Study On System Of Share Repurchase

Share Repurchase is a kind of legal act which Incorporated Company buys back the issued shares. Share Repurchase has been a common phenomenon in the west countries and it has become a important financial instrument in the mature western capital markets. As early as 30 years in the 20th century, most states in the United States began to allow Incorporated Company to repurchase stocks of their own under certain circumstances. After 1970s, the U.S. company repurchased stocks in order to avoid the legal regulation on cash . After that, Share Repurchase has become a important legal system in the west countries. There are mainly two models of the legislation about Stock Repurchase in the two legal systems—America's"license in principle , prohibition for exception"and Germany's"prohibition in principle, license for exception".The two models are different from the difference of capital system. Under the American model, companies are allowed to repurchase the stocks freely except especial rules. In the German model, the Share Repurchase is forbidden unless certain condition. In the theory , the German model has taken the"prohibition in principle, license for exception"rule, because it has been a tradition for the legal capital system and thought that the Share Repurchase would break off the principle of capital maintenance. The American model has believed in the authorized capital system, so the"license in principle , prohibition for exception"rule was taken and thought that the Share Repurchase would help to the long-term development of the Incorporated Company .With the acceleration of economic globalization, the Share Repurchase has become a common regulation around the world and the attitude of two legal system on Share Repurchase has changed, not absolute prohibition or absolute freedom, but it is a trend toward increasing integration. In practice, most countries lay down laws and regulations on Share Repurchase according to their own conditions and hope that the system could promote the domestic capital market's development and improvement. In China, we adopt to the German model. The new Company Act 2005 added a rule of the Share Repurchase on the basis of old company law. With supporting laws and regulations promulgated, the Share Repurchase system in our country is entering standardized development. The Share Repurchase system in our country was started at the late of the 1990s, it has been received development both in theory and practice in the twenty-first century. In practice, the system is difficult to be operated effectively and it impedes the development of capital markets, because our capital markets is not mature and the Share Repurchase system is more principled in the company law. It is high time that the Share Repurchase system would be perfected in theory and practice in order to develop our capital markets.