Research On Legal Problems Of State-owned Equity Transfer

Fashu Chen took Hongta Tobacco Group Company Limited (Hongta Group) to court so thatthe details of equity transfer come to the surface. China is a socialist country, which hasimplemented a planned economy for a period of many years. Since the launch of the reform andopening up drive, the government restructured the state-owned enterprises that a large number ofstated-owned properties were converted to the state-owned shares. These state-owned shares aredirected or indirect holdings through State-owned Assets Supervision and AdministrationCommission of the State Council (SASAC), and state-owned enterprises. For a long term, Chinesegovernment take a cautious attitude on state-owned enterprises’ transfer. Even though this policymay effectively prevent the loss of state assets, the state-owned shares cannot valued by hedgingand appreciation under the strict policy due to lacking vigour in the economic market. Since1990s,China deregulated state-owned shares terms gradually that enacted a great number of policies andregulations which based of preventing state-owned assets losses. On the one hand, the state-ownedshares are encouraged to take “go global” strategy. On the other hand, the government implementstrict limitation on transfer subject and transfer procedures which lead to various contradictions.From a holistic view of the share transfer dispute, state-owned share transfers exist severalproblems such as agreement and vetting procedure. This thesis analyses transfer issues andprovides recommendations based on the current legislative status, from the view of the case.This paper is structured in three parts: The first part, gave a brief description of the equitytransfer disputes between Fashu Chen and Hongta Tobacco Group Company Limited(HongtaGroup), the main body of the case related to the transfer of state-owned shares, the procedure forthe transfer analysis, a clearcurrent problems in the transfer of state-owned shares in China;second part of the theory, a comprehensive analysis of China’s state-owned shares, as well as theconcept of state-owned equity transfer, the nature, characteristics and classification of the statusquo of China’s state-owned equity management as well as the transfer of state-owned sharesthelegal basis made a comprehensive presentation, on this basis, in order for the issues raised in thecase, appropriate countermeasures; the third part of the previously proposed, the state-ownedequity transfer agreement negotiations in all aspects of transfer to the final registrationthe issuesproposed in order to improve China’s state-owned equity transfer procedures.