| With the increasing decentralization of A-share listed companies’ equity,more and more Chinese listed companies begin to take anti-takeover measures to resist the potential or facing hostile takeovers.As a concept originated from the UK,the principle of non-frustration is the core concept of UK’s anti-takeover system,and it has been introduced and developed in the EU,Hong Kong and Mainland China,which is of great significance to the development of the corporate control market in China.Its main content is to limit the anti-takeover power of the board of directors of the target company in the face of hostile takeovers,so as to reduce the agency cost between shareholders and directors and encourage the development of the takeover market.First of all,the first part of the paper introduces the main content and origin of the principle of non-frustration.For the understanding of the principle of non-frustration,there are two important aspects: first,the ultimate ownership of the decision-making right of anti-takeover and the division of the scope of power of the shareholders’ meeting and the board of directors in the act of frustration;second,under the principle of non-frustration,the fiduciary duties of the board of directors of the target company.This paper analyses the origin of the principle of non-frustration form the UK.The reason lies in that empirical data tends to affirm the positive value of hostile takeover,leading to the value orientation of anti-takeover tends to belimited,influenced by the traditional theory of shareholder centrism in company law,and the positive role of institutional investors in it.Secondly,the second part mainly introduces the introduction,development and existing problems of the principle of non-frustration in China.First,the paper summaries the system and realistic basis of transplanting the principle of non-frustration.The legislation of our country also adopts the principle of shareholders’ meeting centralism,and it is not reasonable to entrust the decision-making power of anti-takeover measures to the board of directors due to the reality of centralized ownership structure of listed companies.Then it discusses how this system in our country evolved from the initially too strict principle of non-frustration to the current moderately relaxed regulation mode,and further discusses the main defects of the current rules,including the contradiction between the rules,the unclear division of the scope of decision-making power of anti-takeover measures,and the lack of more operable fiduciary duty rules of the board of directors.This leads to the fact that in practice,the existing rules do not effectively guide the acquirers to compete with price and strength,and promote the formation of a fair market for corporate control.Finally,the third and fourth part of the paper,based on the previous analysis of China’s local practice and problems,makes analysis and suggestions from the two perspectives of the power division of the shareholders’ meeting and the board of directors of the target company under the principle of non-frustration,and the duty of loyalty and duty of care of the board of directors.In the third part,in terms of the division of powers between the general meeting and the board of directors,by analysing the relevant rules of the UK and the EU,the paper thinks that the decision-making power of anti-takeover measures with the effect of direct frustration of hostile takeovers shall be given to the general meeting of shareholders,while the decision-making power of those with the effect of indirect frustration shall belong to the discretion of the board of directors.Because although these indirect measures may also lead to frustration result,but they are beneficial to the interests of the shareholders of the target company.On the other hand,because the current provisionsof our country do not extend to the beginning of the offer,it is suggested to provide shareholders with the opportunity to review after the event for the anti-takeover measures adopted by the shareholders’ meeting in advance.At the same time,considering the characteristics of equity concentration in China,in order to improve the overall rationality of shareholders’ decision-making and protect the corresponding decision-making rights of small and medium-sized shareholders,some suggestions are put forward to improve the voting mechanism of shareholders and encourage investors to actively exercise their rights.In the fourth part,in terms of the fiduciary duty of the directors of the target company under the principle of non-frustration,combined with the analysis of the general and special provisions on the duty of loyalty and care of the directors of the target company in chapter two,the paper thinks that,after the offer begins,under the principle of non-frustration,the directors need to perform the duty of helping the shareholders to make decisions,putting forward suggestions and proposals,and the directors can also perform their own anti-takeover measures.In the process of performing their duties and exercising their powers,the directors need to abide by the principle of proper purpose and act in good faith.When there is a conflict of interest,the interests of the company and shareholders are preferred.The judgment standard is whether the directors have obtained the improper interests,and the directors bear the burden of proof.The duty of care pays more attention to the obligation of directors to disclose information to make shareholders fully informed.And in order to meet the requirements of diligence and prudence in the process of acquisition within the scope of its duties,the combination of both subjective and objective standards shall be adopted.Subjectively the directors should take the maximization of the interests of the company and shareholders as the starting point and end point,and objectively they should be examined whether they perform the due process. |
