Research On The Evaluation Criteria Of Anti-takeover Charter Provisions With A Functionality Perspective

Takeover of listed companies is an enduring topic,and large-scale takeover cases happened in the capital market always intrigue people.While cash-rich industrial investors or financial investors are looking for takeover targets,many listed companies recognize the importance of reinforcing fences against "barbarians at the doorstep" and try to protect corporate control through institutional arrangements.Both takeover and anti-takeover activities become more active and intense,and more controversial at the same time.The vicissitudes of the market have obviously entered the vision of legal review.However,it is a pity that Chinese legal attitude towards anti-takeover activities are still ambiguous and causes uncertainty in practice.This article takes the anti-takeover provisions in the charters as the research object,to discuss the evaluation criteria of such provisions.First of all,the article analyzes the current application of anti-takeover provisions in the charter,in order to make clear the current use of anti-takeover provisions in our listed companies and determine the scope of discussion.On the basis of explaining the background and mechanism of the anti-takeover provisions,by studying the anti-takeover provisions adopted by listed companies in the charter,the article finds that anti-takeover provisions in the charters are similar in content and can be analyzed categorically.So the mainstream anti-takeover clause is classified as structural provisions to protect the incumbent directors,provisions regulating the content and procedure of shareholder proposal,provisions to increase the difficulty of takeover.Then,the article summarizes the existing evaluation criteria of anti-takeover provisions,and finds that an authoritative and complete conclusion has not been reached.The article notices that current criteria tend to evaluate from a validity perspective,which concerns the identification of mandatory and random rules under the company law.However,due to the uncertainty of the nature of rules and the fluidity of legal interpretation,it is difficult to find a balance between the commercial rationality of anti-takeover and the legal text.Starting from a perspective of functionality,to discuss the intrinsic demand for anti-takeover provisions under our legal system,is a feasible way to overcome the difficulties.In light of the various anti-takeover measures developed in American practice,the article finds that the anti-takeover provision is a double-edged sword.Although it can protect the interests of shareholders and the whole company,its negative effect on deepening phenomena such as management entrenchment is lingering.In this case,if the same positive effect can be achieved through legal arrangements,but the negative effect is avoided,the space for anti-takeover measures should be correspondingly limited.Through a comparative analysis of the mandatory protection mode of English law and the relevant laws and regulations of our country,the article finds that our legal system has not set up a comprehensive mandatory protection.The compulsory nature of the provision has been weakened.This shows that our country has not completely relied on the mandatory rules to protect the interests of the acquired company.Under the background that the legal system gives priority to the facilitation of dealing opportunities,there shall be room for listed companies to strengthen their own position in the case of hostile takeover based on their own situations.On this basis,the article points out that,under the legal system of our country,anti-takeover provisions may be developed,but the positive functions shall still be given priority,and the basic power distribution between the directors and shareholders shall be complied with,as the anti-takeover decision-making power shall be reserved by the shareholders’ general meeting.Finally,based on the space and the function of the anti-takeover provisions under our country’s law,the article puts forward two approaches to the evaluation criteria.First,the function of the specific provision is analyzed to judge whether it has the effect of promoting its strengths and circumventing its weaknesses.In practice,many anti-takeover provisions used appear to have functional alienation.These provisions don’t promote the interests of shareholders and the whole company,rather,they magnify the negative effect.Second,the reasonable extent of the interference towards shareholder rights,particularly the rights of the hostile takeovers shall be considered.Following a functional perspective,anti-takeover provisions should not completely exclude the exercise of shareholder rights.Although certain provisions have some merit,but the means are not reasonable to support the aims.The application conditions are too broad,so it should be adjusted.