The Law and Practice of Shareholder Inspection Rights: A Comparative Analysis of China and the U.S.

39 Pages Posted: 22 Aug 2019 Last revised: 22 Jun 2020

See all articles by (Robin) Hui Huang

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law; 华东政法大学(East China University of Political Sicence and Law); University of New South Wales - Faculty of Law

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

Date Written: March 1, 2020

Abstract

Shareholder inspection rights allow a shareholder to access the relevant documents of the company in which they hold an interest, so as to address the problem of information asymmetry and reduce the agency costs inherent in the corporate structure. While Chinese corporate governance and American corporate governance face different sets of agency cost problems, this paper shows that shareholder inspection rights play an important role in both China and the U.S.. On the books, while shareholder inspection rights in both countries are broadly similar, there are some important differences on such issues as the proper purpose requirement. Our empirical analysis further sheds light on how inspection rights operate on the ground. We find that many inspection cases are filed in both China and in Delaware. These cases are resolved by the courts relatively quickly. While inspection rights in both countries are frequently used as a pre-suit discovery device, the types of subsequent litigation that can be filed in each country are quite different. Efforts are made to explain, and draw implications from, the similarities and differences on shareholder inspection rights between the two countries.

Keywords: inspection rights; corporate governance; agency costs; China; U.S.

Suggested Citation

Huang, (Robin) Hui and Thomas, Randall S., The Law and Practice of Shareholder Inspection Rights: A Comparative Analysis of China and the U.S. (March 1, 2020). Vanderbilt Journal of Transnational Law, Forthcoming, Vanderbilt Law Research Paper No. 19-24, European Corporate Governance Institute - Law Working Paper No. 499/2020, The Chinese University of Hong Kong Faculty of Law Research Paper No. 2020-11, Available at SSRN: https://ssrn.com/abstract=3440857 or http://dx.doi.org/10.2139/ssrn.3440857

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law ( email )

Shatin, New Territories
Hong Kong
852-39431805 (Phone)
852-29942505 (Fax)

HOME PAGE: http://www.law.cuhk.edu.hk/app/people/prof-robin-huang/

华东政法大学(East China University of Political Sicence and Law) ( email )

1575 Wanhangdu Rd.
Changning, Shanghai 200042
China

University of New South Wales - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia
61-2-9385 9649 (Phone)
61-2-9385 1175 (Fax)

Randall S. Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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