A Study Of Conflicts Of Interest In Preferred Stock System

Compared with the ordinary shares, preferred shares have priority in the earnings of property and distribution of surplus property, but limited in the voting rights and the affairs of the company management control. Preferred stock system itself, most likely causes the conflict of interest between the ordinary shareholders, board of directors, creditors. Without properly resolving these conflicts, it will hinder the preferred stock playing an important role in the financing.Preferred stock system has a short appearance in our country, due to its historical reasons and the development of law, preferred share has not been real progress. In recent years, as a part of the laws and regulations related to the preferred shares issued, preferred shares system present stage in a comeback trend. At present, China is in the stage of development of the preferred stock pilot practice. In the civil law field, there has been no discussion of the legal issues related to the conflict of interest of preferred stock system. Under our current company law, the securities law and other legal framework, combined with the relevant provisions of laws and regulations, combined with the foreign preferred shares development practice, this paper combs the preferred stock system in the development of the main conflict of interest issues and tries to build the mechanism to solve the various conflicts of interest in the preferred stock system.This paper starts from the basic theory in order to discuss the system of preferred shares, firstly, defines the concept of the scope of the system of preferred shares, and then analyzes the basic content, the reason why the system of preferred shares can not cause rapid development and basic protect of preferred shareholders. On this basis, this paper analyzes the conflicts of interest between the preferred shareholders and ordinary shareholders, between the preferred shareholders and the board of directors, and between preferred shareholders and creditors. Through the research, this paper proposes a shareholding ratio limit of preferred shareholders, in order to prevent the company changing hands; on the other hand the recommendations is put that by the way of the establishment of special system of shareholders’ meeting, to the relief of preferred shareholders in the earnings distributi on, to make up the weak position compared with the ordinary shares. For the special shareholders’ meeting, the convener, the rules of procedure, the voting and such as the specific content are introduced in detail. On the dispute between preferred stock sh areholders and the board of directors on the actual control of the company, this paper attempts to make up the lack of voting rights by regaining the voting of preferred shares timely. At the same time, taking advantage of the fiduciary duty of the board o f directors and the right of redemption request of preferred shareholders to regulate and restrict the board resolution. Differences between preferred shareholders and creditors caused by nature, competition and distribution of surplus property, this paper tries to allocate the reserve system and repayment reserve system to ease the preference shareholders and creditors in the distribution of benefits conflict.Finally, combined with the analysis and study of three kinds of conflict of interest, this paper tries to revise and supplement the provisions of "company law”, and introduces the concept related to the preferred stock system to the “company law”, in order to introduce the resolvent of the three kinds of conflict of interest gradually by this way. At the same time, this paper makes recommendations to the relevant departments to revise the relevant rules and regulations, and the existing rules and regulations should be perfected, as a result, trying to provide a more comprehensive legal protection for t he development of the system of preferred shares.