Research On Legal Issues Of Share Repurchase

In the advanced capital market,share repurchase is a kind of capital operation instrument and management strategy.By analyzing abuses and functions of stock repurchase and comparing the laws of the principle countries and districts in the world, the paper points out the defects in the system of our country's shares repurchase now,discusses the necessity and possibility of setting up the system of share repurchase in China, and raises some legal advice.The dissertation consists of four parts.Chapter One: The Basic Theory of Share Repurchase.In this part, the thesis introduces the definition of the share repurchase, and compares some other related definitions with it.Share repurchase is not only a way to return capital ,but also is special manner of profit distribution.It has the same economical effect as the profit distribution;it's favorable for company's capital and financial structure when capital situation changes;it's a weapon for anti-purchase;it protects minority shareholders'interests;it provides a passage for employ stock ownership plan and executive stock option.Chapter Two: The Corporation Law Theorem of Share repurchase.This part introduces some representative countries'legislation on this issue such as Germany and America. The settelement of shares which were repurchased is decided by different capital system.In statutory capital system,the capital was definite when the company was founded.After repurchasing,the shares must be nullified.There is no space for treasury stock;In the authorized capital system,company can select treasury stock or nullification.The company can also resale the stock as authorized but not distributed yet.Based on the demand of capital maintaining,it is restricted for purpose,applicable scope,time limit,resources of capital,price of the shares.The decision of shareholders conference,procedure of protecting creditors make sure that the capital is maintained and the share have no right of the profit ,have no right of subscription for new share.Share repurchase can lead to decrease of capital.According to capital maintaining principle,share repurchase should have the special procedure.Chapter Three: Comparing Legislation of Stock Repurchase. This part of paper shows the general situation of share repurchase in different countries.It mainly introduces permission in principle and exceptional prohibition in common-law-legal-system,and prohibition in principle and exceptional permission in civil-law-legal-system.There are advantages and disadvantages between different legislation models.In the countries which belong to civil-law-legal-system,there is too much inconvenience about operation because of strict theoretical demand.Oppositely,the American model adapts to the development because of its flexibility,but there is always some abuses which can not fit for the demand of protecting creditors and exchange order .Chapter Four: Institutional Research and Institutional Improvement On Share Repurchase In Our Country.It is only regulated that the profit after tariff can regarded as capital resources for share repurchasing when company conduct the inspiring plan,but there is no rule about the other situations;In some cases which had happened in our country,the price of the repurchasing share was against fair value principle;the manner of repurchase lacks details or specifics;the legal denys the treasury stock,however,the legal does not make a clear rule about the legal status of repurchased stock.Are repurchased stock lawful when company repurchases share against law?How to deal with these stock illegal repurchased?Is financial support lawful in share repurchasing process?What civil law responsibility for the directors who repurchased shares lawfully?The questions all above are urgent to solve.Part one: The Improvement of Basic System.The corporation law should make clear the manner of share repurchase.It can draw the lessons from the developped country such as offer repurchase with definite price and auction repurchase.To avoid insider trading and stock price manipulation,it is necessary to reduce the effect rising from repurchasing on price of share market.We can learn some experiences from America legal such as"safe habor rule".Aiming at protecting creditors'interests,we should stipulate the profit which is distributed as financial resources for repurchasing.It's illegal to use capital for repurchasing.The behavior shoud be forbidden.The theory of status of repurchased share can devided three kinds.In most western country,the company holds its own share without right of voting,distribution requst,subscription for new share and so on.The company law theory of our country had better adopt this theory,when the company holds its own share,restriction that right exercise share attribute of itself, when share shifted from company to the third person, all rights are revived.Namely shareholder's right based on one's own share is not eliminated,but stopped.The directors who actually control the company and the insiders may repurchase share because of incitement from shareholders conference or the other illegl purpose.In case of situation mentioned above,corporation law should not only prescribe solution,but also make clear that the directors take responsibility.Part Two: The Improvement of Auxiliary System.Article 174 and Article 178 of company law provides information disclosure as a procedure for creditors'interests.Article 63 of security law just gives some general rules about information disclosure.We should prescribe information disclosure as a continuous obligation,which runs through the duties on corporations,directors and controllers.It is important to strengthen the system of protecting minority shareholders and supervision of controllers and directors,and it is necessary to establish system of litigation,such as the right to know,principle of honesty and credit.To ensure repurchase share fairly,openly,it is important to prevent insider trading and stock price manipulation.Except for regulation about purpose,manner,procedure,we should put emphasis on prerequisite of repurchasing;in additon,we should reinforce the supervison,set up a series documents and rules to regulate shares repurchase,especially for minority shareholders and creditors'interests.