A Study Of Chinese Rules On Mandatory Bid

Mandatory bid rules are analyzed and explained on a point of view ofprotection of small shareholders in the target company by means of positivestudy, comparative study, taxonomy and induction in this paper. Throughdiscussing the legislative reasons of mandatory bid rules, the author analysesthe rules of developed countries concerning securities market and dissertateson the function and necessity of mandatory bid rules. Based on the true caseson mandatory bid rules, the author points out the reasons of the embarrassedconditions on takeover bid in China. As a result, we can apprehend theadaptability and foreground of mandatory bid rules in our mainland market.On the ground of those, the author brings forward some suggestions aiming atmandatory bid rules in our rules of law.Starting with three cases related to takeover bid in the securities marketof china in which Nanjing Iron&Steel Co., Ltd., Chengdu People'sDepartment Store (Group) Co., Ltd. and Jiangsu Jianghuai Engine Co., Ltd.are involved, the author analyses a series of issues such as the reasons why thecases concerning takeover bid in China did not have the same effect as thewest countries whose mature experience are used for reference by us and whytakeover bid is not popular in Chinese market, that is, it happens only if theacquiring company has reached or crossed over the control threshold, since ithas many advantages as it can drive material reform, embody the fairprinciples, protect small shareholders' benefits. Besides, the necessity ofmandatory bid in China and rationality of current rules on mandatory bid areappraised.Mandatory bid rules stems from U.K.'s City Code on Takeovers andMergers, which is inherited or used for reference by many other countiesincluding China. Therefore, the author analyses it in details. In addition,American Williams Act is also studied to compare with the structure of Englishsystem although rules on mandatory bid are not set up in the U.S.Based on the introduction of information disclosure, exemption rules andother substantive regulations, and the analyses of the problems existing inChinese stock market, the author draws conclusions that the separation ofstock equities and the regulation of price are unreasonable. In the end, theauthor brings forward some suggestions on rationalization of mandatory bidrules in our country, including disposing the old irrational structure of stockequity, perfecting the price regulation, increasing the control threshold ofmandatory bid and perfecting the relative exemption rules.