The Research On Localization Of Preferred Stocks

Nowadays, companies affect the wealth of the society, the employment and the growth of the economics at an alarming rate. As the smallest and the most important economic organization, the companies promotes the development of the society, at the same time, they also amplify the human nature, causing the imbalance of the rights and the gap between the rich and the poor. Corporate governance around the world establishes the principle of equal rights generally, although the corporate law in our country doesn’t provide that the principle expressly, the provisions in the corporate law reflect the principle, so we uphold the concept of equal rights, too.The majority rule principle is a manifestation of the principle of equal rights, it is produced and developed with the autonomy of private laws and independence of companies. The majority rule principle meant to maintain the equal of share holders by maintaining the equal of the shares, but the large shareholders abuse the power and the rules to damage the interests of minority shareholders. The legislators and judges really have seen the disadvantages of the majority rule principle, so they limit the large shareholders’ voting right, or protect the minority shareholders preferentially. But the both ways to solve the problem are still within the framework of the majority rule principle, without breaking the shackles of the majority rule principle therefore, we need to create another principles or measures to assistant the majority rule principle. The equity means to protect the interests of minority shareholders from the damage of the large shareholders, but the formal equality is not able to meet the needs of real equality. Fairness in corporate governance cannot be achieved by depending on the principle of equal rights, the interests between the shareholders are different, so the balance of interests is the most persuasive standards of the corporate governance.If we want to achieve the balance of interests of the corporate governance, we should start from the innovation in the form of shares. To balance the interests of large shareholders and minority shareholders is to face up to the different rights and obligations between the large shareholders and minority shareholders. It is too hard to balance the interests between the large shareholders and minority shareholders with only one single form of shares, using international experience for reference, we can launch a innovative form, preferred stocks, to balance the interests between the large shareholders and minority shareholders.The so-called preferred stocks mean stocks accompanied with priorities on distribution of property and limitations on other rights. In developed countries, the preferred stocks have been widely used in the areas of corporate governance and capital markets, but in China, the preferred stocks haven’t been legalized and standardized since the first appearance in 1990 s.In 2013 November30 the Chinese State Council formally issued “State Department guidance on carrying out pilot preferred stocks”, In 2014 March21 Chinese Securities Regulatory Commission promulgated and implemented “Management measures on pilot preferred stocks”, the Administrative regulations fill the gap to a certain extent in China’s Company Law. At present our country preferred stock is still in the pilot delivery stage, the preferred stock can play a unique role in venture capital, expanding business, merger and reorganization, improving the enterprise’s capital structure and other fields, so the preferred stocks will become important financing tools in China’s capital market in the near future.The company laws pursue autonomy of private law, but if there are no provisions on preferred stock or simply rely on administrative regulations and departmental regulations to regulate preferred stock, the stubborn and basic system in company laws will hinder the development of preferred stocks instead of stimulating them, and affiliated party’s rights cannot be protected, so it is super important to let proffered stocks be constructed in China’s company laws. The legislation of preferred stocks in France is rigorous, the delegated legislation of preferred stocks in American is at liberty and flexible, and Japan finally make a compromise, base on statute law and absorb the essence of delegated legislation of preferred stocks in American. In our country, preferred stocks are innovations, so it’s the most appropriate to regulate preferred stocks by rigorous legislation and supplemented by delegated legislation in the early stage of development.This article researches several questions of how to construct preferred stocks in company laws in the view of balancing the interests of different shareholders. In the first part, the article starts form analyzing the imbalance of interests in our countries’ corporate governance, it is too hard to balance the interests between the large shareholders and minority shareholders with only one single form of shares, so it is the best choice to launch a innovative form, preferred stocks, to balance the interests between the large shareholders and minority shareholders. In the second part, the article studies the legislations of American, France and Japan with the methods of comparing legislations and researching literatures, and then describes the legislative practice in our country of preferred stocks from the enlightenment period, vacuum period and finally to the pilot period, analyses why preferred stocks didn’t develop in our country and the necessity to construct preferred stocks in company laws, finally the article draws a conclusion that it’s proper and necessary to construct preferred stocks in our company laws. In the third part, the article analyzes the coordination of preferred stocks and our current systems and draws the conclusion that only by legislating the preferred stocks in our company laws can protect the rights of preferred stocks holders and balance the interests of large shareholders and minority shareholders. Finally in the last part the article bases on the analysis of the third part and draw a summary of the full article, although the preferred stocks bring the new choice in the capital market, and resulting the comparison and the competition among the different types of securities, but the effect on corporate government is more significant.The corporate governance not only needs the rights to be equal, the interests between different shareholders also need to be balanced. The implementation of preferred stock is aimed to achieve the balance of interests in the corporate governance system and improve the efficiency of the corporate governance, letting the company system to release more power to promote the development of social economy.