5.3.2.4 Comments

In the US, the scope of appraisal triggers is the narrowest in the Delaware Corporate Statute and the broadest in the ALI Principles. The scope in the RMBCA is in between. The triggers in Article 75 of the Chinese Company Law most resemble those in the RMBCA. But through the comparative study, mainly with the provisions in the RMBCA, four major problems in Article 75 can be identified:

Firstly, it is improper to regulate distribution of dividends onder the appraisal remedy. It is advisable for this to be regulated by the oppression remedy, which I will propose in the next section.

Secondly, provisions on each appraisal trigger are not sophisticated enough. Owing to lack of research and consideration of mergers and divisions in the company law, certain types of mergers and divisions which do not constitute fundamental changes are not distinguished in Article 75. A general embrace of all the schemes is unfriendly to business efficiency.

Thirdly, there is lack of accompanying rules to enable the effectuation of triggers in Article 75. Take the disposition of major assets for example. In the RMBCA, dissenting shareholders are entitled to appraisal rights if other shareholders vote for a disposition which leaves the company with no significant business. As far as shareholder voting is concerned, the voting occasions are clarified by three approaches: laying down the types of transactions which are exclusively the power of the board of directors, explicating the standard for judging whether a shareholder vote is needed, and supplementing the safe harbour rule to exclude certain transactions from shareholder voting. But no such standard is mentioned in Article 75; no safe harbour rule; and worst of all, in Chinese company law, powers of the shareholders' meeting are codified, but no rights are explicitly given to the shareholders' meeting to vote on a disposition of major assets.1 In a word, though we have the triggers that resemble those in the RMBCA, we do not have the accompanying mies or an integrated system to enforce them efficiently.

In the fourth place, the RMBCA has adopted an enabling provision which permits the expansion of appraisal rights through corporate articles, by-laws or board resolutions.2 Under Article 75, companies are not empowered by such discretion. Expanding appraisal rights through the articles of incorporation, corporation by-laws or board resolutions requires at least majority approval.3 Private ordering therefore does not provide protection to minority shareholders at the expense of majority shareholders.4 Article 75 should at least adopt an enabling provision that permits expansion of appraisal rights as provided in the corporate articles or board resolutions.