On Preemptive Rights Of The Shareholders

Limited Liability Company has characters based on the trust of shareholders. Ifcorporate shareholders transfer shares to a third party, these characters will beinfluenced. Therefore, the Corporate Law sets up preemptive right. However, thereare still controversies over how to construct preemptive right in theory and how tooperate it in practice. This thesis explores preemptive right in three chapters asfollowing:The first chapter points out the issues existing in the performance of shareholders’preemptive right. As for how to realize priority to the performance of shareholder’spreemptive right, the present methods are incorrect and short of reasoning. And thespecific rules about preemptive right are not perfect yet. The current regulations couldprovide answers to certain specific questions, such as how to cognize the sameconditions, how to determine period for performance and what the relief means are etc.The second chapter analyzes the content of preemptive right system, and alsopoints out that the preemptive right is one kind of right of formation. Holders ofpreemptive right can reach a contract under their unilateral declaration of intention,hence two contracts in effect at the same time. As for “priority”, there are twointerpretations: one is the priority of enacting a contract other than performing it; theother is the priority of enacting a contract and performing it. The judicial practice inChina try to deny the effectiveness of the contract between seller and the third personin order to make the right holders get the shares. This chapter has pointed out the shortcomings of this way. Comparing to other countries’ legislation, analyzing thetheorys one by one, the author comes to the conclusion that the legislation is not goodenough and points out how to legislate.Chapter three discusses how to exercise preemptive right. The same conditions,including the price, cooperation conditions, however, it should allow slightly varies,otherwise, there is no preemptive right exist; The right shall be exercised within20days form the date the right owner knows or should have known of the matter forright happens. The paper also points out that, although preemptive right is a kind ofright of formation, it could still be violated. who infringe preemptive right shall beliable.