Research On The Legal System Of Cornerstone Investors

The so-called cornerstone investor refers to the investor who subscribes for the issuer’s shares in advance to participate in the issuance and placement for the purpose of successful issuance during the initial public offering(IPO).An agreement to obtain a certain number of shares at a certain price(usually the final issue price).The cornerstone investor system is actually a special title for the Hong Kong market in my country.The A-share market in my country is called by allotment to strategic investors.The similar mechanism in the United States is a public offering and concurrent private placement(CPP).The key research object of this paper is A The stock market cornerstone investor system.From the perspective of comparative law,the cornerstone investor system has achieved remarkable results in guiding issuers to set reasonable prices,improve issuance efficiency,ensure successful issuance,maintain stock price stability,and stabilize operations.It has played a huge role in ensuring the successful issuance of IPOs and the stability of stock prices of companies in the Hong Kong securities market.Taking Hong Kong newly listed companies from 2015 to 2022(including a total of 1,115 companies on the Main Board and the Growth Enterprise Market as a sample),the ratio of placements to cornerstone investors to the total size of IPO shares varies from 21.74% to 64.95%.etc.In the past five years,although the number of newly listed companies on the Hong Kong stock market has been decreasing year by year,the proportion of cornerstone investors participating in new share issuance in all placements has risen instead of falling,and has remained high.From the point of view of the evolution of the system,due to the strong endorsement effect of the regulatory authorities during the stock approval and review system,this mechanism has not played its due role in my country’s A-share market,and it was even suspended for a while.The full implementation of the registration system is the cornerstone The development of the investor regime provides an opportunity.From March 2019 to December 2022,about 42.51% of the 501 listed companies on the Science and Technology Innovation Board(excluding mandatory co-investment by sponsors and insider subscription by core executives)chose to adopt Placement by external cornerstone investors.In the future,with the simplification of administrative power and decentralization of power in stock issuance,the way of stock issuance will become more market-oriented,and the contradiction of information asymmetry between issuers and investors will become more prominent.In the registration system,the maximum allocation ratio to strategic investors is as high as 50%.Theoretically,half of the shares in the issuer’s initial public offering can be allocated to cornerstone investors in advance.This change will undoubtedly have a profound impact on the future pattern of the public offering market.Based on the background of the above changes,how adaptable is the cornerstone investor system under the current comprehensive registration system reform? In order to solve this problem,this paper intends to analyze the legal system of cornerstone investors itself as the starting point,analyze its essence and value,mirror the experience of comparative law,summarize the success and failure of the legal system of cornerstone investors in my country’s A-share market,and explore the reasons behind this system.Legal logic hopes to provide a choice for law application and system improvement.As the cornerstone investor system that originated in the stock issuance and sales process,the system adaptability under the stock issuance registration review system constitutes a major proposition of this paper.The research starts from the contextual interpretation of the cornerstone investor system,analyzes its legal structure in combination with comparative law,and further analyzes the nature and function of cornerstone investment.After being introduced into my country’s A-share market as a successor system,it has undergone two different periods of localization transformation,the approval system and the registration system,showing differentiated empirical effects,and the legal regulation orientation and research logic have also been deeply affected.The problems reflected in a system in legal practice may be the real concerns of the society.This article continues to examine the legal system after putting forward such adaptive obstacles as the abuse of legal regulation,the alienation of system functions,and the failure of restraint mechanisms in the interaction between system supply and practical effects.The essence and multi-dimensional functions of regulations and the experience of comparative law are mirrored,and the attempt to construct and improve the cornerstone investor system is pointedly proposed.In addition to the introduction and conclusion,this paper is divided into five chapters,the main contents are as follows:The introduction includes the research background and significance,the current literature research review,the main research methods,the framework structure of the paper,the innovation and shortcomings of the paper in turn.The first chapter mainly studies the basic theory and operation mechanism of the cornerstone investor system.First of all,the concept of cornerstone investors is interpreted in different contexts,and the connotation and extension boundaries of this system are clarified.Second,study the general legal structure of the cornerstone investor system.Through comparative research,the basic appearance of the system under different legislations is outlined,which reflects the heterogeneous and polymorphic regulatory concepts.The degree of marketization of stock issuance deeply affects the development trend of this system.Compared with the cornerstone investor system under different legislation,the A-share market is based on the premise of freedom of contract,public offering and non-public offering are interrelated,and the rent-seeking risk is alleviated by prohibitive regulations and negative list regulations.Finally,explain the basic nature of cornerstone investment.The cornerstone investor system is regulated by different laws such as the Securities Law,the Company Law,and the Civil Law,and three theoretical questions should be answered first in terms of the system itself.The second chapter mainly conducts empirical research and induction on the legal practice effect of the cornerstone investor system,and considers it from three aspects: the evolution and introduction of the system,the orientation of legal regulation,the market and supervision’s legal understanding of cornerstone investment and the research direction.Based on this,the adaptive disadvantages of the cornerstone investor system in the following text can be revealed one by one.First of all,as a reference system,it