A Study On The Laws And Regulations Of Management Buy-Outs

Based on the concept and basic theories of Management Buy-Outs (MBO), this thesis attempts to make a contrastive analysis of MBO's origin and development in both China and Western countries, focus on the problems like MBO purchasers, purchase pricing system, financing, and information disclosure and losses of state assets during purchasing in China, and also put forward some suggestions on the improvement of MBO system. The thesis consists of four parts shown as follows.Part One:presents a clear picture of basic theories on MBO including its concept, features, fundamental notions and comparisons of MBO systems both in China and Western countries. In this thesis, MBO refers to a kind of purchase that managers of the target company buy the company shares through loan capital and other ways and thus change the corporate ownership, control rights and asset structure for the purpose of corporate restructuring and expected benefit achievement. In order to facilitate the understanding of MBO, this part also makes a detailed comparison of MBO's concept with other close concepts and China MBO's present status with MBO's origin and development in Western countries. In addition, MBO's theoretical foundations, i.e. Trust Agent Theory, Coase's Property Right Theory, Entrepreneur Element Theory and Corporate Governance Structure Theory are introduced. Among them, Trust Agent Theory and Corporate Governance Structure Theory are considered as the fundamental guidance theory of MBO operation in this thesis.Part Two:mainly discusses MBO from legal perspective, including its motives, legal nature and characteristics, thus foreshadowing the analysis of MBO legal issues and limitations in the next part. It sets out to extract the motives of MBO, and then analyses its legal relationship like objective selection, purchasers, purchase and payment methods and etc. In addition, MBO's significance in corporate operation is presented for readers' deeper understanding.Part Three:as the main body of the thesis, deals with the legal issues in China's MBO. Confronted with various problems of MBO, nearly all the countries attempt to keep them under control through legal ways. This part aims to give a detailed analysis of MBO limitations in China, e.g. unclear legal status of purchasers, lack of standardization in financing, injustice and unreasonableness of pricing system, losses of state assets, insufficient information disclosure during MBO operation and neglect of corporate restructuring after MBO. Two core issues are centered in this part, i.e. unreasonableness of pricing system and lack of standardization in financing. Due to the problems like injustice of deal price, difficulty in measuring entrepreneur's contributions and ill transparency of business, MBO is faced with many controversies and doubts; therefore, in order to standardize the operation of MBO, first and foremost pricing system requires improvement. On the other hand, new financing channels need to be explored, financing tools require innovation, and relevant laws and policies demand improvement for the reasons of inadequate legal support, imperfect financing channels and tools and existence of professional intermediary institutions.The last part:reports on the improvement of MBO legal system in China. In view of the existing problems of MBO discussed in Part Three, Part Four proposes corresponding adjustment and standardization of relevant laws and policies. The relevant rules and regulations should be improved; some measures concerning how to guarantee the legitimacy of purchasers and the fairness of purchasing price need to be adopted; supervision and management system is expected to be set up to control MBO risks to the fullest extent and promote the development of the enterprise.