The Study On The System Of Freeze Out Of Remaining Shareholders

At present,there are two main legal ways for the privatization delisting of A-share listed companies in China: direct merger and acquisition by offer.The acquisition by offer is divided into two steps: the first step is to issue an offer,and the second step is to trigger delisting,which is stipulated in Article 97 of the Securities Law——the acquisition resulting in the non-conformity of the equity distribution with the listing conditions and the termination of the listing transaction.In accordance with the listing standard of the company stipulated in Article 50 of the Securities Law,although China has not formally established the system of freeze out of remaining shareholders,there is a compulsory sale of remaining shares after acquisition by listed companies in practice: when the number of acquired shares reaches 75% or more of the total number of shares of the target company,the target company shall terminate its listing,at this time,the minority shareholders are entitled to choose to sell shares and withdraw from the company by compulsory.Of course,that is an ideal state.It is obviously unstable and unscientific to rely solely on the active choice of minority shareholders.It is often the case that the privatizations,in which there is a supermajority stake,are unable to achieve full ownership of the target company because they cannot find minority shareholders or the minority shareholders are unwilling to sell the rest.At the present stage,the law of our country endows the remaining shareholders with a very small number of remaining shares with forced sell-outs right,that is,the right of withdrawal,but does not endow the major shareholders who hold most of the shares with forced out-outs right,resulting in the imbalance between the two.In 2014,the China Securities Regulatory Commission officially issued "Several Opinions on Reforming,Perfecting and Strictly Implementing the Delisting System of Listed Companies",which not only encouraged voluntary delisting,but also proposed that the system of freeze out of remaining shareholders should be established to improve the acquisition system of listed companies.Subsequently,the “Securities Law(Revised Draft)” issued in 2017 preliminarily stipulates the system of freeze out of remaining shareholders.It stipulates that when the acquisition offer issued by the purchaser of a listed company expires,if the purchaser holds more than 90% of the voting shares held by non-related shareholders or more than 95% of the voting shares held by non-related shareholders,the purchaser shall have the right to acquire the remaining shareholders' shares,and the remaining shareholders should sell them.In 2018,the Securities Regulatory Commission issued the “With regard to the announcement for public consultation on the revision of ‘Several Opinions on Reforming,Perfecting and Strictly Implementing the Delisting System of Listed Companies' ”.It proposed that as the supporting policies and measures for voluntary delisting,the system of freeze out of remaining shareholders should be studied,established and improved,the acquisition system of listed companies in China should be enriched.By investigating the mature system of freeze out of remaining shareholders abroad,we find that the United States is characterized by statutory merger and two-step offer(offer acquisition + simple merger),while the European model led by Britain and Germany is characterized by statutory freeze-outs right.Regardless of the model,the system of freeze out of remaining shareholders refers to the major shareholders holding the majority shares of the target company(e.g.Britain: the premise for the majority shareholders to exercise the forced freeze-outs right of the remaining shareholders is to offer to acquire and reach 90% or more of the target company's shares),whether the remaining shareholders are unwilling or unable to sell the shares for various reasons,the remaining shares shall be compulsorily purchased,and the remaining shareholders shall be forced out of the company.Generally speaking,how to properly solve the problem of remaining shareholders,how to take into account the interests of minority shareholders and the interests of major shareholders,these problems can be solved through the establishment of the system of freeze out of remaining shareholders.The analysis and study of the system of freeze out of remaining shareholders and its supporting system will be of great significance to the enrichment of the legal system of shareholders' withdrawal in China,the improvement and revision of the Securities Law and the Company Law.This article is divided into six parts,in addition to the introduction and conclusion,there are four parts.The first part is about the practical needs of the system of freeze out of remaining shareholders.It mainly introduces the problems and contradictions caused by the lack of the system of freeze out of remaining shareholders in China through cases.It also defines the meaning of the system of freeze out of remaining shareholders in law,and clarifies the relationship between the freeze out of remaining shareholders and minority shareholders' withdrawal,forced freeze-outs right and forced sell-outs right.The second part is the theoretical basis of the system of freeze out of remaining shareholders.Firstly,it analyses the limitations of legal transplantation in our country,which leads to the lack of forced freeze-outs right of acquisition party nowadays.Secondly,it makes a critical analysis of the reasons why scholars oppose the system of freeze out of remaining shareholders,such as deviating from the protection of ownership/property rights,possible opportunistic behavior of the buyer/major shareholder and violation of autonomy of will.Finally,it positively discusses the value orientation and order choice of the system of freeze out of remaining shareholders.The third part is the foreign mode of the system of freeze out of remaining shareholders and the mode shall be selected by our country.Although China has not formally established the system of freeze out of remaining shareholders,it has rich legislative experience in the European Union,Germany,the United States and so on.This part focuses on the legal merger and two-step offer in the American model,triggered offer acquisition and triggered freeze-outs right in the EU model,and introduces the disguised and circuitous Chinese-style system of freeze out of remaining shareholders in China's practice.Finally,based on the comparative analysis of provisions of the system of freeze out of remaining shareholders in the United States and Europe,this part analyses what kind of model is beneficial to the construction of the system in China.The fourth part is about the localization of the system of freeze out of remaining shareholders.Based on the experience of comparative law,for example,the mechanism of protecting minority shareholders' interests in extrusion transactions in the United States is approved by a special committee of the board of directors composed of independent directors and majority voting of minority shareholders,and the protection of minority shareholders' interests in extrusion transactions in Europe comes mainly from the high threshold requirements in legislation.This part discusses the structure of the system of freeze out of remaining shareholders in China.The construction includes the subjective and objective structure of the system,as well as the compensation and relief measures for the objection of the extruded shareholders.