Legal Regulation On The Self-Dealing Transactions Of Controlling Shareholders

Self-dealing would not only be the rational choice of the Economic Man, namely controlling shareholders here, but also be the effective approach to improve the efficiency and reduce relevant costs. However, with the excessive intervention of factors like controlling force, unfair self-dealing transactions would cause loss to the subsidiary companies as well as such outside shareholders. Accordingly, countries and regions in this world would try their best efforts to realize the goal of rational regulation on the self-dealing transactions of controlling shareholders. Former mentioned transactions in China would usually reflect the character of unfairness since they are largely affected by the special background and history. Therefore, it is necessary and urgent to pose effective legal regulation on those transactions. Although the Company Act did its best efforts to build the legal control framework on the former mentioned issue, less positive results were achieved by now. It is easy to find out the reasons are lacking of the identification standard of fairness and relevant the liability system. This paper would construct the standard of judicial review on the basis of the practice in countries of Anglo-America law system. In addition, this paper would also make unique conclusion based on the review regarding the liability rules in the Konzern Law and eventually make recommendations on the issue of constructing the liability rules applied in the self-dealing transactions of controlling shareholders. This paper would be mainly divided into four chapters in order to illustrate former mentioned issues. The first chapter would point out the necessity of legal regulations on the self-dealing transactions of controlling shareholders in China. It will first make definitions and analysis on relevant concepts in this paper. Then it will specifically analyze such necessity of legal regulations mainly from aspects like economics, the background and history in China and current situations and problems in China.The second chapter would specially analyze the legal control framework regarding on self-dealing transactions of controlling shareholders and its relevant problems. First of all, concepts such as property rules and liability rules would be introduced for the convenience of analysis. Then such concepts would be discussed in the scope of the Company Act. Following this, such mentioned framework would be illustrated by analyzing provisions in the Company Act. Finally, issues such as the lack of the standard of fairness and specific liability system would be considered as the defects and shortcomings.The third chapter would analyze the way to build the standard of judicial review on the self-dealing transactions of controlling shareholder in China in detail. It will first introduce the practice and experience as to the test standard of fairness in countries like America and Britain. Then, it will consider two importance principles as the basic foundations of the proposal standard. They are the separate interests of company and the balance between fairness and efficiency. Finally it will make some specific suggestions on the constructions of the former discussed standard.The fourth chapter would generally discuss how to build and improve the responsibility system regarding the self-dealing transactions of controlling shareholder in China. First of all, it will make discussions on the mode of specific responsibility. Specifically, such review on the responsibility rules and system under the Konzern Law would be selected as the starting point of analysis. Secondly, critical evaluations on the mode under the Konzern Law would be made and relevant choice would also be made for China. Finally, recommendations on the liability system regarding self-dealing transactions of controlling shareholders would also be made from perspectives like the applicable body, content and the implementation mechanism.