Listed Takeover Legal Regulation

Anti-takeover is measures taken on a continual or sporadic basis by a firm's management in order to prevent or deter unwanted takers. The essential part of it is preventing transferring of control. Regarding the lift of ban about China's takeover and anti-takeover's policies , the market of takeover became surprisingly active. Meanwhile, a lot of anti-takeover measures also have been used in our country. But because of the development of anti-takeover law is far behind the practices on this issue, a lot of disputes aroused in theoretical and practical field. At the time, also giving a lot of troubles to judiciary and law practice .In 2002 Regulations on the Takeover of Listed Company was proclaimed, and it changed the situation that the PRC company law and PRC security law having not mentioned about the problem of anti-takeover, but it also has many shortcomings in its rules.This paper adopting the approach of comparative law, law interpretation reviews and analyzes all the main legal issues concerning the target company's anti-takeover and puts forward some proposals and suggestions based on the actual circumstance of PRC. The main intention is to make takeover workable and to protect the interests of vast numbers of small and non-controlling shareholders.PartⅠis the introduction of the basic staffs of company's takeover and conception of listed company's takeover and anti-takeover. The takeover of the listed companies as mentioned in these regulations refers to an act which entitles a purchaser to the practical control right of or the potential practical control right of a listed company through activities of the transfer of shares in the stock exchange, or through lawful means other than the activities of transfer of shares in the stock exchange, the purchaser holds a certain proportion of the shares issued by the said listed company. Regarding to different division standards, takeover can be divided in to share acquisition,tender offer,friendly takeover and hostile takeover. Hostile takeover has special meanings in the research of anti-takeovers. Anti-takeover is measures taken on by a target company's management in order to prevent or deter hostile takeovers. The subject of anti-takeover is very complicated, the object of it is particular, the purpose of it is clear and the measures are also diverse.PartⅡis the introduction about the theories of anti-takeover of listed company. In order to protect the control right of board of directions,to undertake the social responsibilities , the target company takes a series of anti-takeover measures. It is reasonable,necessary and worthwhile. On the problem of who has the right of make decisions, because of different economic and law circumstance,financial market environment ,It was divided into American model and British model. British model thought that the board of director is the executants of the owner's decision, they don't have right to decide the company's ownership. Meanwhile, the shareholders and the board of director have inborn disputes on interests, so, the shareholders should control the right of making decision by themselves; American model thought that, the board of directors understand more about the company and the financial market than shareholders, It is easier for them to make reasonable decisions. The paper also mentioned the anti-takeover measures as follows: super majority,fair price amendment,staggered board,poison pills,ESOP,parachute,greenmail,crown jewels,white knight,MBO,Pac-man. These anti-takeover measures protect the interests of board directors of the target company, but, at the same time, hurt the shareholders very easily. So, it needs legislation on the issue.PartⅢputs a lot attention on the research of American and British model. In America, there are USA security law,security laws of different states and also some case law to regulate the behaviors of takeover by listed companies. The Williams Act requires that the board of directors of target company should include all the details of the attitude towards the takeover,the reasons and measures taken by themselves to the shareholders, in order to give the shareholders enough confidence to make decisions. The Security law of states paid more attention to the board of directors of the target company. The court uses principles of honesty and credibility and business judgment rule to judge the anti-takeover measures taken by the board of directors of the target company. Actually, In America, if the target company does not violate the principles of honesty and credibility and also fulfill the business judgment rules, any anti-takeover measure is permitted. In Britain, it is different. City code on Takeovers and Mergers maintains that if there is no permission from the general meeting of shareholders, the board of directors can't take any anti-takeover measures. First, the target company's board of directors should tell shareholders these information including details about this offer and legal suggestions and their own opinions. Second, if the target company finds a "white knight", they should give all the information to the general meeting of shareholders. Third, the board of directors should not take any measures that have the possibility to influent the shareholder's right of making choice. Obviously, legislation of every country depends on the financing structure, share right structure and structure of corporate governance.PartⅣgives some suggestions to make progress about legal regulation of anti-takeover of listed companies in China. Because of the history of M&A in China is so short that, the legislation on this issue lagging behind severely. PRC Company Law and Security Law have not mentioned about anti-takeover. Although The Regulations on the take-over of listed companies have made a progress on anti-takeover legislation, a lot of important problems about this issue are not got involved and resolved. PRC Company Law does not include the decision making right of anti-takeover in the article of terms of reference of board of director or general meeting of shareholders. It does not proclaim the duty of honesty and credibility of directors of listed companies; it does not have any provisions compensation mechanism in civil procedure.This paper maintains that the right of making decision should belong to the shareholders of the target company by legislation. And it also has to proclaim that the board of directors should fulfill the duty of honesty and credibility in order to protect the interests of small and non-controlling shareholders. And the compensation mechanism in civil procedure and the legislative of anti-takeover measures of listed company should also be paid sufficient attention.