The Legal Dilemma Of Listed Company’s MBO Financing In China

As a kind of financial innovation, Management buy-out (MBO) had successfulimplemented in the United States and Britain, and then became the main mode ofstate-owned enterprises reform in the Soviet union and eastern Europe socialistcountries. At the beginning of this century, based on the reform of state-ownedenterprises,and to promote state-owed economy withdraws from the generalcompetition industries, Chinese government decided to transfer state-owned equity tothe managers, which set off a management buyout boom in China. However, due tothe incomplete legal environment, coupled with serious government intervention, theprocess of acquisition financing was illegal, the reform became a feast to carve up thestate-owned assets, and incur a wide range of social questioning. In2005, the SACJoint Ministry of Finance legislated to restrict the transfer behavior of the state-ownedenterprises, the MBO boom was rapidly cooled. In recent years, with the spread anddeepening of the global financial crisis, China’s OEM export-oriented, labor-intensive economic model is facing a great challenge, Industrial restructuring and upgrading isthe most important economic themes.In this context, the Chinese government encourages enterprises engage inmergers and acquisitions. However, as a special mode of mergers and acquisitions, thelegal nature of management buyouts is affiliated transactions. And its earlyperformance in China was “notorious”, supervision and administration of it should beperfect and strengthen. This article is based on the market and the legal environmentof the new era, Then, this article compares the MBO in Britain, America and analysesthe process of the MBO in our country and its status. This paper can be divided intothree parts:The first part is the introduction of the concepts and theoretical basis ofmanagement buyouts. And discuss the differences of wealth creation theory andwealth transfer theory.The second part focuses on the unlawful act in MBO. Analyze the financingchannels and the manager’s illegal behaviors in Chinese management buyout.In the third part, based on absorbing the advanced experience of the UnitedKingdom and the United States in regulation, provide some legal advices on how tostrengthen and perfect the government regulation system.