Research On The Passing-through Of Parent’s Shareholder’s Right To Inspect The Books And Records Of Subsidiaries

The current Company Law is based on a single corporate structure.However,with the development of the market economy,a number of enterprise groups had emerged.And the current legal systems are unable to deal with the difficulties posed by the enterprise groups.The actual controllers of the parent company may exclude important shareholders’ rights,such as the inspection right of the shareholders of the parent company,by using of the parent-subsidiary structure and thus embezzle the company’s nearly total assets.In this context,the study of the passing-through exercise of shareholders’ inspection right is extremely significant.There is an urgent and realistic need for the passing-through exercise of shareholders’ inspection right.Taking the cases of the right that occurred in China from 2008 to 2022 as samples,this page analyzes the data from multiple angles,such as when the cases occurred,the percentage of the plaintiff’s shareholding,the reasons for court decisions,and the court’s decisions.The conclusion is that there is a real demand for shareholders of the parent company to exercise the right,and this demand is difficult to be satisfied due to lack of the right of claim.Besides,the alternative measures are useless which makes it necessary to allow the shareholders of the parent company to inspect books and records to the subsidiary.There is sufficient theoretical support for the passing-through exercise of shareholders’ inspection right.The passing-through theory provides the basic theoretical basis for the inspection of the parent company’s shareholders’ right to its subsidiary,which points to a limited passing-through aimed at protecting the interests of the parent company’s shareholders.With this theory as the institutional backing,it is capable of affirming the value of the existence of enterprise groups while eliminating their negative effects.After arguing for the practical and theoretical justification,it is necessary to think about how to design the specific system.We should draw on the advanced experiences of the United States and Japan,and design the system in accordance with the national conditions.First of all,the passing-through exercise of shareholders’ right of inspection should meet three conditions.In terms of the preconditions for the application of passing-through,the parent company should control the subsidiary company to a certain degree,which can be judged on the basis of whether they hold a majority of the voting rights or whether they are able to dominate the major business decisions of the subsidiary.And there should be no restrictions on the duration and percentage of shareholding of shareholders in the parent company in order to protect minority shareholders.Regardless of the type of documents they want to inspect,they should state the legitimate purpose.Secondly,the right should be bounded by the system in order to protect the interests of the subsidiaries.With regard to the occasion,the request can only be satisfied if it involves the significant interests of the parent company and its shareholders.With respect to the scope,the type of books and records that shareholders can access should be determined according to the type of the subsidiary and the content of the documents should be significantly related to their own interests.The board of directors of the subsidiary should have the right to deny the request if they think that the shareholder would result in the impairment of the interests of the subsidiary.In addition,the shareholder of the parent company wishing to passing-through exercise the right of inspect need make a written request to the subsidiary company stating its legitimate purpose,and may apply for other professional companies to assist.The whole procedure is initiated without prior review by the court.Considering that the review of the legitimate purpose of the board of directors of the subsidiary and the identity of the shareholders of the parent company take a long time,the response period can be appropriately extended compared to the right of inspect right.Finally,the necessary and final legal remedy should be provided for the shareholders of the parent company,so that if the board of directors of the subsidiary refuses to grant access to them,the shareholders of the parent company have the right to sue in court to defend their interests.