On Several Legal Issues Of Corporate Reinvestment: Interpretation And Construction

It's a prominent phenomenon that of the legal person as shareholder to be dominant in the economy around the world after World-Warâ…¡. However, corporation is a leading role among the shareholders of legal person. After promulgated in 1993, the former Corporation Act of P.R.C. was criticized fiercely for a long time not only because of its attitude of being against the economic phenomenon mentioned above, but also some technological drawbacks in it. It's surely the main reason that changes to be made in the newly revised Corporation Act of P.R.C. correspondingly. Though much progress has been achieved, there are still limits to corporate reinvestment permitted by law, and the relative clauses are expressed too succinct to handle problems in practice. There for, interpretative work needs to be done accordingly in line with scientific methodology. All of those mentioned above can be taken as the"general rules"to regulate corporate reinvestment. However, it is not enough to the complicated case of corporate cross-holdings that inherited with peculiar traits of its own. So, it is helpful to go forward to do much more related research for another revision of Corporation Act.Two chapters are included in the paper as the main contents. There are five essential points in chapter one. The concept of"reinvestment"is the focus of my attention at first. Based on several critical analyses, a new concept is offered in a tentative manner. In order to understand weather it is allowed to be a corporate partner under the newly revised Partnership Enterprise Act of P.R.C., some further steps are followed carefully and thoroughly. The corporate resolution mechanism itself is clear to applicability after the comprehensive interpretation: the board of directors is qualified to take the resolution of corporate reinvestment, and the mangers can be authorized to get the power by the board. From angles of interpretation, the ambiguity of weather it is valid or not when unlawful corporate reinvestment occurs is finally cleared up. Actually, the answer is weather it is valid or not depends on the violation of different clauses. Finally, the relation of corporate reinvestment and affiliated corporations is mentioned with simplicity as the last issue of this chapter.The topic of chapter two is corporate cross-holdings. The concept of corporate cross-holdings and its connotation as the theoretical premise would be the first important difficulty to overcome. Then, a description of the origin of corporate cross-holdings is given to illustrate a realistic attitude towards the topic of this chapter. After an investigation of corresponding legislations in those different countries of the two existing distinguished law systems, a comparison with that of in China is followed. With an aim to put an end to the backwardness of relative legislations, the paper proposes to take revision in the aspects of lateral corporate cross-holdings, and corporate cross-holdings of parent-son corporations.