The State-owned Equity Transfer Problem Of Convergence Of Pre-emptive System

With regard to the state-owned equity, the transfer of which distinguishes from that in the normal sense, namely shares owned by the ordinary shareholders of a limited liability company, the specialty of which is the transfer of state-owned equity shall be bound by the transaction rules of the designated market. As a matter of fact, the transaction rule, say"in terms of the transfer of state-owned equity, the conduct shall be committed in the property transaction market with eligible qualifications"constitutes a limitation to the approach and procedure of transferring state-owned equity. Providing there exist two or more investors intending to purchase after the publication of public offer, the subject equity shall be sold either by auction or bidding. Meanwhile, Corporation law entitles the shareholders of a Ltd., such a priority that where a shareholder transfers his shares in a company, the other shareholders of the company are entitle to have the priority over any other third party outside under the same transaction condition. This is so-called Shareholder Preemptive Right. When it comes to the state-owned equity, however, the transfer shall be done following the procedure of auction or bidding according to the transaction rule of the property transaction market if other shareholders and the third parties outside both want to purchase. The mechanism of shareholder pre-emptive right can't be integrated with either the procedure of the auction or bidding. From the perspective of an auction, as to the characteristics of bidding on the spot and the contractual relationship being established instantly the hammer dropped and so on, it is still not clear under the current laws and regulations that whether shareholders bid in the auction; if he can, when and how to participate in. From the perspective of bidding, it's even harder to exercise the priority. Because the procedure of bidding shall be kept secret under the current law, which means colluded bidding becomes illegal. Notwithstanding the above requirements, one of the essential characteristics of the shareholder priority is under the same condition which relies heavily on the parameter. In addition, which makes it more difficult is that a qualified proposal is more than a reasonable consideration but with many other reference factors which adds to the difficulty of the judgment of"same condition". Therefore, the inconsistence eventually leads to the conflicts between the regimes. But these two regimes are created to serve different purposes. In view of this, the author of this article, through independent and prudent contemplation on this issue, confers his own opinion of recommending the legislature to specify the procedure of each transaction and have the rules on transfer of state-owned equity complemented and improved in order to integrate the regime of state-owned equity transfer and the mechanism of shareholder pre-emptive right and to security the legal interests of all parties.