The Research On Regulation Of Takeover Defense

Takeover defense refers to the measures taken by board or management of target company to resist the hostile takeover. There are serious conflicts of interest between shareholders and the board of target company. Delaware corporate case law created several important rules about the anti-takeover measures. This thesis analyses those cases in the aspect of balancing the interest of stockholders and management.There are five chapters in this article:In the first Chapter, it is about the definition and classification and theories about takeover and anti-takeover measures. The takeover can be divided into friendly takeover and hostile takeover which the takeover defense resists. There are two types of takeover defense, ex-ante and ex post anti-takeover measures. The theory supporting the measures is the bargaining power hypothesis and stakeholder theory. However, corporate control market theory is against such measures. In the view of the article, takeover and takeover defense shall be regulated by the law, because they may affect the interest of target company and its stockholders.In the second Chapter, the author analyses serious conflicts of interest between shareholders and the board of target company, as well as the primary cause of the conflicts. The conflicts are the representation of agency costs which results from the separation of ownership and control of corporation. And the conflicts become much fiercer when board considers whether and how to take some measures to respond the hostile acquisition. On one side, the hostile takeover will lead to the drastic change of corporate control and the management of target company may lose their job and power. It is so unacceptable that they always try to maintain their position by taking action to fight against the hostile bids. On the other side, the resisting of takeover may deprive the chance of stockholders (who support the hostile bid) to gain the equity premium. This article thinks the regulation of takeover defense shall alleviate the intense conflicts and attach importance to the protection of target company and its shareholders, especially allow the board to play positive role in supervising the management.In the third Chapter, this thesis tries to expound the important cases of Delaware in governing anti-takeover measures. These cases are Unocal Corp. v. Mesa Petroleum Co., Revlon, Inc. v. MacAndress & Forbes Holding, Inc., Paramount Communications Inc. v. Time, Inc and Unitrin, Inc. v. American General Corp. These rules, established by the cases, permit the board to take anti-takeover measures and apply the business judgment rule to such measures, if the board can prove that, the purpose of their judgment is to protect the company rather than their own benefit, and their decision is reasonable to respond the threats posed by hostile bid. However, the board has the Revlon duty to maximize the benefit of stockholders when the sale of corporation is unavoidable.In the fourth Chapter, the article tries to discuss how the case law balances the interest of shareholders and the board. These rules show the board-centered corporate governance idea, and promote the board to take an active role in monitoring the management, and require it to make decisions for the interest of company and shareholders. But the rules are somewhat tolerant of the takeover defense by allowing the board to take numerous measures against the hostile acquisition.In the fifth Chapter, author tries to introduce the Chinese law related to takeover defense and propose several suggestions for its perfection. Through comparing the Delaware rules with ours, we can learn some new and effective rules from Delaware corporate law to improve our deficient law. Due to the difference between USA and China in corporate governance, however, we cannot simply copy its law.