5.2.2.2.2 Remedies to leave the company

In many countries, shareholders in close companies can ask for a buyout either through the appraisal remedy or the oppression remedy/the unfair prejudice remedy or similar remedies named in other terms.1 This kind of remedies, exit without dissolution, is the research topic of this book, and the following part of this chapter will focus on the appraisal remedy and the oppression remedy in China from a comparative perspective.

Article 75 and Article 143 of the Company Law 2006 have transplanted the appraisal remedy on occasions that, in the legislator 's point of view, best suit the practice in China. Article 75 applies to close companies and Article 143 to public companies. Except for the appraisal remedy, however, no other remedies in the Company Law 2006 offer the possibility of a buyout for the minority shareholders. This means that if a minority shareholder believes that there has been a breach of fiduciary duties which has damaged his interests, he can only ask for compensation rather than a buyout as explained in the previous section on direct actions.2 I consider the Jack of buyout relief in this remedy as a deficiency in minority shareholder protection in the current company law. Consequently, one purpose of this research is to call for reforms and introduce exit relief in Chinese company law in cases of breach of fiduciary duties.

Another way of leaving the company is to request its dissolution by the court. There were provisions on voluntary and administrative dissolution in Company Law 1993 but no provisions on judicial dissolution.3 Accordingly, if a shareholder had filed a dissolution petition for deadlock or for other reasons, the practice of the court was to refuse the case because there were no relevant provisions in the company law.

In the first draft of the Company Law 2006, judicial dissolution was still not taken into consideration. The Supreme People's Court (the SPC) and other relevant parties then proposed that the right of a dissolution petition should be granted to shareholders because there were companies in deadlock or in other difficult situations, whose continuing existence, even though they might still be solvent, might cause great losses to shareholders and, moreover, such a remedy had been widely adopted and had proved useful in countries with developed corporate law. Article 183 of the Company Law 2006, for the first time, therefore allows petitions for dissolution to be filed by shareholders. It reads: if a company meets any serious difficulty during its operation or management so that the interests of the shareholders will be subject to heavy loss if it continues to exist and this cannot be solved by any other means, shareholders with 10% or more voting rights may apply to the court to dissolve the company. In Section 5.4.2.1, the attempt to identify the oppression remedy in Chinese company law will start with the discussion of this article.