On The Building Of Restrictive Mechanism Of Controlling Shareholders

In recent years, the controlling shareholders of the listed companies usurp on minor shareholders frequently. The controlling shareholders controlled directly or indirectly the listed companies with the predominance in controlling rights, and pursued their own benefits, which is opposite to the interests of corporation and of minority shareholders. The depredatory behavior of controlling shareholders restricted the development of securities market. The conflicts between controlling shareholders and minority shareholders have become the prominent conflict in the realm of corporate governance. Based on the analysis of symptoms,reasons and detriments of the abuse of controlling privilege, the thesis provides some personal opinions about how to construct the system of inhibiting the controlling shareholders. My thesis is separated to six parts, which amounts to more than 30 thousands words. Chapter one: Introduction of controlling shareholders. There are two different standards in determining a shareholder is controlling shareholder or not. One is the formal standard, the other is the material standard. According to the other countries'legislation, I give some advices on the definition of controlling shareholders in Chinese legislation. Chapter two: Symptoms of the abuse of controlling rights. The controlling shareholders utilized the following methods to get their controlling private benefits: (1) usurping the funds of the listed corporations; (2) affiliated transactions; (3) uncertainty of distribution of dividends; (4) controlling the profits; (5) the traps of re-financing; (6) controlling the disclosure. Chapter three: Motivations of abusing the controlling rights. Many factors are contributed to the abusive actions of controlling shareholders, such as: the abuse of majority rule, the separation between controlling rights and cash-flow rights, unreasonable share ownership structure and the limitations of corporation governance etc. Chapter four: Detriments caused by the illegal actions of controlling shareholders. The illegal behaviors of controlling shareholders directly threatened the ordinary operation of listed companies. What is more, the legal interests of minority shareholders were deprived by those actions. Worse of all, the securities market is involved in the continuing downturn due to the bad credit of controlling shareholders. Chapter five: Preventive measurements. The mechanism of preventing the abuse of controlling rights contains: (1) building the reasonable share ownership structure; (2) setting up the fiduciary duty of controlling shareholders; (3) restricting the voting rights of controlling shareholders. Chapter six: Remedial measurements. Giving the minority shareholders'corresponding litigious rights and lifting the veil of corporation are two good ways to relieve the interests of listed companies and minority shareholders.