Research On Legal Issues Of Listed Companies’ Equity Pledge

Equity pledge,as a convenient and effective financing method,has developed rapidly since 2014.Due to the high convenience of equity pledge,it has become more and more popular with funders.While recognizing that equity pledge can effectively solve liquidity barriers for listed companies different from traditional guarantees,we should note that more convenient means will also bring greater risks.Considering the background of the current generally high pledge rate of the controlling shareholder,once some of the pledgers have financial difficulties,causing a large number of pledged stocks to face a deadlock in the exercise,it will lead to a large number of debt failures through the transfer of panic to induce capital market turbulence and ultimately results in systemic financial risks.Therefore,it is of practically significant to study the key legal disputes in the current listed company’s equity pledge system,exploring the system defects,and improving the system structure,so as to provide effective legal protection for the huge and substantial equity pledge transactions.The relevant provisions of the listed company’s equity pledge system are scattered in multiple sector laws,lacking an overall specification,and there are contradictions in understanding and application when put it into practice.This article takes the timeline for the generation,maintenance and elimination of the legal relationship of equity pledge as a clue.This article combines the relevant legal regulations and trial practice to discuss the legal disputes contained in the equity pledge behaviors at different stages,and explains or proposes improvements.The first chapter of this article mainly includes the basic introduction of the equity pledge system of listed companies.It firstly lays the foundation for the following discussion by introducing the current system of equity pledge of listed companies and the analysis of the scope of the subject matter of the pledge.The next is the legal problems it brings.Then the research direction of this article is putting forward,and then the main business model of equity pledge in practice which explains the background of practical problems.The second chapter focuses on the legal disputes in the establishment of equity pledges.This chapter firstly summarizes the current regulations,the general requirements for the establishment of equity pledges,and uses this as a perspective to discuss the legal issues in the establishment of each element.With regard to the relationship between the validity of equity pledge contracts and the establishment of pledge rights,this article explains the existing legal differences and demonstrates the development of jurisprudence.It points out that the principle of distinction should be fully applied in the equity pledge system and proposes to amend Article 78 of the Guaranty Law and related judicial interpretation in order to harmonizes with other laws.Regarding the feasibility of equity pledge of special shares,this article combines the old and new regulations to conclude that there are no barriers to the establishment of shares in stateowned listed companies and foreign-owned listed companies.However,the establishment of restricted shares does not fully comply with existing legal requirements.The third chapter focuses on the legal issues during the period of equity pledge.In the first this chapter discusses the logical relationship between the pledgee’s ability to continue to exercise equity-based participation in corporate affairs and the stability of pledge rights.Through analysis of possible influence channels,it will discuss the issue from controlling shareholders’ conduct regulation,disclosure of pledge information and response of pledgee.Regarding the regulation of controlling shareholder behavior,this article summarizes the institutional tools that can be used to regulate the behavior of shareholders.It points out the unsuitable problem that the pledgee is facing as the subject.It proposes to restrict the controlling shareholder’s voting rights after a large amount of pledged stock to prevent its improper exercise.On the issue of pledge information disclosure,this chapter emphasizes that the quality of the current announcement information is low through the examples of pledge announcements.The current quality standards of announcements and the corresponding liability commitment rules are not fully used and there are institutional loopholes.The exchange should be strengthened in the supervision of information disclosure thus taking advantages of its frontline position.As for the response of the pledgee,this chapter considers that the interval between the early warning line and the short position line is too small to play its due role.The pledgee lacks the institutional supply on the channels of information acquisition.Chapter Ⅳ is based on the obstacles that may arise during the realization of the pledge right.First,it introduces the major routes of pledge right realization,and then discusses the important role of compulsory notarization in the case that the sale restriction period has not expired and the degree of recognition of notarized documents in practice.Then this chapter discusses how the bankruptcy reorganization process will affect the pledge right from three aspects: the proportion of the pledged equity transfer,the validity of the bankruptcy reorganization plan,and the protection of the pledgee’s rights.It proposes the current proportion of the equity transfer is unreasonable and the validity of the reorganization plan to forcibly relieve the transfer of the equity pledge burden is questionable.The protection of the rights of the pledgee should be strengthen in the reorganization process to achieve a balance of interests of all parties.Finally,through the analysis of transaction model,it points out that the realization of pledge rights may involve fluidity item,and the scope and breakthrough possibilities of the prohibition of fluidity item are discussed in combination with jurisprudence and domestic and foreign legislative practices.Through the overall grasp and staged analysis of the equity pledge system of listed companies,this article hopes to further improve the existing system and clarify differences in understanding in practice,so as to better play the function of the relevant legal norms such as the Property Law and reduce the risks that may arise from the pledge of equity in listed companies.