A Study On Legal Issues Concerning Independent Director’s Supervision On Connected Transaction Of Listed Companies

Due to the specialty of the generation mechanism, most of Chinese listed companies come into being through restructuring of the existing shares of state-owned enterprises. In the shareholding structure of the company, the dominance of state-owned shares is still a common phenomenon even with the reform of non-tradable shares. It is no unusual that controlling shareholders of listed companies enter into transactions with the parent company of the listed company, the subsidiary of the parent company as well as other business or personal in association with the listed company through manipulation. Unfair connected transactions disrupt the market order, and exert serious damage to the legitimate rights and interests of the minority shareholders. Thus, the system of independent director is introduced to protect the rights and interests of the minority shareholders and to balance the company’s internal governance structure. The main functions hereof is to carry out supervision on the improper and illegal behavior by controlling shareholders, directors and senior managers, thus strengthening the protection of minority shareholders’rights and interests.This paper centers on the independent director’s supervision on the connected transaction of the listed company, with focus on the problem out of the inadequate function played by the independent director, and further, puts forward solutions to problems and relevant proposals. This paper is divided into four chapters:The first chapter gives basic introduction of the connected transactions of listed companies and the independent director system and gives a general knowledge of the concept, root and the impact of connected transactions of the listed company, the root, function and background of independent directors. In view of this, the relationship between the two above can come into sight. Still, there exists some problem concerning the supervision of independent directors on the listed companies while studying such cases. The second chapter is going to explore the merits in china’s system through introduction of research on the foreign relevant systems; The third chapter pays attention to the three main problems out of the inadequate supervisory function of the independent director through looking for flaws existed in the independent director, the corporate governance structure and the legal regulation; The fourth chapter presents corresponding countermeasures respectively against the three main probelms mentioned above.