Judicial Intervention to Corporate Governance: Causes and Approaches

Sheng Xuan Guo

doi:10.15209/jbsge.v10i1.842

Abstract

A corporation is a legal person with group personality created by the law and is considered to have the freedom of autonomy as a subject of private law. A corporation is also considered as shareholders’ tool to pursue profit just like a kite flown by shareholders especially substantial shareholders. A corporation is considered as a contractual combination, a gathering place of stakeholders and constituting a cell of society. A corporation is described as a Utopia. …With different interest claims, subjects such as management, shareholders, directors, creditors, employees and others who coexist in a corporation through the certain formal structure of corporate governance.

Highlights

A corporation is a legal person with group personality created by the law and is considered to have the freedom of autonomy as a subject of private law
A corporation is considered as shareholders’ tool to pursue profit just like a kite flown by shareholders, directors, creditors, employees and others who coexist in a corporation through the certain formal structure of corporate governance
Whether according to opinion which demands building a corporate governance structure with shareholder’s rights as the core, or according to corporate contract theory, which stresses that multiple stakeholders should be subject to a common governance, a corporation always depends on articles of association to realize its autonomy

Summary

Introduction

Shareholders, directors, creditors, employees and others who coexist in a corporation through the certain formal structure of corporate governance. The majority may even be able to deny the minority shareholders any return in the long run by siphoning off corporate assets in the form of high salaries or rents, insulated from judicial review by the business judgment rule. By taking advantage of their control on the general meeting of shareholders and the board of directors, the big shareholders reach resolutions so as to achieve their special purposes while disregarding, even infringing the rights and benefits of small investors These sorts of disputes frequently occur in the listed companies in respect to affiliate transactions, and annexation of firms’ properties. In the Chinese mainland judicial system,it may be through the way of a Supreme Court case to guide the Primary Court firstly, and by way of judicial interpretation, and by modifying the Companies Act, to determine the principles of judicial intervention on corporate governance, ways and necessary restrictions

The demand of pursuing effective order in company governance

Judiciary function including an exterior safeguard for company management

Setting up special business procedure for corporate governance

Drawing support from judicial experts