The Research Of The Preemptive Right And The Institutional Development

The preemptive right is that the shareholders have the right to purchase the shares which is prior to the third party when the corporation issues the new shares during the operation. The purpose to give shareholders the preemptive right is to ensure that the ratio of shareholders’ interests is not compromised and to avoid the dilution of shareholders’ equity. Meanwhile, the preemptive right has the personal attributes, so the necessary condition to enjoy the preemptive right is having the shareholder identity and it can’t be transferred to the person who isn’t the shareholder. However, the preemptive right also has the property attributes, so when the interests of the corporation are greater than the shareholders’ interests, the preemptive right should be excluded.To make the legal system of preemptive right more perfect, we should refer to foreign advanced experience and combine the current conditions of our country to make the subject, scope, duration of the right explicit and establish the excluding system of the preemptive right.The core of the equity is the voting right, and the ratio of the voting right depends on the ratio of the equity. The preemptive right is one of the most important rights of the shareholder, so protecting the preemptive right is very necessary. According to the present regulations of Corporate Law of the People’s Republic of China, they are too general to solve the problems happened in practice. In the aspect of subject, there are arguments that if the shareholders in company limited by shares and the public company of China have the preemptive right. In terms of the scope of the right to exercise, after the company registration system have been changed from the paid-in capital system to the subscribed capital system, the base of the scope should be changed. About the duration to exercise the right, the relevant provisions of the Chinese law does not make it clearly and have no explicit rules. In recent years, as the increasing of the shares’ value, more and more shareholders institute the legal proceeding for the preemptive right been infringed. It caused the transaction order be destroyed and make the legal relation be uncertainty. There is some situation when the preemptive right should be excluded to protect the third party and the corporation’s interests. Establishing the excluding system will not only improve the efficiency of company operation, but also protect the interests of small shareholders.According to the nature of the personal property rights, only shareholders can enjoy the preemptive right for new shares. And other body having equity interests are not available as a subject of the rights. In addition, in terms of the provisions of Chinese Corporation Law, there is an explicit legal basis for the shareholders in limited company to enjoy preemptive right. But the law is not clear for the shareholders of joint-stock company. From the provisions of Article 133, it seems not clear whether shareholders can enjoy this right. But if based on the legislative purpose of preemptive right, it should be clear for this right of shareholders of joint-stock company. However, for the special form of joint-stock company — the listed company, the shareholders of it should not be given the statutory preemptive right. This right should be conferred by the articles of incorporation or shareholders` resolutions in the general meeting.Many countries have restrictions on the scope of the exercising of preemptive rights,and China is the same. But in China it is irrational that the ratio is based on the paid-in capital rather than Equity ratio after the change from the paid system to subscription system. In addition, when the shareholders who have pre-emptive rights waive this right, the other shareholders should no longer enjoy preemptive right of the part that is given up.It is necessary to prescribe the exercising period of the preemptive right. This will help the courts to recognize the nature of the rights clearly, and make judicial decisions consistency. In conjunction with other national regulations about preemptive rights and the actual situation of Chinese company,minimum exercising period of shares preemptive rights shall be limited to 20 days from the date when receipting the notification.All along, due to the few provisions of preemptive rights, the eliminating system of preemptive rights has not been established. The overprotection for the interests of shareholders causes some obstacles to the company’s operation. To Balance the company’s interests and the interests of shareholders, the new eliminating system of preemptive rights needs to be established. The shareholders meeting resolution should be permitted to exclude the exercising of the preemptive rights if the company’s interests significantly larger than the interests of shareholders.