The Legal Difficulties Encountered By The Management Buyout Of The State-owned Enterprises In China And Countermeasures

Management Buy-Outs (MBO) is derived from Britain and United States. Below the situation of the enterprise in our country about strategy modulated and the property rights reformation in a decisive point, MBO is becoming the main character of innovative structure about reformation and prompting, which is used to be a new thing. But it was the butt of criticism during its developing process because of the problem'The loss of state-owned assets'. Therefore, it is stopped by Ministry of Finance in 2003 peremptorily. The ministry of SAC Joint Finance has announced the'Interim Procedures for the transfer of state-owned property rights of enterprise'in the beginning of 2004, and the'Interim regulation for transfer of state-owned property rights of enterprises to enterprise management'in the beginning of 2005. It seems that those two regulations can bring a little hope for future of state-owned enterprise MBO. Why did MBO encounter such these difficulties when it came to China? Where does MBO can find its future? The author attempts to analyze the meaning and the theoretical foundation of MBO; and learns from overseas experience and lessons; analyzes the characteristics and legal quagmire of the Chinese state-owned enterprise MBO practice according to MBO cases in China; formulates target enterprises perfectly and scientifically with MBO legal system; puts forward proposals to improve the law by opening trust organization as the principal part of MBO and width financing way etc. This paper is based on those concepts of writing.Part I: Introduction of MBO on the meaning and theoretical basis.Firstly, the author analyzes the definition of MBO in different viewpoints which are from the scholars of western countries, domestic scholars and regulations of domestic government. Secondly, the author puts forward the MBO which is embodied in the definition and the characteristics of the MBO. And then, the author analyzes several main theoretical basis of MBO as well. The author considers that MBO plays a positive role in modern enterprise for the creation of wealth.Part II: The experience of MBO in overseas.The author carries through the conclusion and the analysis according to the experience under effective operation of capital markets in Britain and United States. The author carries through the conclusion about problems appeared under the weak efficient operation of the capital market in Russia and other Eastern European countries. It issues that it is a useful reference for Chinese state-owned enterprises purchase.Part III: The Character and legal quagmire of Chinese state-owned enterprise in MBO.Firstly, it lists the positive significance of Chinese state-owned enterprise in MBO. And then it concludes the overall features of Chinese state-owned enterprise in MBO and the legal quagmires which are narrow operation space and nonstandard process etc.Part IV: suggestion for consummating MBO legal system.The author put forward four main aspects of the proposal such as comprehensive MBO legal system criterion, scientific target enterprises, opening Trust organization as the principal part of MBO and opening the restriction of financing.MBO is used to be guided by policy of government. The regulation in the legal aspects is deficient. When a series of problems triggered by MBO is discovered, the government turns into another attitude such as banning or stopping etc. Then a series of policies and regulations are introduced for restriction. Not only the MBO system did not disappear, but also it triggers more varieties and transgressions occurred. The author considers that the inherent advantage of the MBO system determines it shouldn't be treated with only one way'stopping'by China. This means that the fundamentality is how to normalize and guide MBO to a right way. To face the advantage of the MBO system, the direction we should work in has two different sides. One side is that normalize the game rule, balance the information, ensure the equity and justness of purchase procedures, let purchaser to give up the idea of playing games and focus in the profit of enterprise. On the other side, it shall provide a vast space for MBO financing in financial environment. Let MBO has positive significance from the original MBO system.