Listed Companies In China's Analysis Of Anti-acquisition System And Construction

Owing to the development of economic globalization, the merger and acquisitionhas already gone beyond the scope of one region or even one country. Regarding tohostile takeover, many target companies choose to take anti-takeover measures. Doesthe board of directors have the right to take these measures;if the measures taken bytarget company's management are legitimate and how to regulate them? Thoseproblems have aroused disputes in practice, but have not been resolved till now.The purpose of this paper is intended to discuss the fiduciary duty of themanagement under the pressure of hostile takeover. It focuses on the principles suchas the deciding power of the anti-takeover tactics, business judgment rule, mandatorytender offer, which are closely related to fiduciary duty of directors of boards underthe circumstance of hostile takeover.Part 1 introduces the theoretical disputes and value analysis of anti-takeover oflisted companies. The paper holds the opinion that the value of anti-takeovermeasures depends on the specific circumstances of practice and it is not reasonable toforbid it absolutely. The anti-takeover system shall, combines with other systemsrelated, perform sound functions in protecting the benefits of shareholders.Part 2 using the methodologies of legal comparative studies, makes research intothe legislative regulation of anti-takeover actions adopted in developed bodies (mainlythe United States as well as the British and European Union). After comparing theBritish and American model, and considering the reality of our county, the paperconcludes that China should learn from British model and empower thedecision-making right to the shareholders of target company.Part 3 is the essential part of this paper. As a typical style of modern corporations,listed company has been characterized by its separation of ownership andadministration. On occasion of hostile takeover, benefits of the shareholders andmanagement confront directly thus worth to be studied from the point of corporategovernance. Firstly, this part analyses the relativity between fiduciary duty of themanagement and the regulation of anti-takeover actions. Then, this part introducessome judicial standards of review in anti-over context—includes business judgmentrule, enhanced judicial scrutiny, entire fairness standard of US, reasonable purposetest of Britain and strict neutrality principles of European Union. Finally this partcomes to the conclusion that China should adopt the fiduciary duty of managementand use the business judgment rule of US to determine if anti-takeover measures arelegitimate.Part 4 pays attention to some other issues related to the fiduciary duty ofmanagement and put forward some legislative proposals. The paper presents theopinion that, the fiduciary duty of controlling shareholders, as well as the fiduciaryduty of management, shall also be regulated. Besides all these mentioned above, inorder to protect interests of shareholders, the paper also addresses the necessity andpossibility of the establishment of mandatory tender offer system and thecorresponding relief system.