China Listed Companies, Management Buy Legal Issues

MBO (management buyout), born and mostly applied to reduce the agency cost of enterprises in the West, is has an outstanding performance in matters of improving the efficiency of companies' operation. Therefore, as a product of western countries, MBO has met with such criticism, regarding as both 'the production line of Chinese millionaire' and'the most convenient way' to state-owned asset. From the point of view of law, this paper, through the analysis of cases of MBO of Chinese listed companies in recent ten years (from 1997 to 2008), tries to trace the origin of law issues which set off debates, basic issue of acquisition, option pricing, the loss of state-owned asset, the source of capital of buyouts, the taxation during acquisition process, etc. Comparing them with current laws and regulations, the author finds out that there are illegal phenomena and conflicts during the MBO process in China, and puts forward his own opinion and discusses the solution according to our country's actual condition. With the combination of the goal of economic system of reform and the law idea of fairness and justice of China, the author raises that during the process of property reform, for some listed companies, the stock could be resolved by increment, organizing limited partnership to gradually carry out MBO in Chinese way, to realize the transfer ownership from state to privacy and to promote the economic development. The reform of equity division are finished in China. Most of the state-owned listed companies have finished reform, symbolizing the advent of full circulation of stock market. So, as you can see, the MBO, had been proved positively in foreign market, will continue to give full play in new condition in China.In view of thought above, this paper could be divided into three parts:The first part is about the basic theory of MBO, including the definition of MBO, the analysis of the relationship between MBO and law, the development of MBO both at home and abroad and the corresponding regulation and policy environment in China.The second part, through the analysis of cases of MBO of Chinese listed companies in recent ten years (from 1997 to 2008), focuses on the issues in terms of the subject of MBO of listed companies, capital raising, loss of state-owned asset as well as taxation, which lead to the discovery of the existing illegal phenomena and conflicts during the MBO process of our country's listed companies. The third part, on the basis of our country's actual condition, summarizes successful experience, compares and learns from the British and American law, puts forward some opinions aiming at certain issues, bringing forward suggestions on perfecting the existing legal system in terms of the MBO subjects of listed companies, reduction of loss of state-owned asset, capital raising and so on.