Discussion On The Legal Application Of Priority Rights In The Field Of Private Equity Investment

In recent years,private equity investment has gradually become the third major financing method after bank credit and new stock issuance.In the field of private equity investment,based on considerations of investment returns and investment security,practitioners have designed many special preferential rights in this field,which play a vital role in protecting the interests of private equity investors.However,due to the insufficient supply of China's legal system,the specific application of these preferential rights in China may suffer legal obstacles or even negative evaluation.Therefore,the priority rights provisions set in the private equity investment exactly what plays a unique role and significance,in China's private equity investment which legal barriers may exist in the practical operation,and how to make these terms of priority rights and legal system of our country's real fusion,become the core issue of this paper.Based on the legal application of private equity investment priority right,this paper points out that the priority right in private equity investment is actually the result of diversified allocation of shareholders' rights,and in the practice of international private equity investment,priority right is usually attached to priority shares.In private equity investment,priority rights are designed to avoid risks such as information asymmetry,principal-agent,lack of fiduciary duty of controlling shareholders,mismatching of investment and risk.Through case analysis and normative analysis,it can be seen that the obstacles to the application of the right of priority in China's law mainly include three aspects.The second is suspected of violating the mandatory provisions of the company law;Third,financial regulators will not approve the target company in the IPO stage and when it applies for listing on the new three board.This paper focuses on the analysis of these three problems and proposes solutions.First of all,in the contract law,it is not easy to apply the principle of fairness to impose intervention on the "self-restraint" right that only involves the interests of the parties.As long as the creditor does not raise any objection,the legal effect of the "other-related" right concerning the interests of the company's creditors should be respected in judicial practice.Based on the status of private placement and the existing legislative blank,we should clarify the content of the preferential right clause in the contract law,and formulate the private equity investment model contract to provide rules for the legal application of the preferential right.Secondly,at the level of company law,the establishment of preferential rights does not violate the original intention of the principle of same shares and same rights in company law,but is a supplement to the principle of same shares and same rights.The implementation of the provisions violating the company's capital system can bypass the mandatory provisions of the law through legal procedures such as capital reduction procedures.The company lawshould consider introducing preferred stock as the carrier of private equity investment priority right,determine the legal type of priority right,standardize the publicity system of priority right,and allow the repurchase of preferred stock.Finally,in view of the existing financial regulator for the target company IPO and the regulation of the new three board and quotation stage,completely deny the company equity financing in the form of one size fits all related rights priority setting in practice,we should reshape the regulatory philosophy,with financial freedom and efficiency concept to guide the company shares registered public regulation system reform.