controlling shareholders,and the legal norms related to the regulation of dominant stockholders have a low level and limited applicable subjects,which can hardly meet the needs of corporate governance practice.Finally,the identities of controlling shareholders,directors and senior executives do not completely overlap,and huge number of controlling shareholders hold the control of the company by virtue of the equity advantage or the substantial influence on the shareholders’ meeting and the board of directors.Therefore,the applicable space of the duty of loyalty and diligence of directors is also extremely limited.The comparative observation on the legal regulations of controlling shareholders outside China finds that the "fair treatment obligation" evolved from "fiduciary duty" in American law divides the review of controlling shareholders’ behavior into two levels,the fairness of the transaction result and the fairness of the transaction process.As a set of review rules reflecting the sense of commercial judgment,"duty of fair treatment" shows the limitation and modesty of judicial intervention in corporate governance,and can be introduced into China’s judicial practice as the standard for the identification of controlling shareholders’ behavior.The "unfair obstruction action" in English law shows that non-controlling shareholders can seek remedies other than damages litigation,which provides useful reference for the development of diversified and multi-level shareholder rights relief mechanism in China.The "duty of loyalty of shareholders" in German law constrains controlling shareholders from both legislative and judicial perspectives,which not only endows minority shareholders with the right to sue for damages for their own rights and interests,but also clarifies the examination standard of the duty of loyalty of controlling shareholders through judicial precedents,which can be used as a framework reference for the legal regulation of controlling shareholders in China.Finally,based on the above empirical research,collation of regulations,foreign system observation,this paper tries to construct a regulatory system of controlling shareholders that meets the needs of corporate governance development in China.First of all,the definition clause and obligation clause of controlling shareholder are formed in legislation.Then,in judicature,the double review standard of procedure and substance replaces the tort standard to define the behavior of controlling shareholders abusing the control power.In the end,the application of the law is connected with the remedy path of the company resolution defects,forced distribution of dividends,share repurchase and so on.