Study Of The Management Buyout Of Certain Legal Issues

Management buy-out (MBO) which begins in Britain and America is the result of market economy in certain stage of developed countries, and is also the product of unifying the rights of property and management by enterprise's management who can purchase the enterprise by lending money and circulating necessary funds. MBO is the betrayal of this method which governs the separation of the property rights and the management right in one company. In England MBO is the product along with the privatization of state-owned enterprise. In USA MBO is the method for reducing the proxy cost, driving management and the prevention of hostility purchasing during merger and acquisition.But in Eastern Europe and Russia which have profited something from this merger and acquisition form during their privatization, there were the phenomenon which is the state-owned assets drained massively because their markets have not developed, the laws and regulations were not perfect.The symbol of MBO in our country is the MBO in the Group Stone in 1999．For many years, MBO has debated unceasingly in our country, especially the debate between Mr Lang and Gu. The essence is also about the state-owned asset which were seld too cheap; the vacancy of the owner in state-owned enterprise; the flaw and barrier in law, especially main body in transaction, the question of circulating necessary funds and fixing price. The management has takes the legal chance and dodges the barrier, thus has created the massive legal risks.MBO provide a method for restructuring property rights, the impelling the staff in the enterprise as well as the government structure in one company. But the state-owned asset drained greatly, and thus the public were suspected it extremely, which are due to the unperfect laws and regulations related with MBO and the violation of the stipulation during operation. MBO in our country is also at the initial stage, because the external environment of the capital market is insufficiently and the legal environment are not mature. MBO is also the process of assigning benefit. MBO is just one kind of tool, takes the merger and acquisition, if there are no law to limit it, no strict procedure to standard the speech of it, even if the MBO is the good tool, it can only cause the people to defeat the purpose. MBO can make the state-owned asset to form the good circulation form, realize the property multiplication in the circulation. The establishment of socialist market economy means the establish of law about the socialist market economy. During the process we will bump into the sensitive question, we should use the policy to solve it. Since the state-owned asset must be changed, we should consummate law and the procedure of law in order to make MBO to be benefit to change the system in state-owned enterprise and realize the final goal which is about to reform the property right clearly in state-owned enterprise and improve the structure of joint-stock company. It is harmfull no matter that MBO is forbidden or the enlarged. The key is to make rules and regulations. Along with the arrival of merger and acquisition in China, it will become a chaotic market inevitably if there are not the legal rules and regulations.In this article the first is the outline of MBO including the concept of MBO and its relation with other concepts, as well as the basic theory of MBO in economics. At last of this chapter, it will introduce MBO's causes and the summary of MBO in foreign countries. We introduces the historical practice and development of MBO in China; explains the positive sense and existence question and the negative effect in China; analysis the comparison of legal characteristics about MBO between our country and other countries in the world.The second chapter explains the difficult legal position, the implementation and the risks of management and the suggestion of legislation in our country.If we emphasize the construction of the socialist market economy, we cannot carry on the limit to the main body in transaction, everybody can be the buyer in the transaction. It's reasonable to propose the trust system in MBO.The third chapter interprets the legal barrier in circulating necessary funds inMBO in China and the uncertainty. It suggests to establish the loose financialenvironment by the development of capital market in our country in order to reducethe limitation to circulate necessary funds in law and improve the financingenvironment of our country by trust financing. The fourth chapter explains the question about pficing of MBO and the suggestion of legislation in MBO. It will emphasize the property of enterprise and the stockholder's rights in pficing of acquisitions in order to make the process of pricing marketwise, equal and public. We should formulate "State-owned asset Control law" urgently. Because the station of seller cannot be vacant, otherwise the management level buys from sells which is the key about the state-owned asset, we will discuss the government status in above question. The suggestion is to establish the agency which subordinates the National People's Congress to supervise MBO.