On The Exercise Of Shareholders’ Preemptive Rights

China’s Company Law have set rules about shareholders’ preemptive rights for a long time, changing a little till today. In this article the author raised some problems of the shareholders’ preemptive rights in theory and reality that should be faced and discussed in detail and they are narrated by five parts to draw the point of view, as described respectively as follows:Firstly, in the debate of the nature of preemptive rights, theory of claim and theory of formation more convincing, the discussion between the two is therefor more meaningful. It can not be ignored that taking preemptive rights as formation right,which tends to be more and more obvious characteristics of claim right, has many difficulties, so the theory of claim by contrast is more reasonable. In this case it should not be lumped together if shareholders who ‘should buy’ but didn’t still have the preemptive rights. If the late transfer price is not without reasonable grounds below the pre-consultation shareholders, the shareholders who did not agree and did not want to buy will lose priority to buy. And of course based on the company co-resistance and long-term business development, there are exceptions.Secondly, according to the changes patterns set by law in shares ownership,proposing preemptive rights does not make the existing equity transfer contracts invalid and the validity and performance of the contracts should be handled by considering many factors and regulations. Combining contract signing regulations,conditions and manners, optimized legislation level in addition, may do devotions to the resolution of these dilemma conditions.Thirdly, shareholders who want to transfer their ownership should notice the intention of other shareholders in advance and the obligation to inform the other shareholders by the company is more convenient and efficient. Articles of Association can be made as to any restrictions on the provisions of the shareholders’ preemptive rights which are taken as random norm. Generally speaking, as long as the articles did not violate prohibitions and basic legal principles of law it should be recognized asvalid. If the provisions of the constitution set shares not be transferable, an violation of the basic legal principles of equity as an asset sale, it is not valid. Determining preemption ‘equal conditions’ should take price conditions, payment deadline and payment conditions into account. Shareholders’ priority should be taken account into the enforcement procedures and issuing additional shares. In the process of embodiment of judiciary enforcement auction, the holder of preemptive rights does not participate in auction until the maximum bid appears and he can perform the right under this price. In this case the highest bidder are allowed to bid with the holder till one of them quit. In this way not only the company’s co-resistance are protected but also the interests of shareholders to be enforced, legitimate interests of preemptive rights holder and creditor can be effectively protected. When issuing additional shares,if the company has only one shareholder advocating preemptive right to subscribe,the scope of the priority of subscription rights of the shareholders should be granted to the total addition shares to prevent new shareholders. If the shareholders do not want to subscribe all the new capital, the remaining part can be placed into fair market competition.Finally, the shareholders’ preemptive rights of the Company Law set a lot of controversy in theory, and it is difficult to find a satisfactory explanation, its judicial practice effect is also worth careful consideration. Reference to the relevant countries and regions’ legislative mode and legislative trends, our shareholders’ preemptive rights system needs further perfection.