Mbo (management Buyout) Law Discussed

MBO is prevailing in China. It started off in Britain and US in the 1920s. It attempts to avoid the setbacks caused by the separation of management from ownership of the traditional structure of companies by letting the management control the company. Practice has proven that MBO can effectively reduce cost and improve management.MBO has aroused national interest as a way to withdraw state-owned assets since the reduction of shares of state-owned enterprises came to a halt. But due to different background, MBO in China varies from that in the West in terms of the model of operation.MBO is just at its preliminary stage in China. On the one hand legal barriers of previous laws and regulations have contained its realization. On the other hand, there's certain legal vacuum and short of necessary monitoring system. The problems have appeared in the subject, channels for financing and release of information.This paper analyzes legal nature and matters of MBO, explores the legal barriers and monitoring vacuum, makes suggestions on lifting irrational restrictions to the subject and financing and establishing the system of pricing the shares of state-owned enterprises as well as intensify post MBO monitoring so as to prevent possible problems. It aims at promoting the legal procedure of MBO, standardizing MBO operation and providing legal guarantee for carrying out the policy of transferring state-owned assets from general competitive sectors to those of strategic importance as well as intensifying SOE reforms.