Research On Regulating On Going Private Of Listed Companies

Going private of listed companies is defined as a process to transform a public company to a close company,through one or a series of transactions to eliminate or reduce the listed company's public shareholders,and to make the company's ownership structure no longer meet the listing requirements of the securities authority.Going private of listed companies is a category of active delisting.It should be noted that the "privatization" and "privatization of state-owned enterprises" are two different concepts.The former refers to the withdrawal of public securities market by a series of mergers and acquisitions in the capital market,while the latter refers to the transition from enterprises controlled by government to other societies.Smooth channel to entry and exit the securities market is an inevitable requirement and of proper meaning to build a mature securities market.Active delisting is one of the important avenues of delisting.At present,the relevant active delisting system just initially established in China and it is mainly based on the guidance of the China Securities Regulatory Commission(“CSRC”),take the listing regulations of Shenzhen Stock Exchange and Shanghai Stock Exchange as the mainexecutive basis,and the corresponding rules and procedures are applied according to different delisting methods.The active delisting can be divided into withdrawing the listing and going private,the delisting rules for withdrawing the listing has been established clearly,but the rules and procedures for going private are quite general provisions and need to apply the mergers and acquisitions rules according to the corresponding transaction mode.The causes of this phenomenon is that going private is through one or a series of commercial transactions,and the privatization transactions are complex,including equity acquisition and merger transactions,so that the legal regulation contents involved are also quite complex,which results in the necessity and efficiency to apply the above application of law,under the background that the special provisions for going private is in absence.However,considering that the going private transaction sponsors are usually the controlling shareholder or other related parties of the proposed delisting company,that there are conflicts of interests between the sponsors and small shareholders,and that the sponsor can take the advantage of its status,so in the process of eliminating shareholders,investor protection must be the purpose of legislation of going private.At present,going private mainly apply to the general merger and reorganization rules.Can the small shareholders enjoy the efficient protection? How to improve the deficiency of the regulation?To clarify these issues,this article takes different privatization transactions as the breakthrough point,card the relevant procedures and applicable rules,find out the problems in the different transactions during process of going private from securities market in China,and draw lessons from experience of overseas markets.The article is divided into four chapters to discuss:The first chapter introduces the connotation,causes and trading modes of going private,defines the connotation of going private under the legal norms of China,and introduces the causes and basic trading modes of going private in combination with the practical experience of going private in the mainland of China.Due to the issuingsystem in China's market is quite different form the oversea markets that issuing under a regulatory mode of substantive examination style will undoubtedly affect active delisting demand,resulting in the difference between China's market and overseas mature markets.Considering that the foundation of theoretical research lies in practice,it is necessary to understand China's delisting practice as a premise.The second chapter is the chapter which expounds and demonstrates the ideas of the article,introduces the core elements and the regulation path of the legal regulation of going private.It points out that the going private transaction is usually a kind of transaction with conflict of interest and is easy to produce the bad effect on the interests of the small and medium shareholders during the exclusion process,so there is a higher requirement for the effective mechanism of the protection of small and medium shareholders.Besides,it is pointed out that according to the existing regulation path,the private delisting with different trading modes is still applicable to the general and M&A rules,and it is necessary to test the protection for small and medium-sized investors under the existing regulations.The third chapter examines the effect of legal regulations and gives a detailed introduction to the existing problems under current regulation.Take the bellowing two common types of privatization transactions----equity acquisition and merger as the breakthrough point,through analyzing the contents of the current regulation found the following problems:(a)from the overall view,the regulations don't focus on the conflicts of interests during the privatization transaction according to the characteristics of the sponsor,and the corresponding design of specific legal regulation is in absence,which lead to the protection of small shareholders is not sufficient.(b)from the specific content of the regulation,there are further needs to refine and improve the relevant applicable rules and procedures,including three aspects: the first is about the decision-making mechanism of privatization transactions;the second is related with the information disclosure system of going private process,such as the disclosure of financial information and so on;the third is the way to reliefdissent shareholders should be further clear.The existence of the above problems will be not conducive for a company to choose a smooth and appropriate path of going private,and as well as for the effective protection of the investors.The fourth chapter responds to the above problems,puts forward suggestions for improving relevant rules and procedures,draws lessons from the rules of privatization transactions and other mergers and acquisitions transactions in the domestic and foreign markets,and puts forward suggestions for the regulation contents of different privatization transactions.