Study On Pre-emptive Rights

As one of the shareholders' rights, the pre-emptive right is an integral part of the Ownership of Shares system. It plays significant role in protecting both the shareholders' individual interest and enterprises' collective interest. Moreover, shareholders' pre-emptive rights exert considerable roles in maintaining socio-economic order and fostering fair investment environment. Therefore, shareholders' pre-emptive rights have to be sufficiently emphasized so as to be fully utilized in economic development.Due to the lack of systematic studies on shareholders' pre-emptive rights by the current academia, the existing theories only referred to the qualification of the concept, and seldom elaborated on the issues like application conditions, effects, subject-object scopes, etc. With the severe inadequacy in the related theoretical studies, considerable defects occurred in the regulation and protection of the shareholders' pre-emptive rights in corporate legislature. Taking the existing theories as a reference, the author analyzes the defects and unexplored aspects of this realm, so as to enhance the theories and practice in this field.The body of the article has four chapters with sections in each, while the introduction and conclusion parts have no sections. The main content of each chapter is the following.Chapter One "Rationale and Existing Legislation of Pre-emptive Rights". The chapter mainly discusses various denomination comparison, rationale foundation, conceptualization, and different legislative models, with three sections. Different denominations of the subject represent scholars' varied understandings ofthe rights. The establishment of the shareholders' pre-emptive rights is an inevitable condition for the freedom of contracting, the maintenance of shareholders' identification and normal economic order. These rights are directly significant in protecting the shareholders' proportionate interest (including the percent of voting rights and individual economic right), and in upholding their existing legal status in enterprises. Shareholders' pre-emptive rights have internally two levels of denotation: Absraktes Bezugsrecht and Konkretes Bezugsrecht. These two levels are mutually compatible, and are independent to each other as well. They are distinct in nine aspects, such as nature, content, prescription, etc. Currently, four legislative models are related to the rights: Statutory Entitlement, Stipulating Entitlement, Inherent Right, and Mixture model. According to the Corporate Law of China, Statutory Entitlement is applied to close corporations with limited liabilities, and Stipulating Entitlement is applied to the public corporations with limited liabilities.Chapter Two "Nature and Characteristics of Pre-emptive Rights". Observed from different perspectives, shareholders' pre-emptive rights embody different natures. On one hand, with the observation of internal levels, Absraktes Bezugsrecht are reversionary interest, non-proportionate rights; while Konkretes Bezugsrecht are rights of evolvement, proportionate rights. On the other hand, shareholders' pre-emptive rights are un-inherent, universal rights. Meanwhile, shareholders' pre-emptive rights are rights of property and non-property, self-benefit and common-benefit - all integrated into one form. The rights have five characteristics: subject of the rights confined to the shareholders; newly issued stocks as the object of the rights; onerous rights; duality of prescription; comparative independence, etc.Chapter Three "Application Scope of Pre-emptive Rights". To define the application scope, the application conditions have to be clarified first. The application conditions are categorized into pre-conditions and enforcement conditions. Three aspects formed the pre-conditions: having two or more mutually independent investors in one enterprise; the existence of investors' proportionate interest and the possibility of interest disparity; and uncertainty of subscribers. The nominal requests like the full compliance of existing stock-holding percentage haveto...