The Applicability Of Mbo In The State-owned Enterprises And Related Legal Issues

MBO is a kind of acquisition act, which makes the original management of enterprises become the owners by acquiring the shares of their own companies with loaned capital. MBO originated in America in 1970s with the purpose of reducing high risking cost due to extreme separation between managements' power and owners' power. While in China, with the further reform of stated-owned enterprises in China, and the changing of government's economic function after China's entry of WTO, it is certain that the state economic construction should be adjusted accordingly. Stated-owned asset needs to be reallocated, which must bring the transferring of a large number of stated-owned assets from challenging areas to individual. In such economic situation, MBO is employed by many enterprises and supposed to be an active way to clarify property right and excite management. However, there are some serious problems with MBO when carried out in big state-owned enterprises. For instance, the stated-owned asset lost and the right of social shareholders suffered. This essay first analyzes the defects when applying MBO in stated-owned list companies. Then it makes further study on the issue of what state-owned enterprises can apply MBO. The author concludes that MBO can be used in medium and small-sized enterprises instead of big enterprises because of present economic conditions in China. The author puts forward some suggestion to make full use of MBO in stated-owned enterprises. First of all, relative laws and regulations should be improved or established as soon as possible in order to show the advantages of MBO during the special period of stated-owned enterprises' reform. The legal supervision and protection of other shareholders' and creditors' right should be enhanced. If there are breaches of laws during MBO, certain legal actions should be taken against wrongdoers.