Construction Of Laws On Listed Companies’ Going Private

The controlling shareholder or its affiliates can voluntarily delist the listed company by means of making a tender offer or acquiring and mergering the listed company and freeze out the minority shareholders. A series of transactions carried out by the controlling shareholder or its affiliates are called “going private”. These transactions hit the securities market of European and American countries and aroused social attention. Firstly, what inspires listed companies to voluntarily delist after costing so much efforts, time and money? Secondly, it is known that few cases occurred in mainland of China despite of so many practices existed in foreign countries, then what causes such dilemma? Thirdly, how do minority shareholders protect their rights faced with strong power of controlling shareholders? Lastly, what make sense in constructing a good legal system on regulating going private transactions, which can strike a balance between promoting freedom of trades and protecting minority shareholders? Aforesaid issues inspired me to study the construction of legal system on regulating listed company’s going private transactions in mainland China and I supposed to focus on protection of minority shareholders.In the first part, this paper analyzes the relationship between voluntarily delisting and going private transactions as well as its rationality. It clarifies several values of such deals, for example, minimizing the agent costs produced by the attribute of corporations, centralizing company’s shares to be more efficient, saving revenues and so on. Also, such transactions are up to the controlling shareholder, which reflects the concept of private law autonomy.Also, the first part talks about the necessity of specifically regulating listed company’s going private transactions and construction of legal system which is focused on protecting minority shareholders. Going private differs a lot from general M&A deals, which means the laws and regulations relating to such transactions should be differently and specifically stipulated.In the second part, this paper focuses on the practices in securities market in China and reflect on the existing legal systems. It is found that the lack of direct and complete laws regulating such transactions, the dependence of the board of the company and the third agency party, loose requirements on the disclosure of information of the company, limited channels of relief the loss taken by the shareholders who disagree with such transactions, few ways offered to the minority shareholders in participating in company’s decision making and so on consist of the substantial issues.In the third part, this paper has made a brief introduction of relevant legal systems and cases in American and analyzes the reason why minority shareholders will suffer a lot from the listed companies’ going private and the necessity of protecting the minority shareholders. Also, this paper points out that there should be a limit on protection of minority shareholders and cite the cases of HK as an example to clarify it.To make a reasonable advantage of the foreign successful practices, this paper also analyzes the barrier between our country and foreign country suggests that we should learn lessons from foreign countries on a reasonable basis and rational understanding of the environment of our country. In the last part, this paper tells some advice on perfecting the legal system of our country’s companies’ voluntarily delisting from the stock market. It is found that the independency of the board of the company and the agency party shoud be strengthen as well as the influence of the independent directors. Also, the rules of information disclosure should be strict and especially designed for the listed companies’ going private transactions. Lastly, shareholders who disagree with such transactions and consider their rights being infringed should be offered more means of relief besides from the litigation.