Vision Of Anti-takeover Target Company Directors Fiduciary Duties

The acquisition of listed companies is an important tool of allocation of resources through the stock market. It realizes the goal of optimally allocating production factors, through the way of restructuring and assembling the existing assets under the premise of maintaining the total amount of assets, which reflected the basic principle of market competition of the survival of the fittest. Offerors can often be seen of purchasing a certain percentage of shares of a listed company through transfer of shares in the Stock Exchange with the purpose of acquiring the actual control rights of the company, integrating their assets and enhancing its company's competition . Where the offeror continue to buy the company in despite of the resistance of the target company's directors' or offer a public tender offer without negotiation with the target company's director refers to as a hostile takeover. Nowadays, the market environments are unpredictable and full of risks which make it possible that any enterprise would be takeover by the others. For those who are facing a hostile takeover and do not want to lose the right to speak in the capital market the most effective self-defense is to carry out an strong anti-takeover action. Clearly, takeover and anti-takeover are two sides of one coin and both of them are inevitable results of the battle for the rights of company control. Based on the basic judge that the battle for controlling rights contributes to the governance and optimal allocation of assets of the company, An issue worth exploring is how to regulate the fiduciary obligation of the target company's directors while they are taking anti-takeover defenses so as to achieve a balance between limiting of director's anti-takeover rights and respecting their management rights. This problem harasses legislators and acquisition businessmen and inspires me to take it as the thesis of my graduation paper.In my view learning the essential theories of anti-takeover and the fiduciary obligation of directors are premises of exploring the way of regulating the fiduciary obligation of the target company's directors. In addition, countries such as Britain and the United States developed their reasonable regulating measures resorting to their mature capital market. As it is said stones from other mountains can be made into jade. While we are exploring a Chinese-style regulating measure for the fiduciary obligation of the target company's directors, it is necessary to learn from these countries' measure and their concept foundation. However law is regional knowledge which means a certain legal system coming from certain location, creating by certain people and existing in certain culture will not necessarily suitable for another place and the other people. Therefore reviewing our current regulating measure for the fiduciary obligation of the target company's directors is an unavoidable task while we are discussing the measure for the fiduciary obligation of the target company's directors.Based on the above logic path, this thesis consist of three parts—preface, text and conclusion. While the text covers five chapters and each chapter is arranged as follow: chapter I studies the essential theories of anti-takeover, introduces the origin and value of anti-takeover and concluded that the essence of anti-takeover is to strive for the control of the company. As it is to the judge of value on hostile takeover, the mainstream of company controlling theory has different ideas with the non-mainstream one which results in their different attitudes towards anti-takeover.ChapterⅡstudies the essential theories of the fiduciary obligation of the target company's directors. The study in this chapter starts from the origin analysis of the fiduciary obligation and the directors' fiduciary obligation. Then it probes into conflict of interest which resulted in the specificity of the fiduciary obligation of the target company's directors. Thereby the chapter concluded that as long as the fiduciary obligation of the target company's directors is strengthened will the legislative goal of pursuing efficiency and equity achieved. Finally this chapter discussed the content of the fiduciary obligation of the target company's directors and pointed out that the target company directors have the fiduciary obligation in the anti-takeover as in day-to-day operating which both include duty of care and duty of loyalty.ChapterⅢcompared the other countries' legislation on the target company's directors' fiduciary obligations. The comparison is focused on the countries with mature capital markets such as the United States, Britain and Germany. The United States carries out the general licensing measure which is subjected to the three judicial principles .The British carries out the general prohibition measure with exceptions and Germany carries out the measure with multiple restriction and balance system.ChapterⅣexamined Chinese current situation of regulation on the target company's directors' fiduciary obligations. The examination is focused on combing the articles specified in the "Company Law" and the "Regulations and Guidelines for acquisition of listed company" which is about the target company's directors' fiduciary obligations. And finally the third section simply analyzed the articles mentioned above and pointed out their shortage so as to drag out the content of the fifth chapter.ChapterⅤsearched for methods of strengthening the target company directors' fiduciary obligations. This chapter is the starting point and end-result of the whole thesis. And it is where the most personal views of the author settled. What is more this chapter represents the innovation of this thesis compared to the previous article with the same subject. I believe the goal of strengthening fiduciary obligations of company directors shall be achieved in two ways: First, improving the anti-takeover legislation, and second completing building relative system. Thus I arranged two sections in this chapter. Section I improved anti-takeover legislation to strengthen the target company director fiduciary obligations and specially provided with legislative suggestion both on the duty of care and duty of loyalty. Section II Constructed the supporting systems to strengthen the target company director fiduciary obligations. This section is divided into to parts as incentive mechanism and restraint mechanism. The incentive mechanism includes the interlaced and classified system of and the Board of directors. The restraint mechanism includes supervisory mechanism and subsequent accountability mechanisms. Among the supervisory mechanism there are supervisory from the shareholders, independent directors and institutional investors. The accountability mechanism includes claims from the shareholders and the third parties.