The Triggering Events Of Appraisal Right

In China appraisal right is a dichotomy of the right of dissenting minority shareholders to demand the company to repurchase their shares and the right of shareholders of listed companies to receive fair cash value for the stock they hold.Traits of appraisal right include but are not limited to the following:first,it is a remedy out of the collective action of the corporate governance;second,it is the ultimate remedy for minority shareholders;third,it is a compensation for the lack of negotiability of shares.The practical issues concerning the triggering events of appraisal right are rooted in two inaccurate understandings about the functions of appraisal right.The first is the over-broad interpretation of the remedial function of the appraisal right,and the second is the ignorance of the appraisal right's function of facilitating corporate transactions.The former leads to the appraisal right's application to improper companies and dispute about dividends contribution.The manifests of the later include the appraisal right's inapplicability toward takeovers and the chaos surrounding the application of appraisal right to the asset reorganization of corporations.The passive freedom of share transfer is what the appraisal right intends to protect,and it is the appraisal right that makes it plausible to reach a Pareto Optimum between passive freedom of share transfer and transaction efficiency.Based on the aforesaid understanding,amendments followed shall be made to the triggering events of appraisal right.First,the types of companies to which appraisal right applies to shall be changed in accordance with the negotiability of shares.Second,the triggering event about dividend contribution shall be removed.Third,compulsory acquisition and appraisal right shall be added to takeover regime.Last,corporate separation and transfer of substantial assets shall be combined into asset reorganization as a new triggering event,and the standard of substantial asset shall be clarified.