What Are the Different Types of Shareholder Protection?

Shareholders 'rights protection is a long and arduous system project. The "Company Law" and "Securities Law" are difficult to completely cover more and more emerging issues. Shareholders' rights lawyers suggest: Drawing on the experience of consumer rights protection, develop a The Law on the Protection of Shareholders' Rights and Interests, similar to the Law on the Protection of Rights and Interests, is necessary. The scope and principles of protection of shareholders' rights and interests, the rights of shareholders, the obligations of companies and operators, the protection of shareholders' rights by the state, the organization of protection of shareholders' rights and interests, dispute resolution and legal responsibilities, etc. are more conducive to small shareholders. Development of the cause of rights protection. Some states in the United States, such as Pennsylvania and Texas, have promulgated the Shareholder Protection Act, and these legislation can be used for reference.

Shareholder rights

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Shareholders 'rights protection is a long and arduous system project. The "Company Law" and "Securities Law" are difficult to completely cover more and more emerging issues. Shareholders' rights lawyers suggest: Drawing on the experience of consumer rights protection, develop a The Law on the Protection of Shareholders' Rights and Interests, similar to the Law on the Protection of Rights and Interests, is necessary. The scope and principles of protection of shareholders' rights and interests, the rights of shareholders, the obligations of companies and operators, the protection of shareholders' rights by the state, the organization of protection of shareholders' rights and interests, dispute resolution and legal responsibilities, etc. are more conducive to small shareholders. Development of the cause of rights protection. Some states in the United States, such as Pennsylvania and Texas, have promulgated the Shareholder Protection Act, and these legislation can be used for reference.

Chinese name

Shareholder rights

Including

Shareholder litigation

Solid

A long and arduous system project

Relevant laws

, "Company Law", "Securities Law"

What is shareholder lawsuit?

A shareholder lawsuit refers to a lawsuit brought by a shareholder to the company or other persons purely for the protection of their own interests.

The main cases of shareholder lawsuits are: lawsuits requesting payment of dividends that have been legally declared; lawsuits requiring inspection of company books and related records; lawsuits requesting protection of the right to subscribe for new shares; lawsuits that impede the exercise of voting rights; Lawsuits filed by agreement; lawsuits filed against shareholders' transfer of shares infringing their legal rights, etc.

What is shareholder derivative action?

A shareholder derivative action refers to a lawsuit in which the company's legitimate rights and interests are infringed, and the company fails or refuses to hold the infringer responsible. In the name of the company, the shareholder replaces the company's suit against the infringer in its own name.

The main cases of shareholder derivative actions are:

Litigation for damages caused by illegal actions of directors, supervisors and senior staff, such as directors, supervisors, senior staff receiving bribes, embezzling company property, misappropriating company funds, self-employed or operating similar business activities for others ;

Directors, supervisors, senior employees and controlling shareholders have violated the company's good faith obligations or the resulting damages litigation, such as directors, supervisors, senior employees' serious negligence, wasting company assets, betraying company control, directors, supervisors, Lawsuits in which a transaction between an officer or controlling shareholder and the company harms the interests of the company;

Lawsuits filed by company shareholders against outsiders infringing on the company's legal rights, etc.

What is direct shareholder action?

The so-called direct shareholder lawsuit refers to a lawsuit brought by a shareholder to a company or director based on the status of the owner of the stock purely to protect their own interests.

4. How to protect the rights and interests of small and medium shareholders in mergers and acquisitions?

In corporate mergers and acquisitions, small and medium shareholders are often passive bystanders and receivers of results, and all activities are chaired by directors. As minority shareholders are in a weak position, the law protects the interests of minority shareholders from the following six aspects:

(1) Compulsory offer. When the acquirer acquires 20% to 30% of the target company, it is easy to control the target company and become the de facto prosecutor. Therefore, Chinese law stipulates that if one party has acquired more than 30% of the voting shares of a company, that party should issue a comprehensive takeover offer to the remaining shareholders of the company.

(2) Open offer and treat shareholders equally. Every condition in the tender offer issued by the acquirer to all shareholders applies equally to every shareholder of the same equity.

(3) Public information, fraud and misleading are prohibited. When issuing a tender offer, the acquirer must publicly inform its own situation, the purpose of the purchase, the purchase price, the purchase conditions, the placement of employees of the target company, and the original welfare arrangements.

(4) Improper conduct of directors is prohibited. To prevent directors from harming shareholders, the board of directors is required by law to provide an independent financial adviser to advise the board of directors on whether the offer is fair and reasonable after receiving the offer. This opinion, the relevant reasons, and the board of directors' recommendations on whether to accept the offer are all made public to the shareholders of the target company.

