The Economic Effect To The Company Caused By The Arrest Of Actual Controller In Listed Private Enterprises

With the development of economy, the company’s business practices become more sophisticated, the relationship between the company and its stakeholders also becomes more complicate. By adopting pyramid-holding structures, the deviation between control rights and cash flow rights leads the company’s corporate structure inconsistent with the terms of the structure of reality. In these cases, company legal person is only covered in a veil on it. In order to prevent the adverse consequence caused by the inconsistent powers and responsibilities of controlling company, in this case we should pierce the corporate veil and track the actual controller behind. Some subsidiaries are excessively operated by controlling companies and lost their independent legal persons, which damage the interests of other stakeholders. However, the responsibility of controlling companies to the debts of subsidiaries is only limited to the property invested to the subsidiaries. In order to prevent the adverse consequence caused by the inconsistent powers and responsibilities of controlling company, in this case we should pierce the corporate veil and track the actual controller behind. Since La Porta et al (1999) first proposed "ultimate controller" (called "actual control" in our law),more and more scholars pay attention to it. In China, "actual controller", as an important concept in Corporate Law and Securities Law, has been proposed and paid more and more attention.In China, with the deepening of market economy reforms and the rapid development of economic, private enterprises gain rapid development. Now private enterprises have been a growth point of China’s economy. Private enterprises are playing an increasingly important role in the economic and social development. With the held of Plenary Session, the decision gives a clear direction for the comprehensive deepening reform. The plenary session emphasized the role of the market, proposed transferring the configuration role of market resources from the "basic role" to "decisive action" and clarify the relationship between government and the market. And made the public economy and the non-public economy are important and vital part of the economic foundation of the national economy, both institutionally shows are equal in status. For private companies have been growing in the cracks, the fair competition of will make private economic development has entered a new era.In China, more than 90% of private enterprises adopt the family system. In the early development of enterprises, it is the family unity, dedication spirit and the single family structure provides an efficient development mode. Many private enterprises survive from the competition. They are from behind the scenes to the front, from small to large, and become a public companied by listing.They become an important force in China’s economy With the development of family business, its corporate governance issues is gradually exposed in front of us, and hamper further development of family enterprise. Private enterprises in China show some different characteristics with other countries. Because of the influence of traditional Confucian culture, in the management of Chinese private enterprises have a strong " paternalistic "Style and don’t trust external members of the family. Although many listed private enterprises in China set up the general meeting of shareholders, the board of directors and supervisory board in accordance with the requirements of the Companies Act in order to the balance of rights, many of the company’s corporate governance structure have not played their role. In this internal governance structure, the founder has a decisive role for the development of the company. Large number of listed private enterprise cases show that media reporting of crime is increasingly concentrated in the private entrepreneurs. The absolute number and proportion have been significantly improved in the state. Entrepreneurs not only related to criminal acts of their own survival, but also have a great impact to their company. When the founders are convicted in prison unexpectedly, many enterprises also collapse. Such internal governance structure can’t be suited to the development of the times, severely restricting the further development and expansion of family businesses.According to our laws, control is more of a criteria to judge from the appearance. As long as there is a body to dominant the financial and operational decision-making possibility, it will be identified as the actual controller. Since the actual controllers of the listed private companies can be traced back to individuals, mostly are the founder families. With the development of private enterprise,in order to make better use of social capital, they have introduced professional managers After the introduction of professional managers, how to configure the control right by the founder and how to transfer the control right to the professional managers is the focus point. A very important reason why the United States and other countries can complete the transfer of control successfully is the trust of the community. While due to lack of trust in the pattern of resource seriously hampered China’s private enterprises transferring control over the introduction of professional managers’ degree. Through our study, we found that if the actual controllers transfer its rights to professional managers, give them full respect and self-realization means, compared to the company adopting actual control, the company develops more stable. After the actual controllers leaving the company,the possibility of the occurrence of contention will be smaller, and the company’s development will be more stable.This paper uses standard research and case analysis, combines theory and practice. Based on previous studies, this paper defines the concept of the family business, listed family firms, the actual controller. Then through the study of two listed family companies, Skyworth and GOME Electrical Appliances Holding Ltd.,we compared the difference of the influence caused by the arrest of the actual control because of different control form. Then we analyze the reason of adopting different forms. From the perspective of corporate governance, using the Anglo-American countries represented in the external monitor mode and Germany and Japan represented in the internal control mode and other foreign corporate governance model for reference, based on the specific culture of our country, this paper makes recommendations from the external environment and internal environment for our private enterprises governance structural optimization, thus contributing to our private enterprises healthy and sustainable development.