The Research On The Regulation Of Cross-shareholding Of Companies

The lawmakers can’t absolutely forbid cross-shareholding for the positive effectof cross-shareholding, but along with the continuous development of China’s economy,the situation of cross-shareholding becomes increasingly popular, its negative effecthas become increasingly prominent.If not regulate cross-shareholding timely，it willlead to highlight the disadvantage. China’s current legal system don’t directly regulatecross-shareholding, to fill the legislation blank on the research of the theory ofcross-shareholding,I hope to regulate the cross-shareholding of company in Chinaeffectively through the comprehensive analysis of the cross-shareholding system inthis paper.Firstly, the basic research on the theory of cross-shareholding.Research the basictheory of cross-shareholding will help to understand cross-shareholding moreprofound.Above all, study the cross-shareholding through a different angle can graspthe present situation of cross-shareholding better. According to whether thecross-shareholding companies have parent-subsidiary relationship,cross-shareholdingcan be divided into longitudinal and transverse cross-shareholding; According to thedirect shareholding relationship,it can be divided into direct and indirectcross-shareholding;According to the different subjective purpose,cross-shareholdingcan be divided into financial and strategic cross-shareholding. Different classificationhas its theoretical significance and practical value.Moreover, the study on the basis ofcross-shareholding. The company to become legal investment subject is the premiseof cross shareholding system, growing industry competition and adjacent industrycompetition is the external factors of cross shareholding system produce.Lastly, theresearch on the essence of cross-shareholding. Essentially, the cross-shareholding canbe understood as the companies hold their shares indirectly.Secondly, the dialectical research on the positive and negative effect. In the secondpart of this paper,it makes a comprehensive research on the positive and negativeeffect of cross-shareholding.The positive effect of cross-shareholding includes: To prevent external hostile takeover; For the company’s focus on development, formedthe scale economy; To reduce the transaction cost and transaction risk. The negativeeffect of cross-shareholding includes: Impact the enrich principle of company capital;Encourage the speculative investment in the stock market, easy to form the stockmarket bubble; Distort the governance structure of corporate, form the insider control;Easy to form monopoly and induce connected transaction; Through the research ofpositive and negative effect about cross-shareholding, we can decide the degree oflegislation regulation in our country.Thirdly, the comparative study on laws and regulations. Many foreign countriesmake a clear regulation about cross-shareholding. In this paper, I hope it is beneficialto perfect our country’s commercial law system and make up for current legislationvacancy in related field through the comparative research on several typical countries’related legal about cross-shareholding. The comparative research shows that foreignlegislation distinguish between longitudinal and transverse cross-shareholding firstly,limit the longitudinal cross-shareholding strictly, limit the lateral cross-shareholdingthrough shareholding ratio, limit or exclude the voting rights of the share,set upnotification obligation when hold other company’s share and so on. On the basis oflegislation experience of some countries, I put forward the idea about the regulationcross-shareholding legislation for the countries’ economic development status andthe legislation is different: Because China’s large group of companies is not much,most companies are small or medium, economic development is relativelybackward,in principle, legislation should take loose socialist in our country. Becausethe negative effect of cross-shareholding is not inevitable, the negative effect willhighlight if indulge cross-shareholding. In order to regulate the cross-shareholding inparent and subsidiary companies respectively,this paper holds that the legislation inChina also should draw lessons from the practice that distinguish betweenlongitudinal and transverse cross-shareholding. Regulate the longitudinal crossshareholding strictly, the shareholding ratio of transverse cross-shareholding shall notbe higher than25%and the voting rights should be limited, voting rights shall not begreater than10%.Lastly, to enrich the legal system of cross-shareholding in our country, we should set up notification obligation system.Lastly, perfect the related system in China. For the regulating of cross-shareholding,although there is no clear legal regulation in China, but it introduces many systemwhen the modification of the new conpany law.For example, information disclosuresystem, independent director system, limit voting rights in specific situation, theconstruction of board of supervisors system. It can regulate the cross-shareholdingin some degree through the clear of these procedures.