The Harm Of Cross - Shareholding Between Multinational Corporations And Its Legal Regulation

Cross-shareholdings between multinational companies are common phenomenon within Chinese territory. There are several rules and regulations regarding cross-holdings provided that such rules and regulations are disperse and on low level. Cross-shareholdings between multinational companies become increasingly common, however detailed requirements does not exist. This text takes the equity structure between Daimler and BAIC(Beijing Automotive Industry Corporation) for example because they built up joint ventures together, the subjects of such legal relation involved both Chinese party and foreign party. Such equity structure is good to analyzing the influence in China combining the situation of domestic policy. The equity structure between Daimler and BAIC is in the course of forming the cross-holding structure, so the various hypothesis models are appropriate to assess the risks and put forward some legislative suggestions.The types of cross-shareholdings between multinational companies are : cross-shareholdings between multinational companies which jointly established joint ventures; cross-shareholdings between multinational companies which have a parent-subsidiary relationship; annular shareholding between multinational companies.The legal harms arising from cross-shareholdings between multinational companies are as below: General harm, including but not limited to, the capital padding would influence the book value of the joint ventures which the multinational companies jointly established; the equity structure would cause confused governing structure of the weaker party; multinational companies may conduct commercial bribery, squeeze the market share of domestic brand,and transfer foreign market risks when it is necessary. The specific harms of cross-shareholdings between multinational companies which have a parent-subsidiary relationship, including but not limited to, the risk of transnational related party relations and transactions, disrupting the foreign exchange and tax order via international transfer pricing, the monopoly harm of concentration of undertakings, the confusion of personality of subsidiary company. The specific harms of annual shareholding between multinational companies, including but not limited to, taking advance of its concealment, beyond the regulation of transnational insider trading, easier to lead up to the ultimate controlling shareholder.The legislative proposal of cross-shareholdings between multinational companies are the following:Against general harms by taking measures of strengthening regulations regarding multinational companies, establishing the multinational cooperation system, strengthening protection for minor shareholders ’ interests of the weaker party, improving the system of shareholder representative lawsuit, making the independent director system work. Against the specific harms of cross-shareholdings between multinational companies which have a parent-subsidiary relationship, by taking measures of regulating cross-border affiliated transaction, promoting the foreign exchange and tax systems, amending the Antitrust Law by adding a provision to regulate the monopoly harm of concentration of undertakings arising out of a parent-subsidiary relationship, introducing Deep Rock Doctrine to cooperate the principle of Piercing the Corporate Veil. Against the annular shareholding by affirming related-party transaction on the basis of the consistency of action, establishing a monitoring network of transnational insider transaction through enhancing techniques and using the method of hi-technology to obtain evidence, regulating the ultimate control right before the phenomenon come into being.