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Conception Of Establishing Class Stocks System In China

Posted on:2015-01-11Degree:DoctorType:Dissertation
Country:ChinaCandidate:H Y LiFull Text:PDF
GTID:1266330428996282Subject:Civil and Commercial Law
Abstract/Summary:PDF Full Text Request
Class stock is directed against common stock. It refers to special conditionalstocks which are set for the content of stocks like distribution of profit, distribution ofremaining property, resolutions of major issues of company, appointment and removalof directors and supervisors, etc. Compared with common stock, it expands or reducesthe rights content. Legislation of class stock is perfect in U.S.A., Japan and otherdeveloped countries. Company expands channels of raising capital and defenseshostile bid to stabilize company management rights through issuing a variety of classstock. China has exercised non-tradable stock reform from2004, and abolished thedistinction of circulating stock and non-tradable stock after2008. All flow of stock ofJoint-stock company makes China’s companies face the danger of stabilization ofmanagement rights and hostile takeovers, and so on. Therefore, it is necessary tointroduce class stock system in China.Common stock refers to the stock without additional special conditions thatArticle of Association rules. On the contrary, class stock is the stock with additionalspecial conditions. Class stock has dual attributes of stock and bonds. In the UnitedStates and other countries around the world, compared with common stock,companies firstly issue preferred stock with preferred distribution right. Mostpreferred stocks do not have the voting rights. Because the existing shareholders whoplan to extend the operation in case of their rights are not affected want to raise newcapital on favorable terms.China’s Company Law does not directly rule class stock. Article131ofCompany Law rules that the Stated Council may make separate stipulations relating toa company’s issuance of stock of classes other than those prescribed herein. In recentyears, China’s academics and legislative sector begin to research the related problemsand legislate. On March21,2014, the CSRC published <the Measures forAdministration of Pilot Preferred Stock>. It mainly includes following contents.Non-listed company can privately issue preferred stock; listed company can issuepreferred stock; SSE50companies, companies which covered M&A, companieswhich covered repurchase can issue preferred stock, and so on. Thus, domesticcompanies which issue preferred stock have legislative support. Additionally, there are indirect relative contents of class stocks in Company Law and other related lawsand regulations. For example, according to Article of34and42of Company Law,China’s companies can set different rights contents in distribution of profits andvoting rights. It means that they can design stock involved class stocks contents.China’s securities market with the conditions which are ownership concentration,separation of ownership and management, diversification of investors provides a basisin reality for setting class stock system.After entering21st century, countries around the world though modification ofthe company law, gradually expand the types of class stock and give companies moreautonomy. Class stock was first produced in common law countries. Those countries’company law basically do not limit the right content of stock and give company rightsthat company can issue all kinds of class stock relating to distribution profits, surplusproperty distribution, voting rights, election of directors, reimbursement, conversionrights according to the Articles of Association. In recent years, Germany, Japan,Korea and other civil law countries gradually expand the scope of class stock and givecompanies more freedom to determine the type and content of stock. Comparativestudy on the legislation and practice of class stock of the United States, the UnitedKingdom, Japan, Korea, Germany and other countries is helpful for constructingChina’s class stock system.There are two main legislation modes on world-wide class stock. One is theUnited Kingdom and the United States’ free mode. Their company laws basically donot limit the right content of stock and only make general provision of type of stock.According to Articles of Association, company specially issues all kinds of stockrelating to different rights content. The other is Japan and Korea’s legal mode. It rulesthe type of class stock in the form of written code. In the statutory range of class stock,company sets special rights content. According to the present situation of China’slegislation and securities market, it is suitable to adopt the legal mode for China.Company Law can introduce class stock which includes stock of profits distributionand remain property distribution, stock with limited voting rights, reimbursementstock, conversion stock, stock with additional director’s right of appointment andremoval. Through issuing profits distribution stock, company could attract investorsand raise capital. Through issuing class stock of related voting right, company couldstrengthen control right of company or defense hostility acquisition. Through issuing reimbursement stock and conversion stock, company could adjust company financialstructure and ensure the investors’ investment interests.Introduction of class stock inevitably brings interests conflict problems amongclass stock shareholders. The consequences of interest’s conflict among classstockholders are not only the damage of special shareholder, but the companydeadlock. So it needs adopt appropriate means to resolve from the view of protectinga few kinds of shareholders and break the company deadlock. For this, it is necessaryto use Articles of Association or class stockholders meeting to adjust. Moreover, theinterest’s conflict of class stockholders directly affects directors’ loyal duty, and itmay lead to a breach of directors’ obligations and increase of responsibility. So it isnecessary to limit the directors’ liability. As noted above, it needs a law principle toadjust interest’s conflict among class stockholders. According to some perspectives,such as “class stock is the exception to the principal of stockholder equality” or “thereis not direct relationship between the class stock and the principal of stockholderequality”, the principal of stockholder equality does not play a role on class stock.From the perspective of other countries’ Company Law, as for class stock, theprincipal of stockholder equality is not exception apply. If the contents of class stockare different, it is allowed to unequally treat different class stockholders.
Keywords/Search Tags:Class Stock, Stock with Limited Voting Rights, Reimbursement Stock, Conversion Stock, Directors Elected Stock
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