The Value Analysis And Legislation Selection Of Anti-Takeover Actions

With the development of the worldwide economy, takeover has become an irresistible trend. A target corporation, as the object of the takeover, always takes some resistant actions, which are known as the anti-takeover actions of target corporations. Corporation anti-takeover has both advantages and disadvantages. On one hand, effective anti-takeover can stimulate competitions in market and provide an opportunity for shareholders to bargain with the purchaser. On the other hand, disorderly anti-takeover can cause the waste of the social resources and increase the cost of takeover. Moreover, it can cause many conflicts of interest among all kinds of subjects. So it is necessary to regulate anti-takeover actions through laws. But in China, the deficiency in law is obvious. Only a few regulations in"Management Methods of Takeover of listed Corporations"are related to anti-takeover actions. However, anti-takeover actions occurred frequently in the process of economic development in China. Obviously, law lags behind the development of reality. This causes a lot of disputes about the legitimacy of anti-take over actions. So it is urgent and important to establish an anti-takeover law system in China.There are five parts in the dissertation. Part One introduces the definitions of the relative terms of anti-takeover and the basic forms of anti-takeover measures. Anti-takeover is as the opposite area of takeover of the corporations, as far as the importance of the tender offer takeover, the article cores on the analysis of legality of the measures which the target corporation take in the tender offer especially the hostile takeover. According to the stages when the measures appear and the implements whether need the authorization of the shareholders'meeting, it can divided the various measures that the shareholders and the board taken to protect their controlling positions in the corporations into two different types as the convenience of the analysis of the dissertation below.Part Two is value analysis for anti-takeover. Firstly, analyzes the theories of denying the value of anti-takeover, including the theories: The Theory of Corporation Agent Cost, the conflict of the interest and The Property Model. Secondly, enumerate the reasons to support the existence of the anti-takeovers, including enhancing the abilities of the target corporation to bargain with the acquiring company--The Bargaining Power Hypothesis, avoiding the short-sighted behaviors of the acquiring corporations and investors, considering the interests of other constituencies. At last, on the basis of balancing the positive and negative aspects of the anti-takeover come to the conclusion that the advantages of anti-takeover exceeded its disadvantages in the way to promoting the development of social economy. Consequently, the target corporation should have proper right to decide the implement of anti-takeover measures.Part Three makes a comparison among the legislation modes of anti-takeover in USA, UK and Germany. As to legislation on anti-takeover in America anti-takeover of management teams of target corporations are approved the legitimacy, and put the restrictions focal point on guaranteeing the information opening. The Delaware Courts have formed many famous cases on the judicial review of anti-takeover actions. They judge the legitimacy of anti-takeover actions mainly fixing through managing the rule of business judgment instead without shareholders' meeting's consent. British mode forbids management teams in target corporations to take any anti-actions, and have entrusted the shareholders' meeting to the right to make decision on anti-takeover. There was no legislation in Germany at first. As the environment of economy and value sense changed, some special law has been made to regulate anti-takeover actions of target corporations. They entitle the determination right of executive anti-takeover actions to the supervisory board. Through the introduction of three kinds of regulation modes, we can summarize that every country makes its law on the basis of its reality and structure of corporation governance. But, they also have something in common. All the three countries'laws don't deprive the right of the target board to execute the anti-takeover measures, even in the British where the target board's right is strictly restrained in the tender offer.Part Four analyzes the legitimacy of anti-takeover measures. They can be divided into two types according to stages when they appear, measures in advance and measures afterwards. Firstly, this article analyzes the measures in advance, including the Shark repellent, Poison Pill, Management Buy-Out, Employee stock ownership and Golden Parachute. Section Two analyzes the measures afterwards, including White Knight, White Acquirer, Lock up, Scorched Earth, Green Mail, Pac-man defense and Litigation. The writer mainly discusses the legitimacy and feasibility of each kind of measures based the law in effect in China. Most of them is forbidden on the basis of corporation law. The other measures can be taken, but they are restricted strictly in different degree by some regulations in effect. And there are still some measures whether can be applied is vague in the law.Part Five gives some legislative proposals on the regulation of anti-takeover actions of target corporations for China. Firstly, this article analyzes the anti-takeover market in China. Because the law lags the reality, leave many vague areas for the practice of anti-takeover performance. Secondly, this article discusses the disadvantages and advantages of Chinese law in effect. According to the foresight of takeover market of China, the article put forward four advices: correctly divide the determination right between the board and shareholders'meeting, entitle the proper right to the board; as to the preventive measures prescribed in the articles of association is not necessary to be effective, because the measures which have been authorized by the meeting of shareholders is also restricted by the fiduciary duties; to protect the interests of shareholders is the core essential and in the mean while to protect the interests of the stakeholders, pay much attention to the employee participation; in order to stimulate the board to give useful advices on the takeover bids, we should separate the standers for review of director action for purpose of injunctive relief on the one hand, and for purpose of damages on the other. If the director's conduct meet the requirements of the business judgment rule, they will eliminate the risk of personal liability for the conductions in connection with a hostile takeover.