Mbo Legal Issues

The separation of the ownership and the managerial right in modern enterprises has produced the problem of agent and the problem of manager's stimulation. Management Buy-outs (MBO in brief) 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. 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. Although MBO first emerged in America in late 1970s,it is just at its preliminary stage in China. With the further reform of stated-owned enterprises in China, and the changing of governments 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. Study purpose: Because the situation of MBO in our public-mainly-owned market economy has developed more complex and more sensitive than it had ever before, the legislation of MBO must be put on the timetable to make the practice of MBO work effectively and legally in the frame of law. This paper analyzes some problems of MBO, explores the legal barriers and monitoring vacuum, make suggestion on lifting irrational restrictions to the subject and establishing the system of pricing the shares of state-owned enterprises. Study methods: This thesis adopts demonstration research method, review of the history of MBO, comparison, legal economics and other methods to enclose the legal problems of the subject, channels for financing and the price of MBO by summing up the existence investigation. 1. Demonstration research method: This thesis adopts induction to analyse the mode of MBO in the state economic construction. By concluding the characters of the existing cases, this thesis quest for the well mode of MBO of our country. 2. Review of the history of MBO: This thesis states the development of MBO of domestic and international state .By this way, it shows the developping track of MBO in China. 3. Comparison: This thesis introduces the corporation law and the securities exchange act in England and in USA, from which we can get some suggestion by comparison. 4. Legal economics method: Taking economics as a tool, this thesis discusses the motivation of MBO in theory. Structure and content: This thesis is on legal problems on MBO in China. The whole thesis is divided into six parts and the main content is set as the following: The first chapter is the introduction,which states the definition of MBO,development of domestic and international state,and to explain MBO in economic theory. The second chapter introduces and summarizes the law of MBO in the west,from which we can get some revelation. Then this thesis brings forward the existing problems of MBO in China. There still are law obstacles in forming and running a company,which will be only used for buying the shares of the target company. The third chapter will discusses the subject of MBO. The fourth chapter studies channels for financing and the risk of borrowing money,the influence in the future of the company indebt. The fifth chapter holds that the reasonable price lies in the system through which the price is got,not how much it is. At last,this article holds that the regulations on MBO are urgently needed and give out the advice about how to perfect the regulation. Conclusion: Due to the special characteristics of nation status, we cannot take over everything that originated from western states. As a matter of fact, we have to set up our ow...