Legal Researches On The Voting Rights Of Institutional Investors Of Listed Companies

Understanding the exercise of voting rights of institutional investors is the basis in analyzing their governance of listed companies.Theoretically,intuitional investors can improve the governance of listed companies by exercising voting rights based on their superior financial strength.However,institutional invest ors face theoretical and practical difficulties in exercising stocks.Focusing on such difficulties,This paper first clarify the particularity of the voting right of institutional investors,then analyzes the difficulties of institutional investors exercising voting rights in China from both theoretical and practical levels.Based on analyzing the regulations of voting rights of institutional investors in foreign countries or regions,we propose suggestions for legislative response and regulation adjustment for institutional investors in China exercising their voting rights.This paper consists of four parts.The first part provides a theoretical explanation of institutional investors and their voting rights.Through practical obser vation and theoretical analysis,the connotation and extension of institutional in vestors are clarified.As an extended concept,institutional investors includes not only specialized institutions(e.g.,insurance companies and trust),but also asset management products provide by various asset management institutions.From the perspective of law,institutional investors are divided into three types: legal persons,non-incorporated organizations and non-organizations,the qualification of shareholders of the non-organizations institutional investors remains to be solved.In terms of the function of institutional investors in governing listed companies,based on the specified shareholding structure of China,this paper points out that institutional investors should focus on restricting and preventing sh areholders to abuse rights,rather than solving the cost caused by separation of traditional ownership and management rights.As an expression of capital will,the voting rights of institutional investors have the characteristics of double common benefit,compound rights and obligations and separated income rights.Above analysis provides a theoretical basis for regulating the exercise of voting for institutional investors.The second part of this paper analyzes the difficulties of institutional investors from both theoretical and practical perspectives when they are voting.The oretically,the primary difficulty is the shareholder qualifications(i.e.,legal entity qualifications)of non-organizations institutional investors like trust plans,asset management plans and contract funds.The main dispute is about whether the voting rights should belong to the small investors behind the institutional investor,the institution itself,or the relevant managers.In practice,the difficulties,which challenges traditional governance modes of companies,includes 1)that some institutional investors may “transfer” voting rights under the nominal of “represent”;2)unrelated voting(e.g.,“empty voting” and “morphable ownership”)caused by the separation of voting rights and income rights;and 3)conflicts between interests of cooperation and individual investors caused by Shareholder heterogeneity.The third part of this paper aims to remove the theoretical obstacles of non-organization institutional investors exercising voting rights by demonstrating the shareholder qualifications(i.e.,legal entity qualifications),such as collective fund trusts and asset management plans.Due to the functions of property inde pendence and asset partitioning,there is no theoretical obstacles about their sha reholder qualifications.Under the background of the current civil law of our country,it should be endowed with the civil subject status of non-incorporated organizations in legislation,and the voting rights should belong to the institution investors itself.Actually,the civil subject status of such non-organizations is commonly recognized by foreign countries and regions,and China should also adapt to this trend.The fourth part of this paper designs the regulation for institutional investors in exercising voting rights.,based on practical experiences from foreign countries and regions.From the perspective of extraterritorial regulations,the key point is to keep the legality of the way of exercising rights.In the regulation mode,it is mainly divided into two paths: public supervision and self-regulation.In terms of specific rules,it is shown in many aspects,such as the restriction of fiduciary obligations,the supervision of information disclosure the compliance of industry standards and the guidance of principles,and so on.With above references,this paper provide reference for the standardized design of exercising voting rights for institutional investors in China.Based on the special role of China's Institutional investors in listed companies,the key point is to solve the conflicts of interest between small investors and listed companies faced by institutional investors.In the regulation mode,we should take the path of public supervision as the main and self-regulation as the supplement.In the construction of specific rules,it includes the fiduciary obligations to small investors,the restraint of shareholders' duty of loyalty to the listed company and the supervision of information disclosure.Specifically,no matter they are legal persons,non-incorporated organizations or non-organization institutional investors,based on the essential requirements of their capital sources,they should undertake the fiduciary obligation to the small investors in order to realize their interests.In the context of the asset management company as the actual exercise subject of voting,the asset management company should also undertake the fiduciary obligation to the institutional investors to ensure that the voting is fair and reasonable.At the same time,the role of shareholders of institutional investors shows that they are also restricted by the duty of loyalty of shareholders,and do not deliberately harm the interests of the target company.In the supervision of disclosure obligations,we can learn from the American model and give disclosure obligations to institutional investors,including the motivation of exercising voting rights,the way of exercising voting rights,the results of exercising rights and so on.At the same time,it is supplemented by industry self-discipline norms such as the principles and guidelines for the exercise of voting rights of institutional investors,in order to construct a sound system of institutional investors voting in our country.