Research On The Legal Regulation Of The Company Reinvestment

Company reinvestment is a "double-edged sword", one side, as theelementary means to maximize the profit of the company through management,Reinvestment has the function of promoting the appropriate scale of operation,strengthening the ability to resist risk and market competition; on the otherside, When risk appears, it can make the capital of the company go upillusively, and make the company lavish its power, the benefit of itsshareholders maybe harmed thereby. The Company law of the People'sRepublic of China was legislated warily, and adopted the model of strictrestriction to reinvestment. But, up to now, this kind of legislative modelcannot adapt to the high-speed development of economy. Through reviewinglegal definitions, legislation development, pros and cons of reinvestment, thisarticle introduces and analyses the reason and the juristic circumstance of theregulation of reinvestment, and elicits a conclusion that our country shouldrelax the restriction to reinvestment, and take the model of logical restrictionto reinvestment. Beginning with the realityof our country, the writer will bringforward the structure design and the legislation advice to the logical restrictionof reinvestment. The article is made up of four parts. The first part begins with the legal definitions of reinvestment, clarifiesthe essential, style and notions correlatively. Through the investigation of theregulation and the legislative models of other countries, find out that theregulation of reinvestment is according to the development of economy. "Reinvestment"came from the restriction of the company right from theprincipium of company law, it isn't a inherent notion of legislation. Throughthe analysis of the contrast of the notions on legislation and on theory, thewriter reckons that the notion of reinvestment can be cognized as a juristic act 61that according to the legal regulation, company invests other companies andachieves the stock ownership of other companies, including the long-termreinvestment and the short-term reinvestment. So the main body ofreinvestment is the company of the company law meaning, including LimitedLiability Companies and Joint Stock Limited Companies; the form ofreinvestment should be restricted to investment on stock, but not on liability,Including the long-term investment and the short-term investment. Based ondifferent standard, reinvestment can be compartmentalized into the long-termreinvestment and the short-term reinvestment, the strategic reinvestment andthe financial reinvestment, the unilateral reinvestment and the duplexreinvestment. To know reinvestment better, the writer compares the notion ofreinvestment with the notions correlatively, and find out the differences andthe sameness between them. Through the investigation of the legislation development of reinvestmentof Anglo-American law system and continental law system, we can see that,the legislative restriction to reinvestment loosened, stepwise, to a model ofabsolutely no restriction. Because of the rapid economic development of ourcountry and the gap on economic environment with developed countries, ourcountry cannot copy the model of developed countries blindly, and shouldaccept the model of logical restriction. The second part discourses upon the current regulation model ofreinvestment of our country. The model of strict restriction to reinvestmentwas compatible to the economic environment at that time. But nowadays, themarket economy is more consummate; this kind of model is not compatibleanymore. Because of the disadvantages of reinvestment, including the capital ofthe company going up illusively, and the company lavishing its power, thebenefit of its shareholder being harmed thereby, the management structureloses balance, the legislation of our country adopts the model of strict 62restriction. Meanw...