The Research On The Validity Of Anti-takeover Clauses In The Articles Of Association Of Listed Companies

The battle of anti-takeover between Wanke and Baoneng in 2015 has stirred the 10-year peaceful takeover market in China,which has touched the sensitive nerve of the management and major shareholders of listed companies and disclosed the prologue of the defence battle of listed companies' takeover.With the completion of equity division reform,Chinese capital market has the ability and condition to conduct large scales of acquisitions for listed companies.Many listed companies have drafted anti-takeover clauses though revising their articles of associations to prevent barbarians at the gate conducting hostile takeovers and gaining corporate control.However,the validity of anti-takeover clauses are still in dispute and have no clear conclusion in theory now.And discussions on the validity of anti-takeover clauses in theory and practice are still from the holistic perspective to analyze all types of companies.So,when discussing on the validity of specific anti-takeover clauses,traditional theories judge the validity following “one size fits all” policy from the view of structural rules of company,not combining specific characteristics of listed companies.As this result,the discussions fall into endless loops of interest balancing,which is boundless and belongs to wise see wisdom,to talk about whether these clauses belong to arbitrary rules,and there will be no conclusions.As commercial subjects,listed companies have the flexibility when engaging in commercial behavior and hostile anti-takeovers and listed companies themselves have enough cognition on their business behaviors,so there is no unfair problems.And judging the validity of anti-takeover clauses shall combine the flexible trait of commercial relationships and judging the validity from different situations.Only in this way can the judgements follow the nature of commercial behaviors.The development of practice is pushing the changes of judgement minds on the validity of anti-takeover clauses.Only in the year of 2016,Shanghai Stock Exchange and Shenzhen Stock Exchange have issued 23 regulatory letters about anti-takeover clauses in the articles of association of listed companies.This paper has discussed the validity of 8 common anti-takeover clauses and concluded the regulatory attitudes through typological analysis of anti-takeover clauses,integration regulating data and opinions and concluding discussions in theory and other countries' practice.In the end,the paper has concluded the validity of anti-takeover clauses,proposed general minds of judging the validity of anti-takeover clauses in order to support the listed companies to formulate anti-takeover clauses and improve the regulators' supervisory behaviors and legislative practices.Introduction part lays emphasis on introducing the basic situations,including research background,literature review,research methods,structures and main innovation points.Chapter One illustrates the basic theory of anti-takeover articles in listed companies.Basic information,types of anti-takeover articles,current researches and the principles of validity judgement have been introduced in order to lay a foundation of the paper.Chapter Two illustrates the overview of empirical research on anti-takeover articles in listed companies.Data sources and empirical analysis have been described in the chapter.Chapter Three illustrates early period of anti-takeover clauses.Here are the conclusions:(1)Definition clauses on hostile takeover.It is acceptable to use the concepts that are used in theory and practice when there is no clear definition in laws and regulations now.(2)Clauses on enhancing shareholders' obligation of information disclosure.Provisions in Securities Law on the reporting obligations and punitive measures of 5% shareholding are the balance between every parties' interests,so companies reducing the percentage casually shall be banned because it surpasses the range of autonomy of Charters.However,if companies only reduce the 5% shareholding percentage on the duty of information disclosure,such reducing shall belong to the range of autonomy of Charters and shall be valid.(3)Clauses on anti-takeover measures shall be valid.When facing hostile anti-takeover,the board of directors has been entitled to take anti-takeover measures independently authorized by Charters.Meanwhile,the executive power of anti-takeover measures shall belong to target company's board and the shareholders of target company have no power.(4)Parachute clauses.These clauses are one of the effective actions that can be taken when companies are facing hostile takeover and can prevent hostile acquirers from intruding and maintain the stability of target company,so they shall be valid.However,the benefit objects and amount of compensation under parachute clauses shall be reasonable and combine business conditions of the company.Chapter Four illustrates later period of anti-takeover clauses.Here are the conclusions:(1)Clauses on the limitation of convening right of general meeting of shareholders,proposal rights and nomination rights of shareholders.The validity of raising the shareholding ratio of shareholders' convening rights and proposal rights shall be invalid for the reason of violating the Corporation Law and the validity of raising the shareholding periods shall be judged according to the real demand of companies' management.The validity of clauses,limiting the numbers of shareholders' nominating directors,shall be invalid if shareholders can not propose directors in another way.Chapter Five makes the final conclusions.Summarize the validity of every anti-takeover clauses,provide suggestions to listed companies for adding anti-takeover clauses and to regulators for improving supervision and legislation.