| As the most effective incentive mechanism to lower the "agency cost" for the companies and effective path for better modern company governance, MBO "mergers" the owner and manager and facilitates the fairness and effectiveness. Presently there are precedents of MBO, MBO for the settlements of ownership or establishment of incentive mechanism for the managers in the State-owned enterprises, however, under the current legal systems, there are such legal obstacles or absence in connection with the finance, purchase price, purchaser, investment limitation and shareholders interests protection. Accordingly, for the development of MBO, it is required to solve the issues of finance, purchase price, purchaser, investment limitation and shareholders interests protection. This essay starts from the basic M&A rules and modern company governance theory, analyzes the relation between MBO and the modern company governance and the MBO's significance, probes into the legal obstacles of the MBO operation and shareholders interests protection in consideration of the domestic precedents and practice with purposes for contribution to the MBO legislature and law practice.
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