System Of The Reverse Takeover Of Listed Companies In China

Acquisition is considered one of the most effective measures to govern a company and plays an important role in improving the corporate system. It allows poorly-run companies to be acquired, incapable managers be replaced, and market resources optimized. But acquisition can also damage a corporation. Some hostile takeover might bring disasters to the acquired company and harm the interests of the company's share-holders or even the entire securities market at large. Anti-takeover system is thus created to prevent such negative impact. As China pushes forward reforms of the securities market, the battle between takeover and anti-takeover is expected to intensify. Though a key mechanism in the securities law, anti-takeover is not stipulated in the Chinese laws, leading to a host of problems in the acquisition process that might put the interests of both parties at risk. Therefore, it is important for China to learn from the foreign experience to improve its anti-takeover mechanism.In this paper, the author analyses the theory of anti-takeover based on previous researches, pinpoints the problems in China's current legal system concerning the lack of stipulation on anti-takeover and presents recommendations for system improvement.The paper is divided into four parts: Part One:the author analyses the theory concerning anti-takeover, including corporate listing, hostile takeover, and anti-takeover. By comparing a pair of conflicting theories, the author intends to show the value of anti-takeover to the readers.Part Two:the author analyses the measures of anti-takeover commonly taken by a listed company, which fall into two major categories-preventive anti-takeover and retaliatory anti-takeover. The author investigates the probability of application of Poison Pill, Golden Parachute, and White Knight in the Chinese legal system.Part Three:the author introduces China's anti-takeover legislation and practices, identifying the system flaws that deter anti-takeover measures taken by listed companies.Part Four:the author proposes a solution to improve the anti-takeover mechanism in China based on international experience with suggestions on the guiding principles and detailed policy measures.