A Study On The Legal System Of Listed Companies’ Volunteering Delisting

An orderly securities market should have the equal demand for listing and delisting,so as to ensure the high quality of listed companies.For a long time,due to the scarcity of the qualification of listed companies in China’s securities markets,the compulsory delisting is the main way for listed companied to exit securities market;the volunteering delisting is not common and the corresponding legal system is not sufficient.With the improvement of the securities market system and the normalization of the IPO,it is necessary to study the corresponding legal system of volunteering delisting.This thesis analyzes the first volunteering delisting company after the release of“Several Opinions on Reform for Improvements and Strict Implementation of the Delisting System” in 2014.This thesis is based on the practice and does further discussion and research on the problems that emerged during its delisting process and some other typical cases of delisting.The first problem to be discussed in this thesis is the relationship of efficiency and fairness in volunteering delisting.Listed company chooses to go delisting for lack of access to enough financing in the securities market,reduction of expenses required for listing,maximization the long-term value of the company and avoidance of the negative impact of compulsory delisting.In the process of volunteering delisting,the controlling shareholder may dominate or decide the entire process of volunteeringdelisting by virtue of a higher proportion of shares.In order to guarantee the fairness of minority shareholders,it is recommended that a new voting mechanism for plan of volunteering delisting should be adopted at the general meeting of shareholders which require not only two-thirds or more of voting rights holding by shareholders attending the meeting,but also more than two-thirds of voting rights holding by the non-associated shareholders.The "non-associated shareholder" here excludes the controlling shareholder and its related parties that initiated the volunteering delisting.This means fairness to minority shareholders.Notably,the range of avoidance voting here should not be too large.Otherwise,it may overly protect minority shareholders and may hinder the process of volunteering delisting.In particular,there may be some minority shareholders who maliciously hinder the process of the volunteering delisting.The existence of “rational indifference” among minority shareholders may result in a low percentage of votes.Therefore,the development of modern science and technology can be used for help.And the channels for minority shareholders to exercise voting rights can be expanded and online voting can be introduced.At the same time,when the controlling shareholder has obtained a certain amount of shares listed company on the way through the tender offer,it is recommended to adopt the freeze out system.The controlling shareholder can forcibly purchase the remaining shares.This means efficiency to company.Fairness and efficiency are the indispensable legal concepts in volunteering delisting,and neither of them can be neglected.The second problem to be discussed in this thesis is the problem of equity pricein acquisitions during volunteering delisting.There are many ways for listed companies to exit,such as equity acquisitions,mergers,reverse stock splits,and asset sales.Based on practices in China and other countries and regions,equity acquisitions are most common among them.Therefore,this thesis focuses on the form of equity acquisition.The minority shareholders hold shares in hope of obtaining investment returns.The delisting of the company will greatly affect the liquidity of the stock and the stock price will fluctuate greatly.Therefore,the price of stocks in an equity purchase should not only include the stock price,but also include compensation forthe loss of stock liquidity.When the minority shareholders do not agree that the company exits the market but cannot stop the process,they should have the right to evaluate the stock price and require the company to buy back its shares at a fair price.The right to evaluate can only be used when the law has explicitly defined.Therefore,in our country’s legislation,it should be clear that the shareholders have the right of stock valuation.Meanwhile,the exercise of the right of stock evaluation means that the minority shareholders no longer have voting right on the volunteering delisting plan at the general meeting of shareholders.This article also discusses the procedures for exercising the stock valuation right.The third problem to be discussed in this thesis is the problem of the independence of board of directors in volunteering delisting.volunteering delisting is a type of company conversion that also involves certain types of equity transactions.The delisting of the company is actually a process in which the controlling shareholder and its related parties crowd out the minority shareholders.There will be a game of interest between the two parties.During the process,board of directors are independent from both parties one and have the abilities to solve the problems.Board of directors take important responsibilities in the process of volunteering delisting,especially independent directors.However,in fact,in our country’s voluntary delisting practice,board of directors’ independence was often challenged.Therefore,it is necessary to draw lessons from the extraterritorial systems,combined with China’s existing board of directors specific committee,and form a special committee for delisting.The delisting specific committee is mainly set up by independent directors,and may hire external professional organizations to conduct a comprehensive review and evaluation of the plan for volunteering delisting.The committee need offer relevant professional opinions and suggestions,and take relevant measures to stop the controlling shareholders from infringing the equity of the minority shareholders if necessary.The function of the delisting specific committee shall run through the entire process of voluntary delisting so as to safeguard the rights and interests of minority shareholders.Based on the existing cases of volunteering delisting,this article discussed and studied several typical problems that emerged during the process of volunteering delisting of listed companies.According to existing legal regulations in our country,this thesis puts forward some suggestions and author hopes that suggestion above will have some positive effects on the improvement of the legal system of volunteering delisting in our country.