Shareholders' Equity In The Company Merger Protection

As the scale of the corporations expands, owners separate from managers of corporations gradually and the control of corporations passed from owners from managers. The existence of agency cost, i.e., the managers do not act for the best benefits of shareholders or even the corporations, brings out the issue of protection against shareholders. Since the shareholding structure and corporate governance standing of corporations in mainland China are far from satisfactory, we shall attach great importance on protection against the shareholders' rights and interests. Meanwhile, as the necessity and approach of the protection shall vary among different circumstances, the establishment of appropriate system is essential for the protection of shareholders in particular transaction. After the 16* National Conference of CPC, the economy is experiencing deeper revolution, including the exit of the State-owned capital from general competitive industry. In this revolution, merger or acquisition, or M&A, by foreign capital are widely chased. Merger and acquisition share many common characters, however, since the parties to a merger are the companies to be merged while the parties to a share acquisition shall be shareholders, merger and acquisitions shall be treated differently.The research regarding M&A in Mainland China focuses on antitrust, securities regulation and industry supervision as well as other governmental regulation. On the other hand, the protection against rights and interests of shareholder, esp., the protection via improving the regulations regarding corporate governance and shareholders' suit, does not enjoy the importance that it deserves. Although there are to some extent introduction of advanced foreign systems in terms of corporate governance and shareholder's suit, researches focusing on the adoption of the advanced systems in M&A transactions are rarely found, let alone a comprehensive analysis with respect to the protection of shareholders in mergers. Due to various economic and legal reasons, the legal study of merger in the United States takes the leading position in the world. The systems protecting the rights and interests of shareholders in mergers include two aspects: to clarify the rights and obligations of shareholders and board directors and the corresponding relief. That is to say, for one thing, through the fiduciary duty and appraisal right, a stable structure may be established and consequently controller of a corporation and the shareholders not in possession of the control are on equal position; for the other, the enforcement of any rights and obligations shall resort to relief.On the basis of the analysis of the existence and character of the issue, the advanced systems in the United States are introduced and the necessity and possibility of migrating such systems to the Company Law of Mainland China are pointed out in this article.