The Pre-emptive Rights Of Shareholders In Company Limited

In the documentary "The Power of Companies", the limited liability companies arewidely recognized as a representative of the modern enterprises. It originated from merchantsystem, and was developed by the limited liability of modern enterprise theory, eventuallyfeaturing the cooperation of labor and capital. In order to protect the human resource integrity,external transfer of stock shares in partnership companies and limited liability companymembers have certain restrictions. Pre-emptive rights could not be well understood if it isonly viewed from the perspective of limited liability companies. It helps to know pre-emptiverights better with the comparison of the restrictions on external transfer in different forms ofcompanies. China’s Companies Law is basically borrowed from abroad, which results in thelack of cultural roots and experiences to grasp the essence of shareholders’ pre-emptive rights.The law is quite misleading in its legislative language and its judicial practices. Thereupon theauthor hopes to facilitate the understanding and application of this system by way ofanalyzing from the theoretical basics to the judicial practices.Apart from the introductory part, the body is composed of four parts. The first part isfocused on the position of shareholders’ pre-emptive rights in limited liability companiescompared with the whole priority rights system. The second part is about the nature ofpre-emptive rights in limited liability companies. It is going to be elaborated by thecategorization of different rights defined in the basic theories of civil law: pre-emptive rightbelongs to sequential right, statutory right and contractual right, and right of claim. Then thethird part focuses on the value basis of shareholders’ pre-emptive rights. In this part, from thepriority angle, the value of the foundation is the basis for the right to the value of the degreeof importance, to achieve the order set for the right to conflict. Then, for limited liabilitycompanies, the value basis of pre-emptive rights means to maintain the cooperation of labor,the closeness, and stability of control. The fourth part elaborates on the pre-emptive rights inChina’s limited liability companies. The author discusses such rights through relevantprovisions about equity transfer in China’s "Company Law", especially through Provision72.The main mode of legislation on such rights, the agreed effectiveness of the law, holders ofthe rights, the conditions for the enjoyment of the rights, procedures to execute the law as wellas the right relief are analyzed and discussed. The author herein concludes that the legislationmode of China’s pre-emptive rights in limited liability companies is the agreement first and law supplemental and he further comes to the conclusion that the regulations generally havethe binding forces to the special agreement about equity transfer. And also through thediscussion of the subject of the rights, the procedures of enforcing the rights and rights relief,the author aims to clarify the confusion and disagreement on these issues, and to give his ownsuggestions for future improvement.