5.1 Introduction

This chapter examines the exit remedies in close companies in China. The sources of Chinese company law as well as the corporate forms were introduced in Chapter 2. This Chapter, in Section 5.2, therefore starts with a general review of minority shareholder protection in China. We will see that before the company law reform in 2006, there was hardly any minority shareholder protection in the area of exit remedies, which means that the appraisal remedy and the oppression/unfair prejudice remedy studied in the previous chapters did not exist in the Chinese Company Law 1993, so the Chinese courts and practitioners had linie experiences in this area.

Company Law 2006 tried to fill this vacuum by adopting the appraisal remedy from the US. This newly introduced remedy can be found in Article 75. Section 5.3 presents a comparative examination of the scope of this remedy, procedural prescriptions, and valuation issues. It will be interesting to see what the differences are from the prescriptions in the US, whether the same wording means the same thing, how the core elements of this remedy are laid down in Chinese company law, and what we can learn from the US. At the end of the section, I suggest modest amendments to Article 75.

Another exit remedy, the oppression/unfair prejudice remedy, arouses more concerns in this comparative study. The necessity of this remedy has been amply demonstrated in the previous chapters, and the current situation in China shows that China is no exception when it comes to the need for such a remedy to combat oppressive behaviour.1 Since the new Company Law does not contain a buyout remedy based on oppression, in Section 5.4, I first attempt to identify similar remedies. The examination will shed light on Articles 20 and 153, but the vague provisions and other problems identified in these two articles show that that the oppression remedy has not really been established in China. Section 5.4 therefore focuses more on how the Chinese judicial culture could accommodate such a remedy, which is western in origin, and on possible reforms of the existing framework. In other words, instead of a detailed case study of specific issues, this section aims to construct a feasible framework for this remedy through comparative research.2 But the substantive case study on the oppression/unfair prejudice remedy in the previous chapters, especially in the UK part, is still of great value. We will come back to this point in section 5.4. Last but not least, the significance of the availability of exit remedies for FlEs will be addressed in Section 5.5.