Preference Stockholders And Common Stockholders' Rights Are Balanced

The development of preferred shares in foreign countries has a long history,and a relatively perfect system of preferred shares has been established so far.The development of preferred stocks in China is relatively short,and the relevant laws and regulations are not exhaustive.With the continuous development of the capital market,the company's financing needs have continued to increase,and higher requirements have been set for the issuance of preferred stocks.China's preferred stock system is still not perfect,and it also limits the further development of preferred stocks to some extent.This article intends to balance the rights of preferred stockholders and common stockholders,and put forward some effective suggestions for the further development of preferred stocks in China.Compared with common stocks,preferred stocks generally enjoy priority in the distribution of dividends or the distribution of surplus assets.The corresponding price is that the stockholders of preferred stocks have limited voting rights and have a low level of participation in corporate decision making.This means that when the company's management is making decisions,when it encounters a conflict between the interests of the preferred stockholders and the company's equity or common stockholders' equity,it may make decisions that are unfavorable to the equity of the preferred stockholders.Stockholders cannot compete with management's decision because they do not have sufficient voting rights.Therefore,many domestic scholars have already discussed the need to protect the rights and interests of preferred stockholders and how to protect the preferred stock stockholders.However,the reason why preferred stockholders need protection is that the interests of preferredstockholders may conflict with the interests of common stockholders during the operation of the company,and the interests of preferred stockholders cannot be guaranteed if the voting rights are limited.Therefore,there is a large number of articles on the need for protection of the rights of preferred stockholders and how to protect them.This article hopes to analyze the specific conflicts and reasons caused by preferred stockholders and common stockholders,and from the perspective of the balance of interests between the two,learn from relevant experience in the United States,to better solve these problems in essence,and provide some immature suggestions.The first part introduces the concept and nature of the preferred stock and common stock.From the perspective of the basic concept,it clarifies the relationship between the preferred stock and the common stock.This section is divided into two sections.The first section briefly introduces the definition of the rights of common stocks and preferred stocks.The most important feature of preferred stocks is their right to dividends and the priority distribution of surplus assets.Preferred stocks have the nature of both equity and contract,which is the current mainstream theory.The advantage of issuing preferred stocks of the company lies in the dual purpose of achieving financing and ensuring control over the company.This is because if the company raises funds by issuing common stocks,it can effectively achieve the purpose of financing,but after multiple rounds of financing,the management of the company may be diluted due to the company's control,resulting in loss of control of the company's management,while the issuance of preferred stock can well achieve corporate financing and ensure the company's management of the company's control.After clarifying the definition of the two,the second section describes the relationship between preferred stocks and common stocks and the possible conflict between them.The relationship between the two sections is a progressive one.By deconstructing the rights of preferred stocks and common stocks,the links and differences between the two are clarified,laying the foundation for introducing the conflicts and reasons between them.The second part first enumerates the possible conflicts between preferred stockholders and common stockholders.The first section specifically discusses under what circumstances the preferred stockholders and the common stockholders will have conflicts.They are the possible conflicts in the normal management of the company due to the distribution of dividends and the potential for conflicts in the remaining property.The company may have conflicts in financing or mergers and acquisitions.Differences in risk appetite in corporate decision-making may create conflict.Specifically,in the normal course of business operations of the company,the preferential stockholder's right to preferentially distribute dividends and surplus assets may damage the distribution of the interests of common stockholders.At the same time,the essence of the conflict between the two is analyzed,that is,different voting rights.The second section specifically analyzes the specific reasons why the preferred stockholders and common stockholders are prone to conflict.They are different in risk preferences and consistent interest pursuit.Whether it is a preferred stockholder or a common stockholder,the purpose of investing in a company is to hope for profit,so naturally it is hoped that its own interests will be maximized.This will inevitably lead to conflicts between the two.The interests of the two are consistent,and the profit of the company is uncontrollable,but it is also a certain amount.The interest relationship between the two is shifting.This results in a balance between preferred stockholders and common stockholders.Conflicts of interest are highly likely to occur.Through the analysis of specific conflict situations and the causes of conflicts,this section analyzes from the source the reasons for the conflict between preferred stockholders and common stockholders,and lays the foundation for balancing the rights conflict between preferred stockholders and common stockholders.There are different ways to balance different conflict situations and put forward some feasible suggestions.The third part focuses on the typical case of Delaware in the United States.Preference stock have been developed in foreign countries for hundreds of years,and have established a relatively perfect system of preferred stocks.The balance of rights between preference stockholders and common stockholders is with some experience,the Delaware State of Delaware,as a good practice of the domestic company law in the United States,has some reference to other states in the United States.Therefore,this article selects the relevant cases of Delaware in the United States.It plays a certain reference significance for the balance of rights of common stockholders.The first section mainly analyzes the specific practice of the balance of interests between the preference stockholders and the common stockholders in American judicial practice.From the initial contractual remedy until the establishment of the Jewelers rule,the obligation of fiduciary obligation is introduced to balance the preference stockholders and common stockholders between the interests of preferred stockholders will be entitled to the rights divided into contractual rights and common stockholders and common stocks of the same rights.The special rights enjoyed by the preference stockholders stipulated in the contract shall be remedied by the contract law.The common rights not stipulated in the contract shall be subject to the same rights as common stockholders and shall be bound by the Company Law.The board of directors shall have the obligation of fiduciary responsibility.And further explores the addition of commercial value judgment rules to provide direction for the board of directors to further fulfill their fiduciary duties.For example,when the Board of Directors has a conflict between the fiduciary obligation of preference stockholders and the fiduciary obligation of common stockholders,how should the Board fulfill Lutheran obligations,through the commercial value of the rules of judgment,based on the specific circumstances of the company to analyze and make the most conducive to the development of the company's decision-making.There are also companies through the establishment of preferred stock representative system on behalf of preferred stockholder's position,to protect the interests of preferred stockholders.The second section briefly describes the experience of Delaware judicial practice in our country for reference,mainly from the perspective of contractual relief and fiduciary duties,to balance the interests of stockholders of preferred stocks and common stockholders conflict of interests.The fourth chapter specifically discusses the balance measures in our country.The first section describes some of the existing regulations in China,starting from thethree perspectives of controlling the proportion of the company's preferred stockholders' shares,giving preference shareholders special voting rights and whether they are convertible preferred stocks.Section II discusses the principle of balancing the rights of preferred and ordinary shareholders based on the relevant provisions of Section I of China,which is mainly based on the existing regulations on preferential shares in China and the specific judicial practice in the United States.This paper specifically discusses the criteria that can be followed to balance the interests of preferred shareholders and common shareholders.The third section discusses the specific countermeasures to resolve the conflict of interests between the shareholders of preferred shares and common shareholders in China,and the legal system to improve the conflict between them.There are three countermeasures and suggestions:the balance of the contract,the redemption of the preferred shares and the fulfillment of the obligations of the board of directors.