(5) Undertaking to withdraw. As the small and medium shareholders of the acquired company are in a weak position, the small and medium shareholders have the right to revoke the commitment even if they have promised to sell the shares of the target company held by them before the effective period of the offer or before the offer becomes unconditional.

(6) Proportional distribution. If it is only a partial acquisition, when the shareholders of the target company promise to sell more shares than the purchaser intends to acquire, the acquirer shall purchase from each of the promised shareholders in the same proportion.

5. What are the circumstances under which shareholders can sue a listed company?

1. If a resolution of the shareholders 'general meeting violates laws or administrative regulations and violates the shareholders' legitimate rights and interests, the shareholders have the right to file a civil lawsuit in a people's court in accordance with the law.

2. If there is a dispute over the convening, convening of the shareholders' meeting, the legal validity of the voting procedures and the resolution and the coordination cannot be coordinated, the parties concerned may file a lawsuit in a people's court.

3 When the resolution of the board of directors violates laws and administrative regulations and violates the investors' legal rights, shareholders have the right to file a lawsuit in the people's court to stop the illegal act and infringement.

What is the difference between direct shareholder action and shareholder representative action?

First, the two are based on different reasons. The former is based on the status of the company's shareholders; the latter not only enjoys the legal qualifications of the company's shareholders, but also files a lawsuit in its own name as a company representative after meeting the pre-litigation procedures. Second, the reasons for the exercise are different. The former is a lawsuit filed because its own interests have been infringed by the company, while the latter is a lawsuit filed when the company's interests have been infringed by members of a company organ or a third party and the company is indifferent to relief.

Third, the effects of the two exercises are different. Whether the former is successful or not, all interests or uninterests belong to the plaintiff's shareholders; if the latter is successful, the winning interest belongs to the company; if the latter is unsuccessful, then the company will be given judgment and other shareholders may not represent the lawsuit again on the same ground. The costs of losing the case shall be borne by the plaintiff shareholders.

Finally, the scope of the subject of the two defendants is different. The defendant in the former lawsuit may be the company, or the company's shareholders, directors, supervisors and employees, but may not be a third party outside the company; while the defendant in the latter lawsuit may be a third party outside the company, or a company shareholder, Directors, supervisors and employees, the company cannot become a defendant in the substantial sense.

How to protect the rights and interests of the company's bankrupt shareholders?

Bankruptcy means that when the company (debtor) is unable to settle its due debts, in the interests of all creditors, the entire property of the debtor is repaid to the creditors in a certain order and proportion.

Once the company goes bankrupt and is liquidated, it is not the investors that receive compensation, but the creditors. When the company is insolvent, it is clear that your rights and interests cannot be protected and you have to bear the risks arising therefrom.

Therefore, investors should have a certain understanding of the bankruptcy of listed companies, and should have some understanding of the company's situation before investing in stocks.

What is shareholder subrogation lawsuit?

Subrogation lawsuit refers to a lawsuit brought by a shareholder with legal qualifications on behalf of the company for the benefit of the company when the company is not willing to pursue the liabilities of company organs (such as major shareholders, directors, and managers) or protect the company's interests through litigation. The prosecution of subrogation shall meet the following requirements:

1. The plaintiff who filed a lawsuit must be a shareholder of the company and have the qualifications of a shareholder at the time of the infringement, and always maintain the qualification of a shareholder when filing a lawsuit and substituting a lawsuit;

2. Shareholders should submit an application to the Supervisory Board when they file a subrogation lawsuit, and if necessary, request the convening of an extraordinary general meeting. Subrogation lawsuits can only be made after the application is rejected.

3 Because the judgment of the subrogation lawsuit is directly vested in the company, the company can neither stay out of the case nor participate in the lawsuit as a third party. Instead, the company should be listed as a nominal defendant and should not actively control the lawsuit.

Shareholders' Rights Protection Creative Strategy

Defenders are using some innovative new strategies to avoid being noticed or monitored by the other party. The new strategies include "using total return swaps and other derivatives to avoid disclosure requirements or obtaining voting rights that do not meet the company's economic equity investment." As shown in a blog post on the College's Corporate Governance and Financial Regulation Forum. This post was written by Wachtell, Lipton, Rosen & Katz. (Lipton created the Poison Pill Project in 1982.) Founding partner Martin Lipton.

So, although more defenders and management often reach a certain level of mutual understanding, executives still have to maintain their company's defenses.

"The reason defenders feel secure and shaken is that the value creation they feel is not reflected in stock prices," Giordano said. "They have a requirement: to return the most money to investors at the highest possible rate."