A Study On The Allocation Of The Power Of Making Antitakeover Decisions In The Listed Companies

At the end of the year 2015,Baoneng Group,which owns a total asset of RMB 50 billion,attempted to bring Vanke,a public company with total assets valued of RMB 600 billion,under its control with the help of financial leverage.Thus,the competition between Baoneng and Vanke for the right of control has become a hot topic in the market.Despite the twists and turns of the deal,"hostile takeover" has become the focus of the discussion.As an important business activity,the merger or acquisition of a company often has a direct influence on the management of the target because the transaction may involve the transfer of the right of control.In the face of a hostile takeover,the management of the target company may take measures to prevent a hostile bidder from further "invading" the target company for various reasons.Defensive measures can keep the undervalued target company from being controlled by an opportunist.But,in some cases,defensive measures also prevent target shareholders from obtaining proceeds by selling shares to the bidder.Therefore,whether or not the target board shall be authorized to have the discretion of taking defensive measures in the event of a hostile takeover is a contentious issue.The paper will thus focus on the board's role and the role of laws and regulations in the hostile takeover.The paper consists of four parts.The first chapter introduces the basic theories underlying the anti-takeover activities,from the perspective of establishing the goal of corporate governance and solving the essential issues.The discussion of defensive measures used in the hostile takeover embodies the combination of “shareholder primacy” and corporate social responsibility in the corporate governance,and the conflict of interests caused by the agency problem arisen from the separation of ownership and the control of the listed companies.The role of the board of directors in the hostile takeover needs to be revisited.The second chapter first introduces the different views of the role of the board of directors in the hostile takeover,including the “managerialist school” which advocates the board's power of decision on anti-takeover,and “shareholder choice” which advocates that the target board only serves as the shareholders' bargaining agent and helps shareholders get the best price from the buyer.The paper further analyzes the importance and necessity of granting the board of directors the decision-making power of launching defensive measures.It is pointed out that the board of directors of the target company can not only make the most reasonable assessment of the value of the company based on its professional experience and information superiority,but also can make the most appropriate judgments of whether the transaction is in line with the company's interests of long-term development and the needs of the stakeholders.Thus,the board shall be granted the discretion of using defensive measures in the case of hostile takeover.In the third chapter,the author analyzes the foreign legislation on the anti-takeover activities,and introduces the role that the target board plays in the hostile takeover,as well as its duties.The difference of the legislation is reasonable in consideration of the different regulation mode.Besides,the practice of the United States,where the board of directors plays a leading role in the anti-takeover activities,is of flexibility.The target board,which is authorized by the shareholder resolution,the charter or the corporate law to take defensive measures,is made up of directors who have strong professional ability and business sensitivity.The board of directors is able to made decision according to the actual situation,thus preventing a company with good prospects from being acquired maliciously,and also avoiding the target shareholders from making wrong decisions.Therefore,the practice in the United States is worth learning from.The fourth chapter of this paper points out the problems of the current role of directors set by the laws and regulations,and puts forward corresponding suggestions.This chapter analyzes the social status of listed companies in China and the current situation of the absence of laws and regulations with respect to anti-takeover activities.The paper then put forwards the idea of re-positioning of the role played by the directors in the merger or acquisition through the default rules,namely,by using default rules in the regulations of commercial organizations to make clear that the target board has the discretion of launching defensive measures.The board's power of taking defensive measures in face of hostile takeovers is implied by the standard rules.The target board can take measures such as debt restructuring and asset disposal,which is also allowed by the corporate law.The shareholders of the target company can exclude the authorization in the charter.By adopting the default rules,which are not favored by the majority shareholder and the controlling shareholder,the efficiency of the corporate governance could also be promoted.The paper further proposes that the obligations and accountability standards with respect to the board of directors of the target company should be established and improved,in order to avoid the decision-making power being abused.