is particularly important to examine its origin and evolution to analyze the current crux of the system.Empirical research on legal practice shows that the cornerstone investor system is becoming more and more important in the five major stock exchange listing sectors.However,due to the short period of operation of the new norms and endogenous defects,the long-term effect remains to be seen.Secondly,the main function and legislative purpose of the cornerstone investor system is to attract long-term capital to enter the market,improve the structure of investors;ease the pressure on market funds and stabilize investor expectations;reasonably determine the issue price to ensure stable issuance and listing,etc.Only in a relatively market-oriented environment can cornerstone investors play the greatest role in value discovery.In other words,the marketization characteristics of the registration system give cornerstone investors the possibility to release the institutional functions.Finally,the legal cognition of the cornerstone investor system is mainly based on the tension between the market and legal regulation,economic purpose and legal logic.In view of the review of research methods in practice,combined with different legal regulatory thinking,it is proposed that systematic thinking should be used to examine the adaptability problems and deficiencies in legal practice.Based on this,a system construction plan that meets the legal purpose can be proposed,and the research is limited to the perspective of securities law.It is not enough to use the method and the way of using it.Chapters 3 to 5 focus on the analysis of the three different types of adaptability problems of the cornerstone investor system based on the evaluation of institutional norms and the gains and losses of legal regulations.The dissimilation of institutional functions due to excessive regulatory intervention,and the failure of the restraint mechanism due to lack of regulation and lack of norms,the overall problem of institutional adaptation is manifested as an interactive obstacle between institutional supply and practical effects.First of all,the transfer of interests regulated by the law is not without controversy in practice.By examining different types of transfer of interests,it can be found that there is a lack of clear and consistent interpretation of the legal effect and liability composition after violation of the transfer of interests,which leads to the emergence of adaptability problems.Secondly,the alienation of institutional functions is manifested in the fact that the restrictions on the resale of cornerstone investment stocks exacerbate the risk of insufficient liquidity,and the problems of invalid information disclosure and insufficient disclosure under the comprehensive information disclosure rules.Finally,the failure of the restraint mechanism caused by the lack of regulation and lack of norms and insufficient supply of the system is mainly manifested in the lack of norms for the participation of cornerstone investors in corporate governance,the conflict between the current norms of cornerstone investment and the rules of public persuasion,and the lack of clear boundaries for cornerstone investors’ improper securities behavior,etc..At the same time,in response to the legal system adaptability issues raised in the previous chapters,continues to examine the nature and multi-dimensional functions of legal regulation and mirrors the experience of comparative law,and puts forward the attempt to construct and improve the cornerstone investor system in a targeted manner.First of all,based on the legal effect and responsibility of the benefit transfer arrangement in the strategic placement agreement,the legal interpretation and response are made,and it is advocated to classify the benefit transfer behavior in the cornerstone investor system,explain the application of systematic thinking and abolish unreasonable regulations.Second,rectify the ills of the functional alienation of cornerstone investors and release their multi-dimensional functions.First,based on the analysis of the operating mechanism of cornerstone investment resale restrictions,the improvement of resale restrictions in cornerstone investment is proposed.Second,the introduction and practice of the materiality judgment standard has laid the foundation for the improvement of information disclosure of the cornerstone investor system.While emphasizing that important information must not be omitted,we should also beware of misleading statements that cover up important matters with invalid disclosure,advocate improving the quality of information disclosure of strategic investors,reduce meaningless disclosure,and strictly enforce the responsibility for information disclosure in violation of regulations.Finally,in the face of the failure of the restraint mechanism caused by the lack of regulation,lack of norms,and insufficient supply of the system,this chapter proposes a perfect path to correct the insufficient supply of the cornerstone investor system based on the "marketization" perspective.First,for external cornerstone investors,allow them to participate in corporate governance,encourage shareholder activism,and pay attention to the negative impact of shareholders’ initiative,and use legal norms and guidelines to eliminate the destructiveness of short-sightedness.For internal cornerstone investors,the legal norms should strictly restrict their use of the dual identities of owners and operators to seek their own benefits,and the prohibition of direct or indirect benefit transfer behaviors should specify that company executives violate the duty of diligence and Duty of loyalty.For sponsor cornerstone investors,the Sci-Tech Innovation Board’s mandatory sponsorship requirement to participate in strategic placements should be cancelled,so as to truly leverage the cornerstone investment position.Second,compared with ordinary retail investors,cornerstone investors do not need special protection in the securities law,and regulatory resources can reduce the allocation of institutional investors participating in cornerstone investment.Third,put forward targeted improvement suggestions for the identification of insider trading and market manipulation behaviors that cornerstone investors may be involved in.Limited functions,comprehensive use of the legal system to regulate market manipulation,etc.The conclusion part points out that the cornerstone investment system itself is full of controversies,adverse selection,and moral hazards that cause adaptive barriers,which require the constraints of multiple legal norms and the optimization of legal regulations.It can and should be carried out under the existing legal system.Only through the benign interaction between legal practice and legal construction can the cornerstone investor system play its greatest role in the trend of the registration system era.