5.4.2.1 Possibility I — Article 183- rights to dissolution

One may find that certain remedies exist in one country but not in another. This, however, may not be the whole story since remedies with similar functions may have different names.1 And the same legislative purpose can be achieved by different legislative frameworks as well. In this sense, to find out whether the new Chinese company law contains a remedy to control the problem of oppression, a thorough examination is necessary. I will first examine the newly introduced dissolution rights for shareholders in Company Law 2006 because my comparative research has shown that the unfair prejudice remedy and the oppression remedy either originated (UK) or are still embodied (US) in the remedy of judicial dissolution.

Article 183 of the Chinese company law provides shareholders with the right to file a petition for dissolution. It reads: "where there are serious difficulties in the operation of a company and the company's continuance will definitely cause significant losses to shareholders' interests, however, such scenario cannot be solved through other means, then, shareholders representing 10% of all the votes may request the people's court to dissolve the company." This article applies to both public companies and limited liability companies when three conditions are met: (1) serious difficulties in the operation of a company, (2) the company's continuance will definitely cause significant losses to shareholders' interests, and (3) such scenario cannot be solved through other means. The answer to the question whether this article has the same function as the oppression or unfair prejudice remedy depends on the interpretation of `serious difficulties' in the operation of a company. Can oppressive conduct constitute `serious difficulties' in the operation of a company? If so, we need to do further research on this remedy. If not, we need to look for other provisions in the company law.

Section 14.30 (2) of the RMBCA provides for dissolution at the request of a shareholder under two circumstances: deadlock or abuse of power by controlling shareholders or directors. The laffer circumstance- abuse of power by controlling shareholders or directors — is the oppression remedy in the US which I have studied in Chapter 3. Such a circumstance, however, seems not to be covered by Article 183 for the reason that interpretations of `serious difficulties' given by the Supreme People's Court are predominantly inclined towards the first category, deadlock. According to Article 3 of the "Interpretation of the Company Law 2006- Series 1" published by the Supreme Court, where shareholders in pursuit of the remedy provided in Article 183 request the court to dissolve the company, the court should allow the petition under the following circumstances: (1) shareholders' meetings or shareholders' assembly have not been held for two consecutive years; (2) no resolutions of shareholders' meetings have been adopted for two consecutive years due to less than the quorum required by law (public companies) or by the company's articles of association (close companies); or (3) other serious difficulties in the operation and management.

The way in which Article 3 is expressed suggests that deadlock is not the only situation covered by `serious difficulties'; other situations can also be possible triggers of the remedy, but the situation of abuse of power is not explicitly mentioned and whether it comes under the last open-ended item `other serious difficulties in the operation and management' is doubtful because it can be gathered from the wording of Article 183 that the focus is on the difficulties which occur in the operation of the company. Occurrences of abuse of power, such as exclusion from management, transactions with conflicts of interests, or no distribution of dividends, may not pose difficulties to corporate operation and management, but merely damage the interests of minority shareholders. Besides, over time, in both the UK and US, the oppression/unfair prejudice remedy has outgrown its origin of dissolution.2 With the development of alternative relief to dissolution/winding up, less serious forms of oppression, such as exclusion from the management and transactions with conflicts of interests, are included in the oppression remedy.3 At this stage, where the remedy only has a short history and where it only offers relief by way of dissolution of the company, it seems far-fetched to conclude that this article is the Chinese counterpart of the oppression remedy or the unfair prejudice remedy.