Study On Shareholders’ Preemptive Right

Limited liability company is a transitional form from joint corporation to corporation limited. It is an integration of both human resources and capitals, and is well embraced because of its low cost, high efficiency, good management, and rapid development. The shareholders’ preemptive right is an important right held by the shareholders in a limited liability company. It preserves the human integration of a limited liability company, maintains the sound cooperation between original shareholders, balances the free transfer of equity, and ensures the steady operation and development of the company. In practice, however, the exercising of shareholders’ preemptive right faces a lot of problems and the equity transaction engenders no lesser disputes. Therefore the specification and modification of relevant regulations on the shareholders’ preemptive right in the Corporation Law, as well as the construction and improvement of such a system is pressing.This paper is consisted of three parts, namely the introduction, the main narrative, and the conclusion.The introduction briefs on the background, the objective, the status quo, and the methodology of the study on shareholders’ preemptive right.The main narrative is comprised of five chapters as follows.The first chapter starts from the clarification of theory, including the definition, trait, and value ground of the concept. This chapter then attempts to interpret the essence of the shareholders’ preemptive right and analyze the nature of the shareholders’ preemptive right revolving around the fight over the right of claim and the right of formation. In this chapter I also elaborate on the value foundation of the shareholders’ preemptive right.Chapter 2 focuses on the main issues existed in the exercising of the shareholders’ preemptive right. It discusses the prerequisites, the qualification, the time limit of the shareholders’ preemptive right and the exercising of this right in real judicial enforcement scenarios. The focal point of this chapter is the standard of judgment under the same conditions.Chapter 3 analyzes the effect of shareholders’ preemptive rights on the equity transfer contract. For cases of the shareholders reserving the shareholders’ preemptive right, my comparison and analysis leads to the conclusion of a “ theory of validity”. For cases of the malicious infringement of shareholders’ preemptive right, I raise the” theory of invalidity”.Chapter 4 explores the measures in legal aid of shareholder’s preemptive right based on the previous analysis on the effect of equity transfer contract.Chapter 5 targets at the major problems existing in the shareholders’ preemptive right system in China and lays out four feasible recommendations.