Research On The Redemption System Of Preferred Stock

Preference stock first appeared in the United Kingdom and it has been nearly 200 years since its birth.Today,as a financial management tool with low risks and fixed earnings,preferred stock is favored by small and medium investors,and its value in corporate governance,mergers and acquisitions,and anti-mergers and anti-acquisitions is also highly recognized by companies.On November 30,2013,the State Council issued the Guiding Opinions of the State Council on Pilot Program of Preferred Shares,marking the formal establishment of China’s preference stock system.As an irreplaceable exit way,redeemable preference stock has its significance.Not only it could be used to adjust the imbalance of benefit appearing in the preference stock system,but also it is of great intrumental value with respect to M&A and anti-M&A.Since preference stock is still new in China,the majority of existing rules and regulations are frameworks and yet to be perfected.Also,there are multiple problems as to the rules and practical status regarding to redeemable preference stock system need to be solved urgently.Therefore,it is important to perfect the contents of such system.Given all this,based on the experience from foreign jurisdictions on redeemable preference stock systems and the financial legal system in China,this thesis will discuss the issues involved in the redeemable preference stock system and give relevant suggestions on the perfection of the system accordingly,hoping to make efforts in the improvement of the repurchase of preferred stock system of ChinaThe main body of this thesis is divided into four parts:Part 1——ideological originand development of redeemable Preference stock system.Due to the particularity of preference stock,redemption of redeemable preference stock is different from that of common stock and has its own implication with respect to time and procedures.Since the redeemable preference stock system has just started in our country,while some developed countries have formed a relatively complete system,by sorting out the origin and development of the redeemable preference stock system and extraterritorial practical history,we would have a better understanding of the cause and system value of redeemable preference stock.Part 2 — — system value of redeemable preference stock.When being generated,the redeemable preference stock system mainly aimed to protect the interests of preference shareholders.However,along with constant change of social and economic environment,company’s practical experience and demands from investors,the value has been gradually transiting to adjust the imbalance of benefit appearing in the preference stock system and improve corporate governance.Through the analysis of the system value of redeemable preference stock,we would have a better understanding of the impact of the system on all the parties,and thus to improve there deemable preference stock system accordingly.Part 3——the status quo of the redeemable preference stock of China.Company Law of PRC sets out relevant rules for redemption of redeemable preference stock of the company.Measures for the Administration of the Pilot Program of Preferred Shares also stipulates rules of redeemable preference stock.However,because there are still conflicts between existing regulations and the rules set out are over general,many open issues are triggered and lead to infringement of rights in practice.Based on the existing legal system in our country,an in-depth analysis has been conducted with respect to the legislative status quo of redeemable preference stock system.Part 4 — — improvement of redeemable preference stock system.In view of that the current problems in redeemable preference stock need to be solved in timely manner,firstly we should define the ideology of the system regarding to the establishment of redeemable preference stock,the scope of self-governance of the corporation and the balance of the interest of all the parties;then,based on the above,we shall further clarify the subject,object,condition,price,means,voting procedures,management after redemption and information disclosure regarding to the redeemable preference stock system and give suggestions accordingly.