The Legal Research Of Cash Option Right In Context Of Merger Via Share Swap

The cash option is a common term in the merger transaction of stock exchange absorption.The interpretation of the cash option by the Shanghai and Shenzhen Stock Exchanges is "When a listed company intends to implement major matters such as mergers,divisions,acquisitions,asset reorganization,etc.,the relevant shareholders will follow the agreed price The right to sell the shares of the listed company it holds to a listed company or a third party within a prescribed period of time;and there is no direct regulation of cash options at the CSRC level.The right to cash selection is not legally established by the transaction subject to create and promote the applicable informal regulations.It is said that the cash option is regarded as the flexible application of the repurchase request of dissenting shareholders in a joint-stock company.The key to distinguishing the two is to distinguish the characteristics of the cash option and clarify its attributes.Through the comprehensive use of normative analysis,comparative analysis,and empirical analysis,cash options and objection repurchase rights differ significantly in terms of rule interpretation,institutional context and function,pricing mechanism,grantor attitudes,and exerciser preferences.The cash option is not an objection repurchase right,the two are regarded as the same or an attempt is made to replace the objection repurchase right with a cash option,which does not have any institutional effect.The cash option comes from the secondary market,and relies on the existing stock price of the secondary market to determine the exercise price.However,the cash option is also subject to the "exercise cycle" generated by stock price fluctuations: when the stock price is higher than the exercise price,because there is no premium space to attract shareholders to declare exercise,the cash option is in a "dormant state";when The stock price is approaching and eventually falls below the exercise price.The emergence of arbitrage space will stimulate large-scale exercise of shareholders.This situation not only causes a huge cash flow burden to the repurchasing party,but also causes shareholders to declare exercise and bounce.The number of negative votes of the General Assembly surged.When the negative votes reached a certain percentage,the transaction would be aborted.It can be said that the natural use of stock options by cash option rights has also become its inherent flaw,and has brought about "prisoner's dilemma" in exercise of rights.The incompleteness of the cash option makes it impossible to play the role of dissatisfied shareholderrelief.Its general application in the share merger is mainly the result of the listed company's own choice.Therefore,the cash option is not a legal right but a contract.Since the terms of the cash option are drafted unilaterally by the listed company,the authorized shareholders have no right to make changes and can only accept or reject it.Therefore,the attribute of the cash option is a standardized contract.The development of cash options in China is relatively short,business practices are limited,and it has not yet become a business habit,but through a wider range of practices,it has become a habitual operation in mergers and acquisitions,and has certain demonstration and guidance functions.From the perspective of earnings motivation,the majority shareholders of listed companies are most likely to be the real beneficiaries of cash options.Regardless of the necessity of the rules or the effectiveness of the rules,the cash option is neither used to increase the exit channels for dissent shareholders,nor helps to ensure that dissident shareholders get a fair and reasonable exit price.Therefore,the large shareholder who widely implements the cash option may be the original intention of the cash option system.From the perspective of institutional effectiveness,cash option is likely to provide real beneficiaries with two dimensions of compliance and economic efficiency.The current supervisory thinking of the regulatory authority on cash options is prudential supervision.The cash option has appeared in China for a relatively short period of time,and has not yet developed into a business habit,but has become a routine operation in the area of merger and absorption.Therefore,it is necessary to clarify the nature of its standardized contract and respect the suitability of listed companies according to their own circumstances The arrangement of cash options strongly requires that listed companies must apply cash options under certain circumstances,which not only violates the principle of contract freedom,but is also easily circumvented by listed companies and cannot be effective.