Research On The Transfer Of Voting Rights Under The Name Of Entrustment In The Acquisition Of Listed Companies

With the in-depth adjustment of China's economic and industrial policies and the continuous development of the capital market,the M&A market of listed companies has gradually become active,and has exhibited the characteristics of complex transaction structures and non-industrialization reorganization,and the same is true of the market for control acquisition.Since 2016,under the background of financial deleveraging,which caused serious bail-out demands,the strictest new holding reduction rules going into effect,strengthening the supervision of backdoor listing,and the sudden increasing risk of compulsory liquidation caused by the downturn in the stock market,the number of cases of control rights transfer has increased sharply.And a large number of new schemes to achieve the transfer of control rights by signing the “Voting Rights Entrustment Agreement”.Compared with the traditional method of acquisition of control rights,the acquisition arrangement through the “Voting Rights Entrustment Agreement” can spend lower transaction costs,promote transfer of voting rights,and avoid legal obstacles.It has become a weapon for transferring control rights of listed companies.However,while sweeping the market,it has also brought harms such as unstable control of listed companies,chaotic corporate governance,and damage to the interests of small and medium shareholders,increasing difficulty for securities supervision.In addition,there are many doubts about the legitimacy of such misleading transactions and the effect of trading arrangements.Although the regulatory authorities have paid attention to such problems,there are still many problems in theory and practice that need to be resolved urgently.The first chapter is the practical analysis of voting rights entrustment in Listed Company Acquisition.The evolution of the instrumentalism of the voting right entrustment system can be traced back to the early cases of fighting for control through the collection of voting rights.Although there are few successful cases,the market has realized the power of separating voting rights from shares.Later market participants began to try creative applications of the voting right entrustment system,the most typical of which is the application in the VIE structure.Inspired by the VIE structure,the number of cases in which the A-share market changed its control by signing a “Voting Rights Entrustment Agreement” has surged since 2016.These agreements generally showed “Trustee's benefits first and take responsibility”,“Strict restrictions on the principal's right to dispose” and “Long-term and continuity of the period”.These characteristics do not conform to the constituent requirements of the proxy of voting rights and also be different from systems with similar characteristics outside the territory.According to the “substance over form” principle,The essence of “Voting Rights Entrustment Agreements” used in the acquisition of listed companies is the transfer of voting rights.The second chapter analyzes the practical dangers of the implementation of the transfer of voting rights in the name of entrustment.First of all,the change of control in this way will cause the control of listed companies to be in great uncertainty.There are two main reasons: 1.If the “Principal” who signed the “Voting Rights Entrustment Agreement” breached the contract,such as multi-party delegation,repeated delegation,or unilateral cancellation of the delegation,it would lead to disputes over the exercise of voting rights and trigger disputes over control rights.2.Because the reason for changing the control right in this way is that the shares are restricted and cannot be transferred directly,the restricted shares themselves are at the risk of being disposed of.If disposed,the voting rights that are free from the equity will accompany the direct transfer of the shares to the hands of the new buyer,the control of the “Trustee” will be greatly threatened.Secondly,this way to change control will aggravate the conflicts of interest between shareholders and managers,and between major shareholders and minority shareholders,forming high agency costs,which is not conducive to the stable operation and development of listed companies.Finally,“Voting Rights Entrustment Agreement” can disrupt regulatory logic.On the one hand,lawyers responded to part of the inquiry letter that this agreement was a case of traditional voting right entrustment,and the exchange as a direct regulatory body gave default to this qualitative.But on the other hand,it recognized the substance of the transfer of voting rights.For example,the words “own” and “transfer” appear in the relevant provisions of the regulatory document(draft for comments).The disorder of the supervision logic has led to the dislocation of supervision methods.For example,the supervisory authority adopts the method of “persons acting in concert” to conduct supervision,which has caused many disputes in practice and cannot be effectively regulated.The third chapter is to question the legality of transferring voting rights in the name of entrustment.At present,there is no distinction between the entrustment of voting rights and the transfer of voting rights in China,and there is no restriction and refinement on the relevant rules of entrustment of voting rights of listed companies.As a result,this act is covered by the vest of “principal-agent”,but actually lacks a solid legal foundation.Through the study of the transfer system of voting rights outside the domain,it can be found that the transfer of voting rights is generally prohibited outside the domain,and in order to prevent the transfer of voting rights in disguised form,most of the voting rights are subject to restrictive regulations.On the one hand,there is no provision for the transfer of voting rights in China,on the other hand,the voting right entrustment system is not clear in many aspects,leading to an expanded interpretation that exceeds the legislative intent.In this situation,can the voting right be created commercially according to the principle of private law autonomy? I think there is no space for freedom.The reason is that it violates the principles of “equal shares enjoying equal rights”?“one share-one vote” that China's securities market has always followed.Even if differential voting rights are to be adopted,it is necessary to meet the constraints of subject qualification,authorization,time and so on.In addition,In addition,due to the personal and management attributes of voting rights,the separation of the rights of common interests is not allowed in the practice of securities law in China.Finally,because its motivation is mostly to evade the restrictions of reducing holdings,acquisition rules and share pledge,the illegal purpose of the behavior will be suspected to cover up the illegal purpose in legal form,which will lead to invalid transaction arrangement.The fourth chapter introduces the correction of the transfer of voting rights in the name of entrustment.The act of transferring voting right in the name of entrustment to realize the transfer of control has gone beyond the scope of the autonomy private law,violated the legal basis of our country,and exposed a lot of harm in the actual operation.If it is allowed to grow savagely,it will bring adverse effects on the sustainable and healthy development of the securities market,so it is necessary to correct this behavior.I believes that the root of this behavior lies in the great lack of voting right entrustment system in our country,which is reflected in the fact that although the legislation is early,it has not kept pace with the times,the lack of practicality,and the risk of expanding interpretation of some provisions out of the legislative purpose.Some rules not only can't effectively prevent the abuse of voting rights by major shareholders,but also become a powerful tool to promote their development.Therefore,the first thing to do is to standardize and improve the existing voting right entrustment system.I suggest that the company law should explicitly add the rule:“Not to be transferred in disguised form under the name of entrustment”,and specify the relevant restrictions in the guidelines of the articles of association of listed companies,such as clearly setting the validity period in the power of attorney,not to carry out the irrevocable entrustment,etc.In addition,I think that we should strengthen the supervision of the entrusted matters,such as improving the identification standard of the actual controller,making clear that the entrusted agreement does not belong to the agreement scope of obtaining the control right of the listed company,and preventing the possibility of transferring the voting right by improving the disclosure standard of the voting right entrustment.