| Cross shareholding is two or more companies, based on a specific purpose, holdingeach other company’s issued shares, which forms the phenomenon of cross shareholdingbetween companies. In the modern corporate system, cross shareholding betweencompanies is a double-edged sword. On the one hand, it plays a positive role in thedevelopment of the cross shareholding companies. It not only reduces transaction cost,enhances market competitiveness, but also helps to realize scale effect. On the other hand,it challenges the existing system of Company Law seriously. It may bring manydisadvantages such as fictitious capital, holding their own share and disrupting themanagement structure of companies and so on.Cross shareholding is a complex economic phenomenon which involves accounting,tax law, securities law, economic law, company law and other fields. It has close relationsto the capital system, affiliate system, getting their own shares system, the companypersonality denied system, the structure of company governance system, and representativeof shareholders litigation system. However, the enforcement of the new Company Law inour country doesn’t have any direct regulation about the cross shareholding betweencompanies, which results in the legal regulation of cross shareholding in our CompanyLaw is blank and forms a weakness of the Company Law in our country.For this reason, there are several suggestions to regulate the legislative of crossshareholding in our country. The suggestions are as follows: Firstly, adopting differentiatelegislation model, distinguish the cross shareholding between normal companies from thecross shareholding between subsidiary companies, confining the proportion of crossshareholding in subsidiary companies strictly. Secondly, confining the voting rights ofshareholders in the cross shareholding companies. Thirdly, building information disclosuresystem of cross shareholding. Fourthly, defining the consequences of violation of crossshareholding in the law explicitly. |
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