Legal Regulation Of Listed Companies In The Tender Offer

Tender offer is an important acquisition way for listed companies. Tender offer refers to, for the purpose of the control right over the listed company, the open actions outside the stock exchange taken by the investors to the all the security shareholders of the listed company to purchase the voting securities of the listed company. During the purchase of tender offer, the minor shareholders of Target Company are vulnerably subject to tort because of their weakness in business transactions. Thus special protection is needed. The effects on the minor shareholders mainly come from the purchaser, the major shareholders and company management of the target company. Many countries, for the protection of minor shareholders' interest, have law regulation from three aspects of the purchaser' behavior, the company's managerial behavior and the equality maintenance for shareholders of the target company. The article analyzes the defects in our legislation on the basis of the acquisition system of developed countries and puts forward the countermeasures to protect the minor shareholders' interests of Target Company.The article has four sections as follows:The first section: Explore the necessity and principles of protecting the minor shareholders' interests in the tender offer of listing companies.The second section: Deal with the law regulation of purchasers' behavior. Legislation should be improved. Firstly, the information disclosure system is not perfect. The bottom and ceiling price of the purchased security should be fully disclosed; the financial audited accounting report of the issuer in recent three years should be provided by the purchaser together with the value analysis of relative securities given payment is made by security; the 15-day waiting period is not reasonable ahead of tender offer announcement and should be abolished. The subjects' scope in the concept "Persons acting in concert" is too narrow which is not beneficial to the full understanding of the information for minor shareholders. The relative regulations of developed countries on the concept "Persons acting in concert" should be introduced to widen the scope of subjects and the principle "reversal of the burdenof proving fault" should be applied in the litigation of "Persons acting in concert". Secondly, the regulation on the modification and revoke of the offer is not complete and it should be clearly clarified that the conditions of the modification of offer should be superior to those of the former tender offer. The regulation on the revoke of the offer is not flexible and the principle "principles forbidden, exceptions allowed" should be employed to protect the minor shareholders' interests. Thirdly, the regulation on the follow-ups of tender offer should be improved.Section three: deal with the regulation on the managerial behaviors of target company. Firstly, the duty of information disclosure for the company management of target company only appears in "Method of Administration for the Acquisition of Listed Companies", whereas there are many defects. For example, if the Board of Directors suggests that shareholders accept or reject an offer, the Board of Directors should make clear statements of making such decision, and the directors should deliver the intentional statement of accepting or rejecting the tender offer as to their own share-holding. Secondly, only "Method of Administration for the Acquisition of Listed Companies" is involved in the anti-takeover of target company management. But vagueness and scope narrowness still exist in the regulation on the decision-making power of the anti-takeover and specific measures. It should be clearly identified that the decision-making power lies in the shareholder meeting and clear regulations on the anti-takeover measures is indispensable. And Class Shareholder Voting system should be used in voting on anti-takeover measures at the shareholder meeting.Section four: deal with the regulation on the equality maintenance of the shareholders. The unreasonable pricing system of the tender offer leads to the ineffectiveness of the compulsive offer in our country, with the result of failing to protect of the minor shareholders' interest. Thus, the regulation "the offer price is the 90% of the average price of 30 days" should be deleted. The minimal premium should be set and the opportunity of controlling premium and withdrawing from the company should be given to minor shareholders to protect the legal interests of them. Meanwhile, in "price equality and the highest pricing rule", "the tender offer'spurchasing price specified by the purchaser should not be lower than the ceiling price paid for the purchase of the company's stock within six months ahead of the Reminding Announcement Day, which is not scientific. Six months is too short and is easily subject to the manipulation. Thus six months should be twelve months by introducing the British practice.