A Study On The Legitimacy For Trading Halts As The Measure Of Anti-takeover

In the Chinese capital market,although the successful hostile takeovers are rare,the hostile takeovers are no longer new.And if there is a hostile takeover,it will certainly generate measures of anti-takeover.Observing a series of classic cases of hostile takeovers in PRC in recent years,trading suspension for a long period has become one of the anti-takeover measures that the defenders will inevitably adopt when encountering hostile takeovers.This so called Chinese exclusive measure has ever not appeared in the mature foreign capital market.In China's hostile takeover,the defenders usually defend the hostile takeover by a long-term trading suspension in the name of “planning of major asset reorganization” because the rules for the trading suspension or halt are not perfect,the supervision is not enough,and the illegal cost is low.After the issuance of the new rules for the trading halt at the end of 2018,listed companies have been unable to suspend trading for a long time under the name of“planning major asset reorganization”.However,whether or not to allow anti-takeover as a reason for trading halt,that is to say,whether or not to allow trading halt as the measure of anti-takeover remains to be discussed.Through the combing of the core value of hostile takeover and anti-takeover,combined with the function and purpose of the trading halt,this paper concludes that the Trading Halts as the Measure of Anti-takeover has a legal basis,and then refers to the Unocal rules established by the Delaware court in order to classify The legitimate boundary of the trading halt as the measure of anti-takeover.Finally,this paper provides ideas for institutional arrangements on trading halt as the measure of anti-takeover.The purpose of the trading halt is to eliminate asymmetry of the information,maintain a fair and efficient market order,and protect the legitimate rights and interests of small and medium-sized investors.In the process of hostile takeover,there are several conflicts of interest between the hostile takeovers and the listed company,controlling shareholders and external shareholders,management and shareholders.By analyzing these three conflicts of interest,it is clear that the logical basis on the core value of the anti-takeover measures is maintaining the interests of the company and the company's shareholders rather than maintaining the interests of the controlling shareholder or management.It can be seen that the core value of the anti-takeover measures and the original intention of the trading halt are similar-both focus on the interests of the company's external shareholders.But finding the common ground between the anti-takeover measures and the trading halt does not mean that trading halt should be one of the anti-takeover measures.Due to the surprising feature of the hostile takeover,there are many complicated factors involved.Especially when it may pose a threat to the interests of shareholders,the listed company is obliged to disclose the material information about the threat to the shareholder's interests to the shareholders of the company.From the halt system of the New York Stock Exchange,the Hong Kong Stock Exchange and the British Stock Exchange,listed companies are not unable to halt trading when they encounter hostile takeover.Because the overseas capital market is more mature,and the absorption of major information is more efficient,and in order to maintain theorder of the market,the period of trading halt is extremely short,which may be the reason why the trading halt has not developed into a measure of anti-takeover.China's capital market is full of a large number of small and medium-sized investors,and has not yet reached the high level of efficiency in overseas markets.It takes longer to pass and absorb major information.Therefore,the trading halt is regarded as one of the measures to defend hostile takeover,which is in accordance with the pursuit of value to protect the interests of external shareholders.There only provide a principled provision in Administrative Measures on Takeover of Listed Companies for the measures of anti-takeover,which stipulates that the measures taken by the board of directors for the acquisition shall not impose undue obstacles and shall not harm the legitimate rights and interests of the company and its shareholders.But what is an inappropriate barrier,that is,whether the anti-takeover measures taken by the defenders have legitimacy lack the judgment standard.This paper refers to the Judicial Review Standard established by the Delaware Court of the United States,the Unocal Test,to determine the threat type of hostile takeover and the proportional requirements for the measure,and divides the legitimate boundaries of the measure.The types of threats that identify hostile takeover include: the opportunity loss for shareholders and the substantive coercion,change of control or become a controller when the hostile takeover has a precedent for crushing the company's shareholders or has evidence to prove that it has crushing intentions.Since the mechanism of the halt is to sacrifice the liquidity of the market in exchange for the time of information transmission and absorption.Therefore,in order to meet the proportional requirements of judicial review standards,the motive for halt must be maximizing shareholders' interests,but not just to protect managements' private interests.By minimizing the period of halt to reduce the impact on the market price mechanism,the trading halt as the measure cannot be cohesive and preclusive,which means the measure can meet proportional requirements.According to the legitimate boundary of the trading halt as the measure of anti-takeover,this paper finally draws on the experience of foreign trading halt system,in addition to China's current regulation,and propose a framework for the measure,including types of halting,procedures,regulatory measures,etc.This paper attempts to clarify the legitimate boundary of the trading halt as an anti-takeover measure through the analysis of the mechanism of the hostile takeover and the anti-takeover and the mechanism of trading halt.utilize case studies,comparative analysis and other research methods to standardize the Chinese characteristic measures.