On The Problems And Its Solution On Shares Repurchases In China

Shares repurchases, as a financial tool under the modern economy condition, play a very important role in promoting economic vitality and maintaining securities market, but there is some harms. The debt risk, the inequality between shareholders and the harm to the securities market possibly resulted from shares repurchases generally are regulated after occurrence through such systems as the denial system of personality of corporate juridical person, the responsibility of directors and managers, and shareholders derivative action. In our Company Law, a series of new systems such as the denial system of personality of corporate juridical person, derivative action caused by decisions of shareholders have been established for the purpose of protecting the benefits of the minority shareholders and creditors and providing the guarantee system for shares repurchases. But unfortunately, our Company Law applies the prohibition principle instead of deregulation to share repurchases that is the world trend. The established pattern of share repurchases has severely affected the competitive advantages in system of our Company Law and the competition of companies that consequently do harm to the operation and development of companies and the prosperity of securities market. Though in recent years, the study on share repurchases has become more and more, the existing study mainly focuses on the cause of repurchases, financial limit and repurchase procedure, and happened before the amendment of Company law in 2005. Most of them have not been adopted in Company Law. The practice of share repurchases in the previous stage in China indicated that share repurchases has been reduced to the tool of the decrease of state-owned shares and is not the real capitalized share repurchases. This paper is written in order to establish a set of share repurchases guarantee system that is to promote benefit and avoid harm, to appeal for deregulation to realize the real value of share repurchases. In detail, this paper is divided into three chapters.Chapterâ… Jurisprudence Basis for Share Repurchases.In this chapter, the concept, study area of share repurchases and the subject, object, content in this legal relation are analyzed, the compatibility between share repurchases and the theory of corporate theory, the principle of capital maintenance and the system of reducing capital of corporation are demonstrated. The development trend, the advantages and the disadvantages of share repurchases are compared. The author comes to the conclusion that share repurchase may be guaranteed in system to make best use of its advantages and bypass the disadvantages.Chapterâ…¡Regulation and Judicial Practice of Share Repurchase in ChinaThis chapter mainly introduces the legal basis and procedure of share repurchases, elaborates the treatment and the legal status after the company obtains its own share in China, the effect of law rules of share repurchases, the type and legal effect when purchasing in violation of laws and the legal consequences the company shall bear when not complying with the laws, points out that the company shall not enjoy the right of shareholders, the examination for the legal effect of share repurchases shall be limited into the violation of mandatory norms in laws or administrative regulations, and excludes compulsory management standards. In view of the possible problems in share repurchases, this paper designs right guarantee system of stakeholders, that is the minority shareholders may exercise the right of claim for declaring invalidation of decision of shareholders and for repurchasing dissent. The creditors may exercise voting right through creditors meeting, and exercise the right of claim for stopping share repurchases, institute legal proceedings for invalid share repurchases and claim for damages. Therefore, the guarantee system that is the organic combination of the three aspects of advance, going on and afterwards may be established.Chapter III Legislative Defects and its Improvement of Share Repurchases System in China.This chapter introduces the current status and defects of our share repurchases, learn from the legislative lessons about share repurchases abroad, elaborates the problems, the cause, the procedure, financial limitation, the amount and the pledge of the company's shares, the action not in line with laws, the repurchases in violation of laws of share repurchases of limited companies and the supervision of repurchasing shares by listed company, suggests the specific measures to improve it. It plays an important role in improving the share repurchases system in China and in the application.