1.2.3 Significance of the research

Worldwide, shareholders' exit remedies in a close company have undergone a process from being denied to being permitted and developed.1 In the US, the appraisal remedy replaced the unanimous agreement, the change of which was supported by judicial sympathy for flexibility in corporate management.2 Later, exits also became possible when legislators came to realize that minority shareholders needed more protection on account of abuse of power onder the practice of majority rule.3

The evolution of the exit remedies mentioned above is also reflected in the development of Chinese company law. Previously in China, appraisal rights were not offered. So it was not pos sible to exit through appraisal rights. But the situation changed with the amendment of the PRC Company Law in 2006. Under the new company law, Article 75 confers appraisal rights on shareholders in close companies. In that company law, the oppression remedy was introduced as well to combat the abuse of majority power, but at present, the only relief available is compensation. Unlike onder the statutory provisions of the developed jurisdictions on the oppression remedy, therefore, it is not possible to exit through this remedy, but I believe that availability of the exit remedy is the direction of future development.

There is some literature in China about the new appraisal remedy. As far as I know, because the appraisal remedy was newly introduced, the literature on this remedy before 2006 was mainly a general introduction of the provisions in other jurisdictions, rather than a detailed comparison or in-depth analysis. After the company law was amended, attention was primarily paid to the comparison of procedural rules. In my opinion, however, the discussion of procedures does not go far enough. Other important aspects, such as substantive scope and valuation issues relating to this remedy remain scarcely touched. In a word, the existing literature on the newly adopted appraisal remedy has not reached a satisfactory level in either scope or depth. More critical opinions as well as constructive suggestions are desired. By examining provisions, commentary and cases about the appraisal remedy in the US, this book conducts relatively deep and more systematic research covering a range of issues from the purpose of the remedy, the triggers and the procedures to the area of valuation, which is not specifically prescribed in the current company law.

Even fewer materials can be found in China on the new oppression remedy. There was no oppression remedy in the Chinese Company Law 1993. This research first attempts to locate the relevant articles of the new company law which are analogous to the oppression remedy. Under Article 20, majority shareholders are prohibited from abusing their rights to harm the interests of minority shareholders. This open-worded norm aims to restrict majority power and to protect the interests of minority shareholders. In the UK and US, the task to interpret the open norm is left to the court. Unfortunately, the same approach is unlikely to be effective in China, owing to its legai tradition and current situation as a civil law country.4 This research therefore seeks to devise a workable model for China by adopting elements from the US and UK practice. In addition, a major reform is also proposed through comparative research. This research advises Chinese company law to extend the exit remedy to Article 20. If the advice is adopted, minority shareholders' protection will be significantly improved in close companies in China, and China will be a more attractive destination for international investors.5 In brief, the contribution of this book to the oppression remedy is that it starts to examine this newly introduced remedy in Chinese company law, and proposes a new framework which enables the exit remedies in China to be further expanded and more enforceable in practice.