Preferred Stock System Research

This paper chooses "Preferred stock", which is popular in the company law regime of western countries, but is still a vacuum of the Chinese company law, as the study object. Through an introduction to the definition, features and characteristics of preferred stock, and an analysis of the conflict of interests among class shareholders, which gives rise to the need for the protection of preferred shareholders, as well as a study of the legislation and cases in relation to preferred stock, this paper seeks to give a brief introduction to the preferred stock regime from both sides and propose to import it into the Chinese company law.This paper divides itself into four chapters. Chapter I functions as an overview of preferred stock. A comparison between preferred stock, common stock and company debt contributes to a better understanding of preferred stock. Chapter II deals with the origin and evolution of the preferred stock respectively in Anglo-American countries and civil law countries.Chapter III and IV are highlights of this paper. In Chapter III, the paper takes America, where the preferred stock is most developed, as a study example. It, in the beginning, makes a detailed analysis of the inherent conflicts of interests between preferred shareholder and common shareholders, based on which, it concludes the vulnerability of preferred shareholders. Then it discusses four most outstanding situations in which preferred shareholder are harmed by the board directors for the sake of common shareholders. To resolve these problems, American case law develops a lot of principles and methods. Some of them are also involved in the company laws, which we can learn from.In Chapter IV, the author alleges that preferred shares should be imported into the company law due to its significance to the perfection of Chinese company law and its contributions to corporate financing. On the basis of a comparative study on relevant legislations and case laws of other jurisdictions, the author comes up with several legislative proposals in relation to the preferred stock regime.