Research On Pledge Of Stock Rights

After China's entry into WTO, pledge of stock rights is showing its increasinglyprominent function in modern society, for its reflecting a trend centered on using in jusrerem. However, system of pledge of stock rights of China can't completely meet theneed of reality and should be perfected, due to too fixed regulation, lack of enoughfeasibility and necessary coordination system. Therefore, this article, centered onsystem value, by using philosophy of law, economics of law and comparative study,makes a comprehensive research into the system of pledge of stock rights of China.There are also some specific ideas on reconfiguration in this article, based onreconsidering lack of system, with the author's hope to benefit theoretical study onpledge of stock rights and practice.I. Pledge of Stock Rights and System ValueDifferent from other methods of security, pledge of stock rights is the production ofcompany and company systems, with its peculiar features and system value. To developthe financing channels, and to maintain the transaction security, we should follow therule of giving priority to safety with due consideration to efficiency and fairness.II. Analysis on Subject of Matter of Pledge of Stock RightsThough there are different opinions on nature of stock rights, scholars do agree thatit's made up of rights for own interests and rights for common interests. Pledge of stockrights is thought to take part of rights for own interests as object, or is thought to take allcapacity of stock rights as object. The author approved the latter. The purpose of settingpledge for pledgers is for financing, but not for transferring stock rights;and forpledgees, their purpose is to guarantee creditor's claim with exchange value of stockrights, but not acquire stock rights.According to stipulations of law of China, stock rights of company limited, ofcompany of limited liability, of partnership and foreign-related stock rights can becreated pledge, but not all stock rights can be object of pledge, because of the speciallimitation on stock transfer in laws or regulations. The present law sets too strict limitson objects of pledge of stock rights, which affects the efficiency of pledge of stockrights, so it should be amended.III. Creation of Pledge of Stock RightsThe taking effect of contracts for pledge of stock rights is different from that ofhypotheque of stock rights, the creation of which is kind of juristic act of real right. It isgenerally thought that the delivery of pledge of unregistered share is viewed as makingpledge of stock rights public, while pledge of registered share needs endorsement ofpledger besides it. According to the law of China, pledge of stock rights for listedcompanies needs pledge registration in organizations for securities registration, whilepledge of stock rights for unlisted companies needs record in register of stockholders forthe pledge, for registration is the essentials for its validity;but there are differentsettlement for pledge of defect stock rights in line with different conditions.The regulation on registration being the essentials for validity for pledge of stockrights Guarantee Law of China seems strict but actually unsafe. The validity for publicof registration is not very reliable, at the same time, it will create the situation of lackinglien effect for hypotheque of stock rights and increase the cost for transaction.Accordingly it should be perfected.IV. Validity of Pledge of Stock RightsValidity of pledge of stock rights is the key part of system of stock rights.Compared with other pledge, priority of claim for pledgees is with special properties,for its weakening lien and great risks in preserving right. Pledgers, to their pledgedstock rights, enjoy the rights to attend meetings and vote, etc, but the law giveslimitation to their jus dispodendi. On the issue of validity, the regulations in China's lawshow the favor of pledgees' right, so they should be revised.V. ConclusionIn brief, we should perfect our system of pledge of stock rights in accordance withthe rule of giving priority to safety with due consideration to efficiency and fairness.First of all, we should improve the methods of making pledge of stock rights public,construct perfect risk prevention mechanism to insure the safety of transaction;next, weshould lessen the administrative control of pledge of stock rights, expand the suitablescope for stock rights and develop the financing channels to increase efficiency ofpledge of stock rights;then, we should balance the conflict in interest between pledgersand pledgees to realize the fair protection of two parties.