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Study Of The Legality Of Provisions Of Limiting Appointment Of Directors In The Articles Of Association Of Listed Companies

Posted on:2017-04-11Degree:MasterType:Thesis
Country:ChinaCandidate:Y Y DengFull Text:PDF
GTID:2296330503959160Subject:Economic Law
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With the completion of reform of non-tradable shares, the situation in which the shares of the listed companies is highly concentrated is already broken, the time when the thorough circulation of the stock market arrives, which makes the company control market increasingly fierce in China, the acquisition and anti-takeover battles carry on a scene after scene between listed companies. Facing the pressure of real acquisition, listed companies tend to adopt a variety of anti-takeover measures beforehand and afterwards. As we all know, acquisitions outside would make the target company and the company’s management in the fierce conflicts of interest, once the takeover is successful, the acquirer would restructure the target company’s board of directors, former board members will face the risk of unemployment, so facing potential acquisition, the board of directors of listed companies tend to take a variety of anti-takeover measures against the acquirer. In view of uncertainty of the effect of anti-takeover measures afterwards, listed companies would pre-list in the articles of association the anti-takeover provisions. For example, the famous “Dispute regard the Legality of the articles of association the Ai Shi Co” opens the use of Provisions of Limiting Appointment of Directors in the articles of association, since that, it is quite commonplace that listed companies formulate Provisions of Limiting Appointment of Directors in the articles of association. The original purpose that listed companies agree on Provisions of Limiting Appointment of Directors in the articles of association is always to prevent the transfer of control of the company, but because 2 such provisions involve companies’ core governance arrangements, which often have a significant impact on the company’s governance and operational efficiency. At the same time, because Provisions of Limiting Appointment of Directors would have an effect on interests of the parties concerned, the application of such clauses will have some negative impact on governance and shareholders’ interests of the company. After a research, I find that currently, many listed companies in China have set up Provisions of Limiting Appointment of Directors in the articles of association in advance, which often involves the proportion of directors reelected, requirement of shareholding time and ratio by shareholder, many listed companies also have restricted in the articles of association qualifications of directors and the appointment procedures. Due to the limitations of the will of shareholders, Provisions of Limiting Appointment of Directors in the articles of association not necessarily reflect the will of shareholders, which in turn is likely reflect the management’s will, China’s current legal framework does not mention Provisions of Limiting Appointment of Directors, Article 8 of Administrative Measures for the Takeover of Listed Companies only made the general requirement for loyalty and diligence obligations of the management in the post-takeover, therefore, in order to make sure healthy and stable development of control market in China and protect the rights of shareholder, it is necessary to take a thorough study to the legality of such provisions.In view of that, based on legality of Provisions of Limiting Appointment of Directors, combined with value analysis of such provisions and the relevant stipulations of law and regulation of China, this paper make specific categories of Provisions of Limiting Appointment of Directors, and analyze in-depth the legality of specific provision, and also take a deep discussion about the basic principles with which must be complied when inspect the legality of such provisions. This paper is divided into Preface and Body, the preface includes the introduction and the document review, and the body includes the following parts:The first part: this part mainly summarizes the definition of Provisions of Limiting Appointment of Directors, and categorizes such provisions specifically: general provisions and special provision, general provisions mainly includes: provision that limiting qualifications of the Directors, provision that limiting shareholding time and shareholding ratio by shareholders; special provision——Staggered Board Provision. Meanwhile, this paper has a deep study towards the current theory dispute about the effectiveness of Provisions of Limiting Appointment of Directors, and I raise my own opinions. At last, in order to have a direct knowledge towards such provisions from a practical point of view, this paper introduces and analyzes two classic anti-takeover cases in the merger history of listed companies in China.The second part: this part mainly makes a value analysis of Provisions of Limiting Appointment of Directors to have a deep knowledge of its concept. The original purpose that listed companied set up such provisions in the articles of association is anti-takeover, but gradually, in the course of operation, such provisions have a significant impact on the governance structure and operational efficiency of the company. Then, this paper analyzes the positive utility and negative impacts of such provisions in detail, mainly from the corporate governance, the interests of shareholders, corporate interests, and other aspects. I think that listed companies should be highly careful in consideration of setting up such provisions, in the premise of playing their active roles, listed companies should also make other arrangements to regulate the negative impact.The third part: this part mainly discusses the basic principles with which Provisions of Limiting Appointment of Directors must comply when inspecting their legality and the necessity to inspect legality of such provisions. About the necessity, first, Provisions of Limiting Appointment of Directors may break the Articles free boundary, because they not only involve the shareholders’ interests, but also have an impact on the corporate governance structure, what’s more, they also involve the interests of others out of the company and public interests, so they must be restricted by some principles; Second, because the existence of Provisions of Limiting Appointment of Directors may make the board more powerful, it is likely break the existing balance between departments of company, especially the board and shareholder meeting. So conflict of interests may arise, the rights and interests of parties involved may be infringed; Third, Asymmetric information may make possible limitation of will of shareholders, under most circumstances, general assembly resolutions may not reflect the will of shareholders, in turn, it may reflect will of directors, so it is necessary to inspect the legality of such provisions. About the basic principles, mainly in light of the limited rationality and the flaw of market mechanism, there should be some appropriate restrictions for listed companies to set up Provisions of Limiting Appointment of Directors in the articles of association. In order to maintain the effectiveness of corporate governance and protect the interests of shareholders, such provisions should be restricted by some basic principles as baseline.The forth part: this part mainly conducts a specific discussion about the legality of Provisions of Limiting Appointment of Directors in China. Because Provisions of Limiting Appointment of Directors appropriately restrict the power of appointing directors of shareholders of the company, but whether such provisions are legal or not is not clear in the current Legal Framework in China, and because such provisions mainly involve corporate governance structure and shareholders’ right to appoint directors, which determines Provisions of Limiting Appointment of Directors must be subject to the corporate law. So this part will give a clear result about whether a certain provision is legal or not according to whether it violates the mandatory provisions of Corporate Law and whether it infringes upon the right to appoint directors by shareholder, and will have a detailed certification.The last part: this part is to have a conclusion for the whole paper, and have a recapitulation for the framework of this paper. Also I will put forward my ideas to make it clear the legality of Provisions of Limiting Appointment of Directors in the current Legal Framework in China.
Keywords/Search Tags:Provisions of Limiting Appointment of Directors, Legality, Articles of Association of Listed Companies, Value Analysis
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