Research On Legal Regulations Of Unfair Affiliated Transactions Of Listed Company

The unfair affiliated transactions of listed company have long been existed as a recurring disease in our securities market, which not only lowers the reasonable distribution of resources in the capital market, but also harms the interests of the minor or medium shareholders and the interests of those concerned, such as the creditors. Though the laws and regulations laid out to solve the above issue have caused wide public concern over the recent years, the present legal system in our country is still in a comparatively weak state, both in terms of the construction of the supervisory system associated with the unfair affiliated transactions of listed company and in terms of studies of laws.We should take the clear definition of the affiliated person as a premise for the laws and regulations laid out to conduct the unfair transactions of listed company. However, our new Company Law only defines the affiliated person in a simple way, and worse still, the new Securities Act even makes no definition of the affiliated person. The listed rules of Shenzhen and Shanghai Security Exchanges puts forward a specific and concrete stipulation on the scope of the affiliated person by enumeration, but there are some unavoidable omissions. Therefore, to make a clear definition of the scope of the affiliated person, we should adopt a legislative pattern by way of combining enumeration with generalization. Meanwhile we should act up to the principles of keeping the essence rather than the form. On the other hand, the key to making those mentioned laws and regulations lies in the accurate determination between fair affiliated transactions and unfair ones. Due to the absence of a unified clear-cut standard for the time being, great uncertainty springs up in the application of law. Hence a explicit criterion by which to judge the three following aspects should be formulated through legislation, that is, judging the existence of affiliated relationships among principals of transaction, judging if the transaction process is in accord with the actual demands for the interests of the corporation and for the overall interests of the affiliated persons, and judging if the transaction result meets the needs of economic rationality.Admittedly, as regards unfair affiliated transactions, a legal system has already taken initial shape in China. At the end of 2005, large-scale modifications were made for Company Law and Securities Act. In this way, a great breakthrough has been achieved in Company Law by the appearance of"disregarding of the corporate fiction"and"affiliated director avoidance system". But, to our regret, it brings no substantive progress in Securities Act. Nevertheless, over the past year, China Securities Regulatory Commission(CSRC)and Securities Exchanges in Shenzhen city and Shanghai city have introduced many documents which have been contributing a lot to the exposure of unfair affiliated transactions and to investigating the responsibility of violation. In fact, we must come to realize that a great many theoretical and practical problems still exist in our laws and regulations unfair affiliated transactions, calling for a complete study and a perfect solution. These problems are mainly in the following aspects: the imperfect determination between fair affiliated transactions and the unfair ones, the vague stipulation of honesty obligations which should be hold by the shareholders, the unclear standard for testing, the lack of a thorough information exposure system, the irregular legal relief measures. To deal with the above problems, we should learn from the successful and advanced legislative examples in other countries while at the same time adhere to the actual conditions in China in order to further improve Company Law and Securities Act, thus effectively standardizing and controlling the unfair affiliated transactions of listed company. To achieve the goal, we should stick to the legislative idea of"preserving both efficiency and fairness", and at the same time, we should comply with principles of maintaining equality, sacred rights and honor credibility and of obtaining maximum benefits.