On Study Of Legal Issues Of Cross-Holding Of Companies In China

The main reason of the appearance of cross-holding is that due to the development of economy, the modern company system has been changed. The core of modern company system is the independency of the Juristic Person, the independency of company property out of the investor's property. The essential form of cross-holding is that the Juristic Persons will invest to each other for cooperation. This paper will make a research in details for certain kind of Juristic Person Cross-Holding, and the researching scope will be within China.The definition of Cross-Holding is that the companies will invest to each and become the share-holders of. each other for the purpose of cooperation. The Cross-Holding is an efficient share structure for activating the mode of company management, which will promote the current company system greatly. Therefore, the Cross-Holding has been applied widely all over the world. The advantage of Company Cross-Holding cannot be replaced, i.e. enhance the market competition ability of the company, stable the capital chain; increase the value of listed company. However, everything has two sides, the disadvantages of company cross-holding also exists, i.e. it will arise the virtual increase of company capitals; give birth to monopoly, damage the rights of share-holders. Such disadvantages will destroy the whole structure of economy. Therefore, the countries and districts which use cross-holding widely have regulated it in law; however, the intentions of regulation in different countries are totally different.The Company Cross-holding, which did great contribution toward the development of company system and market economy of China has been applied for over twenty years, however with the perfect of market economy in China, the Company Cross-holding has escaped from the interference and guidance of the government, and its disadvantages is coming out inevitably. Due to there is no specific regulation for cross-holding, it becomes the focus of legislation and institute.This paper will make research on cross-holding in China, which contains five sections:The Introduction explains the origin, history and development in China of Company Cross-holding,Section one introduces the concept of company cross-holding and analysis its characteristics, types and what economic benefits the company cross-holding will bring to the society. Section one explains that the companies will become the share-holders of each other by using the company cross-holding, but it has to stick to the essential rule that the juristic person must be independent. The company cross-holding is defined as direct cross-holding, rotating cross-holding, netted cross-holding and radial cross-holding by the quantity of share holders; the company cross-holding is defined as vertical cross-holding and horizontal cross-holding by the relationship of cross-holding companies. The advantage of cross-holding is to activate the company system completely, hence its application widely in the economy operation in different countries.Section two further analysis the disadvantages of company cross-holding and the necessity of legislation of company cross-holding. The section two introduces three different models of legislation for company cross-holding, i.e. free legislation, restriction legislation and case-by-case legislation. The section two explains the advantages and disadvantages of the above mentioned three attitudes and which model is suitable for company cross-holding in China.Section three introduces the current status of legislation of company cross-holding in China based on the section one and two and suggests how to perfect the company cross-holding in China. The comments on the current status of company cross-holding in China is that it's in a weak and scattered condition and the maneuverability of company cross-holding is quite weak, which cannot lower the disadvantages of company cross-holding. Therefore, based on the other countries' experience of legislation of company cross-holding together with the practical situation of China, we suggest the legislation mode of company cross-holding in China should be case-by case cross-holding mode, which should be defined in specific words and systemically. Meanwhile, we need also perfect the other assistant systems for company cross-holding in order for the efforts of multi-regulation.The Conclusion summaries the evaluation of the current status of company cross-holding in China and summaries the suggestions on how to perfect the legislation of cross-holding. The suggested legislation mode of company cross-holding is case-by-case mode, which should be regulated in specific word, systematized in the company law; consummate the legislation that assorts it. The innovation of the suggestions rest with the foundation for upper limit of cross-holding quotient evaluating system, according to this former step, it will decrease the costs of redress for the aftereffect that is caused by the exclusive standards.