An Analysis Of The Legal Path To Maintain The Control Of The Founder Of The Company

There is a natural contradiction between the company's external financing and the control of the founder of the company.On the one hand,the external financing means that the founder of the company hold the decrease of the shares and the weakening of the control right.On the other hand,the stability of the control is an essential condition for the company listing and other behavior of Capital operation.At the same time,the founder of the company maintain the control of company is extremely important to the stability of the company's management team and the implementation of long-term development strategy.Therefore,it is necessary to explore the existing legal path for the founder of the company and its implementation status,then decide whether there is the necessity of introducing advanced foreign system.There are a variety of legal path under the existing legal framework for the founder of the company maintain the control of company.Particularly the pre-emptive right in capital increase,preferred stock system,cross-shareholdings,concerted action agreement and other path through the agreement.The pre-emptive right in capital increase is helpful for the founder of the company to maintain the control of the company,because subscription for new shares can avoid reduce the proportion of shareholding.but subscription for new shares need sufficient funds for and generally the founder of the company lack of funds,so this system is unworkable.In general,preferred shareholders do not be entitled to vote,so the company issued shares preferred stock will not dilute the company's founder's control,but only listed companies and non-listed public companies can issue preferred shares,more importantly,preferred shareholders to enjoy preferential dividend rights will bring great pressure on the company's cash flow,so using preferred stock system to maintain control is not a good path.Cross-shareholding should be clean up when the company listed on the Shanghai and Shenzhen Stock Exchange Markets and the NEEQ.Although listed companies also adopt cross-shareholding,but not based on the purpose of holding control.Concerted action agreement also bring high cost of negotiation,lack of stability,so its not the best choice.In conclusion,the existing legal paths for the founder of the company to maintain control are ineffective.So it is necessary to explore the new legal path for the founder of company to maintain control.The Lakeside Partners system adopted by Alibaba which listed on New York exchange once interpreted as a new path to the founder of the company to maintain control,but the Lakeside Partners system was based on the compromise of the major shareholders and relied on the unique corporate culture,then the scope of application of this system is small.Dual-class share structure is one of the most widely used control channels for the founders of companies in the United States,Canada and other countries.Therefore,it is necessary to explore whether the founder of company in China should be allowed to adopt this system.The basic characteristics of the Dual-class share structure are:the company which adopt Dual-class share structure divided its shares into Class A and Class B.Class A share should follow one share-one vote rules.Class B shares have super voting rights,generally Class B shares are several times the voting rights of Class A shares.Class B shares are generally held by the founder of the company,and Class A shares are generally held by the public shareholders.Therefore,the Dual-class share structure helps the founder of company to maintain control when the company wants to external financing.In addition,the Dual-class share structure is still playing an important role in enhancing the competitiveness of China's stock exchanges and promoting the reform of state-owned enterprises.This paper argues that China should introduce Dual-class share structure,but different types of companies should adopt different policies.Non-public incorporated companies should be allow to determine the terms of implementation of Dual-class share structure in the company statute.The company which want to listed on the Shanghai and Shenzhen Stock Exchange Markets and adopt Dual-class share structure must be listed on the NEEQ meet a certain period.In addition,those companies should implement Dual-class share structure through the issuance of low-voting rights shares and IPO.The company want to listed and listed on NEEQ and the company listed on Shanghai and Shenzhen Stock Exchange Markets should implement Dual-class share structure through the issuance of low-voting rights shares.This paper uses the comparative research method to sort out the existing legal path for the founder of company to maintain control in China,and also makes a systematic comparison,pointing out the insufficiency of the existing legal path.This paper designs the steps and proposing for the introduction of the Dual-class share structure systematically,arguing progressive implement the Dual-class share structure according to the company's public differences.At the same time,combined with the practical of multi-level capital market construction,suggesting that the company which want to listed on the Shanghai and Shenzhen Stock Exchange Markets and adopt Dual-class share structure must be listed on the NEEQ meet a certain period.Using the empirical research methods to analyze the prospectus of China related stock,providing practical support for establishing a multi-voting share conversion system of this system.