Chinese take-aways: what can China learn from the English experience of derivative actions?

This article evaluates the derivative actions in England and China from a comparative perspective. The statutory derivative actions are introduced by the Companies Act 2006 in England to replace the rules at common law; whilst derivative actions are introduced for the first time in China by the Chinese Company Law 2005. It is argued that some pertinent and important lessons can be learnt from the English experience for future law reforms in China, taking into account their distinct constitutional-political, socio-economic, legal and cultural backgrounds. In particular, a more sophisticated set of procedural rules should be established in China to minimise the number of malicious suits and the courts should play a substantially more active role in determining whether derivative actions can proceed. At the same time, the unfair prejudice remedy should also be considered for adoption in future Chinese company law reform.