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12002320026OnProtectionofMinorityShareholder’sInterestinCompanyD922.291.91CompanyMinorityshareholderProtectionofinterest19931229199912252Fossv.HarbottleFossv.Harbottle18819420Fossv.Harbottle3AbstractAsanimportantcomponentofmodernCompanyLaw,thelegalprotectionoftheminorityshareholder’sinteresthasbeenenthusiasticallytakenbymanycountrieswhoconsequentlyhaveactivatedasetofregulationsforthesakeofminorityshareholder’sinterestprotection.Amongthemoderncompanylawstherearevariousprocedures,bothinsubstantivelawandinprocedurallaw,whichhaveprotectedtheminorityinteresttocertainextent.Ourcountry’sstate-ownedenterprises,ontheirreformingwaytothestockcorporation,areconfrontedwithacompletetransformationfromthetraditionalmanagementstructuretothecorporationmanagementstructure.Duringwhichcourse,duetothenonstandardconversionfromtheoldtothenewstructure,especiallyduetothemagnificenceoftheStatedOwnedShares,theminorityshareholder’sinteresthasbeenseverelyimpaired.That'swhyitisbecomingmoreandmorenecessaryandimperioustoprotecttheminorityshareholder’sinterestinourcountry.ItisnotuntilDecember29th1993thatthefirstCompanyLawwasenactedinourcountry.AftertheamendmentsmadeonDecember25th,1999,therestillexistflawsandshortcomingsespeciallyintheprotectionoftheminorityshareholder’sinterest.Someprevailingproceduresofthemodern4companylawsaretobeaddedinfutureimprovements.Inretrospectofthehistoricalbackgroundforthe“protectionofminorityshareholder”principle,withreferencetotheforeignlegislativecasesforminorityshareholder’sinterestprotection,thethesishasprobedintoseveralissuesastotheestablishmentoftheminorityshareholder’sinterestprotectionsysteminfoursections:First,theestablishmentofthecorporationminorityshareholder’sinterestprotectionprinciplesarousedbythemajorityshareholder’sinterestprinciples.Second,thefoundationofthelegalprotectionofminorityshareholder’sinterest.Third,thenecessityofprotectionofminorityshareholder.Andfinally,thelegalformsoftheminorityinterestprotection.Inthefirstsection,theFossv.Harbottlecasewasmentionedinwhichthemajorityshareholder’sinterestprinciplewasestablished.Accompanyingthis,theEnglishandAmericanCaseLawhasconstantlyimposedrestrictionsovertheapplicationoftheprinciplethroughtestcasesbyallowingtheminorityshareholderstosuetheboardofthedirectorsundercertaincircumstances,whichwasknownastheexceptiontotheFossv.Harbottle.In1881,theUnitedStatesabandonedrelativeprinciplesofEnglishCaseLawandtheminorityshareholderswereadmittedtoaderivativelawsuitforthesakeofthecompany.ThisisthefamousEquiptableLaw94inhistory,thefoundationofthelegalprotectionofminorityinterest.Inthesecondsection,thefoundationoflegalprotectionofminorityshareholder’sinterestswasfurtherdiscussed.Togetadaptedtothenewrequirementsofthedomesticandforeigneconomicsituations,refreshmentsoftheCompanylawhavesurgedinmostcountriessincethe20thcentury,especiallyaftertheWorldWarII.Thevalidityprinciplehasreplacedtheinvalidityprincipleintermsofthecompany’sauthority-exceedingconduct,theboardofdirectorshastakentheplaceoftheshareholdersasthecoreofthecompanystructure,andtheblossomoftheequalityamongtheshareholders,allthesehavedrasticallyalteredthefoundationoftheFossv.Harbottlecases,whichinevitablyledtotheexpansionofthelegalprotectionoftheminorityinterest.Inthethirdsection,thenecessityoftheminorityinterestprotectionwasexpatriated.Thelegalprotectionofminorityinterestsistheinevitabledemandandlogicalextensionofthecompany’sdemocraticnature;it’sanimportantguaranteeofthecompany’ssteady,coordinateandsounddevelopmentaswellastheguaranteeoftherealizationofminorityshareholders’reasonable5expectation.Ourcountry’sCompanyLawshalladaptitselftotheworldwidetrendofmodernizationandintegrationinthedevelopmentofcompanylaws,soastoprovidethecorporationswithpowerfulprotectionsininternationalcompetitionbystrengtheningpracticallytheminorityinterestprotectioninbothsubstantiveandprocedurallaws.Inthefourthsection,thelegalformsoftheminorityinterestprotectioninmoderncorporationshavebeendiscussedindetail.Itincludesthefollowingaspects:thevalidationoftheHonestObligationPrinciple,theminorityshareholders'righttosuealawsuitagainsttheabuseofthevotingrightbythemajorshareholders,theirclaim—andtherightfor—conveningthegeneralmeetingofshareholders,andalsotheaccumulativevotingsystem.Accordingly,therelativeregulationsofCompanylawinourcountryarealsodiscussedandsomelegislativesuggestionsareputforwardinthispart.5116K122FossV.Harbottle56101313151618181819202121263032737384011ContentsPreface1ChapterOneAHistoricalSurveyoftheProtectionofMinorityShareholderPrinciple2I.TheEstablishmentoftheMajorityShareholderPrinciple2II.ExceptionofthePrincipleofFossV.HarbottleCase5III.TheEstablishmentofthePrincipleofProtectionofMinorityShareholderinCompany108ChapterTwoFoundationsofLegalProtectionofMinorityShareholderinCompany13I.EstablishmentofthePrincipleofEffectiveSet-upoftheCompany’sAuthority-exceedingConduct13II.EstablishmentoftheKeyStatusoftheBoardofDirectors15III.UpsurgeoftheThoughtsofShareholderEquality16ChapterThreeNecessityofLegalProtectionofMinorityShareholderinCo