Foreign Acquisitions Of Listed Companies Legal Issues - Some Of The Constraints Analysis And Legislative Proposals

Share acquisition, also known as stock acquisition, is one of the most important means to realize corporation expansion externally and sharp the competitive edge as a whole, acquiring corporation can get controlling rights of target corporation through buying shares from the shareholders of the target corporation. Acquisition of the listed company is a typical practice. Recently the cross-national Merge and Acquisition (M&A) becomes to be a key method for Foreign Direct Investment (FDI) in developed countries, and the impact of stock acquisition to China's economy cannot be underestimated. On the basis of introduction of the current laws and regulations related to stock acquisition, this thesis intends to make some legal analyses on some factors which restrict the process of acquisition: 1. The laws and regulations on tender offering by foreign investors are vague, also the legal and market environment is not really mature for acquiring. 2. Different share pricing systems for quoted and non-quoted stocks result in a lot of difficulties for stock acquisition. Further more, it is certain that all the issued stocks of a listed company will be wholly quoted and traded on stock exchanges in the future, how to balance the interests between quoted stocks holders and non-quoted stocks holders (foreign investor) need to be solved properly. 3. The current assets evaluation method, that is replacement cost of company's assets, cannot reflect the profitability of a specific enterprise; hence foreign investors cannot recognize the valuation made in this way. This approach should be optimized equally. 4. According to related regulations, there is no other payment options for acquired stocks but only by cash, this not only deprives the rights of the participants to select the appropriate payment method they need, but also impedes the way of acquisition from diversification. There should be more payment options like share exchange, trusted finance etc. introduced into this market. 5. The limitation on the company's reinvestment proportion makes the stock acquisition more difficult, this thesis tries to present the unreasonableness of this kind of limitation, and suggest that this kind of restriction actually should be abolished. 6. There is also an intention to discuss whether the controlling right of the company could be transferred during the transitional period from the beginning of the acquisition to the date when assigned stocks are registered under the name of the acquirer. Under certain conditions, allow the acquirer share some shareholder's rights by stock seller's specific authorization might explore a workable way to clarify the rights and the obligations of the participants in this period. Finally, this thesis gives some suggestions on legislation related to foreign investors' acquisition in establishing a new legislative structure which focus on conducting necessary regulating, in gradually integrating of the laws and regulations on domestic and foreign investment, in compiling of the special regulations on foreign investment, and, in eliminating the confliction, lagging and omission phenomena in existing provisions. By doing so we can give foreign investors a clearer picture of the legal framework when make investment into China.