How Could the Mechanism of Appointing a Custodian or a Provisional Director Help Solving Corporate Deadlock in China?

Abstract

To enter management deadlock is certainly a misfortune for a corporation, especially for a highly profitable one. Deadlock not only influences the daily operation of a business but will eventually cause great economic loss to it. Delaware corporate law provides several mechanisms including appointing a custodian and a provisional director to solve this dysfunction. On the contrary, there are not many choices available to a Chinese company in deadlock. The only judicial remedy provided to Chinese companies experiencing is judicial dissolution. This article reviews the mechanism of appointing a custodian and a provisional director for a close corporation under Delaware General Corporation Law and discusses the feasibility of transferring them to Chinese corporate law.