Study of Protect Shareholders’ Rights in Takeover of Listed Companies
Takeover of Listed Companies refers to that a investor, including natural person & legal person,purchases a certain amount common shares of a listed company for purpose of getting its controlling rights. As a typical form of corporate takeover, it has been one of the most popular ways of merger of corporation and corporate reconstruction. According to various standard,takeover of listed companies is classified to privately negotiated transaction and tender offer, friendly take over and hostile takeover, takeover by cash and take over by swap.
A legal subjects interests are always expressed in the law as his legal rights, to shareholders is just same. Shareholders’ rights refers to the rights based on the qualification of shareholders of getting profit and participation in corporate management and governance. To protect shareholders”rights has become the fundamental aim of contemporary securities and companies law.
Comparing to both the subject of take over and the administrative organ of the target-companies,the shareholders, especially those medium and small shareholders, are in a disadvantage^ status, so they need a special legal protection, in China, takeover of listed companies is regarded as the better way to resolve the key problem of state-owned share can not transact freely,from which has suffered Chinese stock market for a long time. However, because of the specific characteristics of state-owned companies, it’s easier lo occur some events injuring shareholders’ rights and interests.
Therefore,there is special significance in China to enhance protection of shareholders’ rights in procedure of takeover.In order to protect shareholders’ rights,we must comply with following basically principles: equality among all shareholders, information disclosure, fiduciary duty of the administrative organ of target-companies to shareholders’ interests, prohibition of fraud and inside trading.Both the Tentative Rules of Stock Issuing and Trading (1993) and the Securities Law(1998) stipulate especially one chapter.
Takeover of listed Companies. Based on the guiding idea of restricting takeover, the Tentative Rules provides more regulations in respect of protecting shareholders rights. How ever, the Securities Law changed into encouraging takeover, and to some extent neglects the protection to shareholders. It is unfavorable too for our practice of corporate take over in that adopted 8 years ago Companies Law has been out-of-date.
Synthesizing the relevant laws and regulations, the main disadvantages of protection to shareholders’ interests in takeover of listed companies are as follows:
A. Lack of detailed provision of privately negotiated transaction. B. The drawback of tender offer,such as systemic confusion, contradictory between practice and regulation, lack of requisite conduction and legal procedure of exemption,defeat of the provision of conduct after purchase,lake of price terms and terms of the mode of payment,etc.C.The defect of information disclosure,such as lack of legal duty for both associated companies and administrative organ of target-companies to disclose related information of takeover,the subject’s dis closure is not complete enough for shareholders, etc. II. Lack of regulation of capital resources. E.Lack of regulation of anti-takeover. F.Lack of regulation of some new forms of takeover, such as takeover conducted by foreign investors, takeover by certificate of entrust and MBO ( including GBO),etc.
In order to improve the system of takeover, strengthen protection to shareholders,the following measures should be adopted?
Establish the system of takeover of listed companies which encourages tender offer,but limit privately negotiated transaction, perfect the system of tender offer in different respects: rebuild mandatory offer, set voluntary offer,vest shareholders with revoking the acceptance of offer in certain conditions,make a further regulation on conducts after purchase,standardize the price and the mode of payment.