Legal Regulations On Irregular Share Repurchase Of Listed Company

Since the revision of the share repurchase system in the Company Law in 2018,the capital market has lifted a wave of share repurchases.In 2019,the scale of share repurchases implemented or completed by listed companies through the secondary market exceeded twice the total amount in 2018 cumulatively.Under the rapid increase of share repurchase,violations in such area have continued to appear.From the regulatory documents issued by the Exchange and the Securities Regulatory Commission,it is common that listed companies fail to perform its obligations under share repurchase program,in whole or in part.Regulators pay much attention to regulating irregular share repurchases,but there is no scientific response to this issue at present.Therefore,how to further regulate the repurchase behavior of listed companies needs attention.The whole thesis consists of three parts:introduction,content and conclusion.The content is divided into four chapters.Chapter 1 explains the current situation of irregular repurchases in the capital market based on regulatory cases,and discusses the motivations of irregular share repurchase,then analyzes the negative benefit of listed companies for irregular repurchases.Chapter 2 is an in-depth investigation based on the irregular repurchase situation of listed companies,and explores the system deficiency reflected in various irregular share repurchase behaviors.Chapter 3 discusses the improvement of the implementation conditions for the share repurchase of listed companies and regulates the situation of irregular repurchase.Chapter 4 discusses the liability of director and company under irregular share repurchases of listed company,and clarifies the situation and form of liability.Based on the experience of comparative law,corresponding suggestions are made for regulating irregular share repurchases by listed company.The contents of this thesis are as follow:At the beginning of this thesis,from the latest cases of irregular share repurchase of listed company,the overall situation is introduced and the specific situation is analyzed.Secondly,the reasons for irregular share repurchase of listed company were introduced.Because the share repurchase announcement has a positive market effect,it can transmit the company's undervalued information to the market and has the function of transmitting market signals and increasing earnings per share.Therefore,listed companies can affect stock price simply by issuing share repurchase announcements.Since the repurchase information is highly controllable,the share repurchase has become a tool for benefit transmission.Finally,this chapter clarifies the harmfulness and necessity of regulating listed companies' irregular repurchase.The purpose of the listed company's share repurchase is to stabilize the stock price,enhance the value of the company,and optimize the capital structure,etc.,but irregular repurchase may fluctuate the stock price again and affect the company's market reputation.In addition,share repurchase would easily become a tool for manipulating the market,insider trading,and other benefits transmission.The irregular repurchase of listed companies will expose the company in big risk.Chapter 2 examines the omissions in the systems that cause listed companies to conduct irregular repurchases in the basis of the specific patterns of irregular repurchases summarized above.first of all,the current rules lack a good balance between protecting the interests of creditors and encouraging listed companies to buy back.The existing rules focus on the efficiency and lack the protection of creditors,increasing the risk of non-performance of repurchases.Secondly,there are only simple regulations on the financial resources of share repurchase.The standard of "maintaining continuous operation ability" is relatively vague in financial judgment.There is also no relevant restriction on the proportion of borrowed funds for repurchase.In this case,it is difficult to obtain an objective judgment as to whether the listed company has the ability to continue repurchase program.Thirdly,the revised repurchase rules have simplified the body of the resolution.Although simplifying the resolution rules has optimized the repurchase efficiency,it has also lowered the requirements for repurchases to a certain extent and increased the probability of repurchase violations due to lack of prudence in the repurchase program demonstration.Last but not least,the existing repurchase system has not yet been clarified in terms of directors'responsibilities and corporate responsibilities for irregular repurchase.Under the conditions of simplifying repurchase resolution procedures and expanding the powers of the board of directors,if the responsibilities of directors are not clearly defined,it will lead to a situation where powers and responsibilities are not compatible.The repurchase plan finally passed is clear and specific.Once the decision is made,it will have corresponding legal effects,which is a unilateral legal act.A listed company shall implement share repurchase in accordance with the disclosed repurchase plan.The company shall have an obligation of good faith to the disclosed repurchase plan.It shall determine the listed company's failure to fully perform the repurchase plan for breach of contract and liabilityChapter 3 starts with the improvement of the implementation conditions for the share repurchase of listed companies and regulates the situation of irregular repurchase First of all,China's legislation on the restriction of financial resources for share repurchase is relatively simple.Through the study of the comparative law,the solvency test is worthy of attention and reference.The solvency test is conducive to the specification of vague regulations and is also in line with the current thinking of promoting the flexible operation of enterprises.It can not only adjust the market function of the share repurchase system,but also meet the requirements of protecting the interests of creditors.Second,the creditor protection rules in share repurchase of listed company need to be improved.The existing rules have taken the shape of the director's statement of solvency.Giving thought to the interests of the company,shareholders,creditors and the simplicity of the repurchase process,it is recommended to draw on comparative law to clarify the specific rules of the directors' solvency statement.At the same time,professional opinions from auditing or accounting service providers or service agencies can be introduced to improve the prudence of all parties in the early decision-making process of the repurchase,thereby reducing the occurrence of irregular share repurchase.Third,there is room for optimizing the rules for the resolution of share repurchases of listed companies.In the procedures for the share repurchase resolution of listed companies,whether the repurchase should be passed by the shareholders' meeting or by the board of directors,the system design of each country is different.Combined with the current repo legislative rules,the experience of Taiwan can be used to adjust the details of the repurchase resolution rules while maintaining partial decentralizationChapter 4 discusses the responsibility of directors and listed companies in irregular share repurchases,and makes corresponding suggestions based on comparative law Maintaining the existing objective standards,Japan's regulations can be used for reference to incorporate goodwill and gross negligence into the scope of judgment of directors' fiduciary duty.If a director has done his best in good faith and has no major negligence,the compensation may be removed,in whole or in part.After improving the directors' solvency statement rules,the directors should make a solvency statement in the repurchase and be responsible for it.At present,the supervision of repurchasing irregular shares is mainly based on administrative supervision,and the form of liability is relatively simple.Drawing on the experience of comparative law,it is suggested that civil liability and criminal liability can be appropriately increased.In terms of clarifying the company's responsibilities for repurchasing irregular shares,it is also necessary to clarify the scope of the company's responsibility in violating repurchases.If a listed company satisfies conditions that can implement the repurchase before completing the lower limit of repurchase plan,it should perform the repurchase obligation unless there are objective reasons that are unavoidable,and the violation of this obligation will cause a liability for breach of contract.From the cases above,the listed company's irregular share repurchase is mainly responsible for administrative liability,but civil liability shall be paid more attention to better guide listed companies in fulfilling share repurchase.