| The preferred shares originated in the west developed countries and was in obscurity for more than half a century.Since the 1990s,they have made rapid development in the U.S.capital markets.As Basel III sets forth new requirements for capital regulation and the wave of cross-border mergers and acquisitions were brought in recent years,preferred shares have regained their strength in the financial and corporate finance sectors in various countries.In 2016,Germany enacted an amendment to the German Share Act on the basis of the sophisticated legislation about preferred shares,in order to make the preferred shares adapt to the needs of economic development in the new era.Also in this context,in 2013,the Guiding Opinions of the State Council on Launching the Pilot Program of Preferred Shares was issued by the Chinese State Council.The core theory of preferred shares lies in the expense of voting rights in exchange for preferred dividend income,which is essentially a share,but also has the character of debt.However,unlike the creditors,the preferred shareholders,as "insiders" who share the proceeds of the company and distribute profits on the same piece of cake with the common shareholders,which is a zero-sum game.Differences in the benefits distribution method also make preferred and common shareholders have different preferences for risk.The holders of preferred shares without voting rights cannot decide the appointment and remuneration of the directors nor are they able to personally participate in the company’s business decisions and therefore they are easily exploited by common shareholders and the board of directors.Based on this,the paper analyzes the status of the preferred shares issued in China and the legislative and judicial practice in Germany and the United States,then proposes solutions to deal with the interests’conflict between preferred shares and common shares.Chapter one introduces the background of the issue,including conceptions,classification and functions of preferred shares,and raises the question:how to resolve the conflict between the interests of preferred stockholders and common stockholders?Chapter two mainly introduces the current issuance situation of preference shares in China and analyzes the significance of the study.On one hand,the legislation on the issue is nearly blank;On the other hand,due to the special economic conditions of China,preferred shares play a significant role in financing and banking fields.Chapter three introduces the solution to this issue in German legal practice,which serves as a reference for the future amendment of China’s corporate law.The German Share Act,which enacted in 1965,has already provides protection measures for preferred shareholders with half a century of legislative experience.Chapter four introduces the principle of Delaware State Court through a series of preferred stock cases as a reference.Although procedural standards of righteousness established by Delaware courts in practice are more applicable,they also increase the costs of transactions and are inefficient.In chapter five,this article puts forward the view through the legislative and judicial practice about preferred shares in Germany and the United States:the purpose of the fiduciary duty should be maximization of the company’s interest,rather than the maximization of common shareholders’ interests.Therefore,preferred shareholders should be protected as well as common shareholders.To compensate for the disadvantage position without voting rights,the corporate law should establish relatively sound and well-protected measures and in the judicial practice,and the court should prudently invoke the faith obligations for common shareholders.Investors and companies also should be given autonomy and freedom within a certain scope.Without prejudice to the law and the interests of creditors,the Preference Shares Agreement should be allowed to make some innovations in institutional arrangements.The conclusion summarizes the key viewpoints in this article. |
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