Exit remedies for minority shareholders in close companies. England, the United States, China

PhD ceremony: Ms. Q. Wang, 16.15 uur, Academiegebouw, Broerstraat 5, Groningen

Title: Exit remedies for minority shareholders in close companies. England, the United States, China

Promotor(s): prof. J.B. Wezeman, prof. M.L. Lennarts

Faculty: Law

Worldwide, the topic of protection of minority shareholders gains much attention. One of the protective mechanisms minority shareholders may use is the exit remedy. This remedy is helpful for minority shareholders, especially those in close companies because shareholders in such companies can not exit at will like shareholders in a listed company. In this comparative study two exit remedies are examined, namely the appraisal remedy and the oppression remedy/unfair prejudice remedy. The comparative research includes the laws of the UK, the US and China.

China is a most attractive destination of foreign direct investment. As foreign invested enterprises in China usually take the form of close companies, a comparative study with the aim to improve protection of minority shareholders by adopting experiences from leading jurisdictions will benefit both foreign investors and China’s economic development.

Under the new PRC Company Law 2006, both the appraisal remedy and the oppression remedy have been introduced, but they are embryonic and there is plenty of room for improvement. Regarding the appraisal remedy, a number of recommendations are made in this study, covering both substantive and procedural issues. With regard to the oppression remedy, it is concluded in this study that the current provisions in the 2006 PRC Company Law are unlikely to be effective. Therefore fundamental reform is proposed, adopting elements from the UK and US laws on oppression remedies.. Adoption of this proposal will lead to a significant improvement in the protection of minority shareholders in Chinese close companies. As a result China will become a more attractive destination for international investors.