Repurchase System, Legal Research

Share Repurchase is a legal act undertaken by a company with limited liability to re-purchase some of its stocks in distribution. There are two main legislative models thereof: "prohibition in principle with exceptions", implemented in Germany for example; and "permission in principle with restrictions", one used by the United States. Following the tradition of its civil law, China adopted the former. Many progresses have been made in the legislations on share repurchase with the new Company Law and Regulations on Share Repurchase by Listed Companies (Trial Implementation), although there still exists noticeable deficiency and much room for improvement. In practice, recent legal cases involving stock repurchase have provided valuable feedbacks to the legislation and academics alike.With forty thousand words, this report is divided into four chapters.Chapter One contains studies on basic legal theories on share repurchase, It discusses the definition, reviews the history, and introduces various methods thereof. Analyses on the potential advantages and disadvantages of share repurchase are presented. It will show that acknowledging both the drawbacks and the benefit, company laws in different countries are in the transition from strict prohibition to a more moderate position which encourages the practice and employs various restrictions to minimize potential pitfalls.In Chapter Two, two legislative models of share repurchase are compared. Adoption of either model should be contingent upon the actual political, economical and legal environments of the country. Since the current stock market regulation in China is far from mature, the model of "prohibition in principle with exceptions" is consistent with the actual situation and the legal tradition of China.Chapter Three contains discussions on current legislations and cases of share repurchase in China, along with the contents in Company Law and Regulations on Share Repurchase by Listed Companies (Trial Implementation), particularly on the conditions, quantities, finances, methods, decision-making procedures, holdings and disclosures of share repurchase.As a summary to the theoretical discussions, comparative analyses, and actual case studies contained in this report, the author will provide a few recommendations in Chapter Four for further improvement of rules and regulations of stock repurchase.