Legal Protection for Minority Shareholders in China

Frontiers of Law in China, Vol. 8, No. 2, June 2013

Edinburgh School of Law Research Paper No. 2014/31

26 Pages Posted: 8 Jun 2014 Last revised: 3 Jul 2014

See all articles by Shaowei Lin

Shaowei Lin

Shanghai Jiao Tong University (SJTU)

David Cabrelli

University of Edinburgh - School of Law

Date Written: June 5, 2013

Abstract

In view of the increasingly severe exploitation of minority shareholders and the existence of double agency costs in China, it is necessary to provide strong protection for minority shareholders in China in order to build an investor-friendly system. By enabling minority shareholders to prevent misconducts of majority shareholders and managers, legal system has made significant progress in the past twenty years. Nevertheless, many defects still exist. The first enactment of the PRC Company Law was passed in 1992 with primary goal to serve reform of state-owned enterprises and therefore protection for minority shareholders was excluded by the scope of these reforms. The revision of the Company Law in 2005 was regarded as historical progress of Chinese company law in respect of providing protection for minority shareholders as many rights are conferred on shareholders and more measures were adopted to restrain the power of directors and controlling shareholders. However, this paper identifies that these various rights and protective mechanisms have certain deficiencies, which means that the interests of minority shareholders suppose to be guaranteed would be inevitably affected. Without improvements and clarifications of the existing legal protection in the future, interests of shareholders and company as a whole will be obstructed ultimately and development of capital markets will be significantly impeded.

Keywords: Minority Shareholders, China, Corporate Governance

JEL Classification: K22

Suggested Citation

Lin, Shaowei and Cabrelli, David Louis, Legal Protection for Minority Shareholders in China (June 5, 2013). Frontiers of Law in China, Vol. 8, No. 2, June 2013, Edinburgh School of Law Research Paper No. 2014/31, Available at SSRN: https://ssrn.com/abstract=2447132

Shaowei Lin (Contact Author)

Shanghai Jiao Tong University (SJTU) ( email )

KoGuan Law School
Shanghai 200030, Shanghai 200052
China

David Louis Cabrelli

University of Edinburgh - School of Law ( email )

Old College
South Bridge
Edinburgh, EH8 9YL
United Kingdom

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