Research On Restrictions On Voting Rights Of Shares In Violation Of Regulations

Article 86 of the Securities Law of the People’s Republic of China,namely the Rules for Disclosure of Interests and the Rules for Slowly walking,established the current system of licensing of the capital market in our country.Actions violating these two rules are in this paper defined as purchasing securities in violation.The legal consequences of illegal placards stipulated in Articles 193 and 213 of the Securities Law shall be ordered to correct,given a warning,imposed a fine with a maximum of 600,000 RMB.Similar rules can also be found in the Measures for the Administration of Takeovers.At current stage,articles in the Securities Law against purchasing securities in violation are relatively weak,making the cost of breaking law very low.The administrative punishment with a fine of 600,000 RMB to the most has objectively encouraged the raid style acquisition featured with conduction before report,compensation after detection,bypassing procedures to save money and winning once-for-all if not detected.A lot of licensing companies try to restrict shareholders from purchasing securities in violation by amending some articles of association,thus causing abundant back-and-forth lawsuit between the licensees and the targets(or its major shareholder),and even stalling the governance of listed companies.As a result,the rights and interests of minority shareholders and the development of capital markets are severely hampered.The question of whether the voting right of the shareholders in illegal placards listed companies should be limited has become a hotspot issue in the judiciary and academia arousing a heated debate.Starting from the Chengdu Road and Bridge Case and Shanghai Xinmei Case,this article analyzes the relevant provisions of the current legislation and deficiencies with a review of different opinions from the academia and a retrospection on enforcement and judiciary practice in foreign mature capital markets.Finally,the author believes that the experience of relevant legislation in other jurisdictions can be learned in order to improve the relevant legislation in China and restrict the voting rights of shareholders in illegal placards listed companies.Meanwhile,Articles of Association can also restrict shareholders’ voting rights within the scope prescribed by relevant laws so as to urge investors to strictly comply with the mandatory norms on information disclosure obligations promulgated by laws and regulations such as the Securities Law to effectively improve the transaction in capital markets.It can also give placards sides and listed companies a cooling-off period,prompting both parties to increase communication and solve problems and thus promote the stability of the capital market.