FUNDING DERIVATIVE ACTIONS IN CHINA: PRACTICE, PROBLEMS AND PROSPECTS.

It has been 13 years since statutory derivative actions were introduced into the Chinese Company Law. The lawmakers expected this mechanism could help enhance corporate governance by facilitating the provision of judicial remedies for shareholders. However, the statutory derivative action has had no significant impact on practice because of certain practical obstacles, such as funding difficulties faced by potential shareholder claimants. It should be mentioned that the fourth judicial interpretation of the Chinese Company Law enacted in September 2017 provides that shareholder plaintiffs could be indemnified by the company for rational litigation costs incurred in the derivative action. This article discusses: (I) the current practice of funding derivative litigation in China; (2) problems with funding derivative litigation in China; (3) proposals for funding derivative actions in China, for example, lowering case acceptance fees and introducing public funding for shareholder plaintiffs, particularly for minority ones; and (4) new funding mechanism introduced by the fourth judicial interpretation (2017) of the Chinese Company Law and how to facilitate the use of it. A conclusion is then made that the new mechanism may help to solve funding problems with derivative actions to a certain extent. But the good functioning of it needs more practical details, for example, how to define the scope of "reasonable litigation costs". [ABSTRACT FROM AUTHOR]