Research On Performance Commitment And Protection Of Minority Shareholders' Interests

The performance commitment system was first applied in the shareholding reform in 2005,and has been increasingly used in M&A activities since 2008,becoming an important arrangement in transactions.In order to restrict the way assets are sold and protect the rights of the acquirer and small and medium shareholders,the CSRC stipulates when the present value of income method and hypothetical development method are used or when the counterparty is the controlling shareholder of the listed company,the actual controller or related parties under its control,a performance commitment is required,together with a clear and feasible compensation agreement.However,the measurement do not further specify the rule of performance compensation,which gives major shareholders an opportunity to use their positions making profits for themselves when performance commitments are not completed.As a result,the company's normal operations are affected and the interests of small and medium shareholders are damaged.Hareon PV backdoored * ST Shenlong in 2011,and agreed on a performance commitment for the three-year period of 2011-2013.If not completed,the major shareholders will compensate the profit difference in cash.Finally,the commitment performance was not achieved.The major shareholders used cash for compensation in the first two years,and changed cash compensation to share compensation in the third year.However,under the poor operating performance around 2012,the company still carried out a high cash dividend distribution.Through reasonable inference,major shareholders had an incentive to compensate performance commitments with cash dividends.At the end of the 2014 commitment period,after the company's "high delivery" plan was released,major shareholders reduced their shares and cashed out.In addition,a few days after the completion of the above reductions,reminder announcements were made.The large cash dividend distribution of the major shareholders during the commitment period and the "high delivery" at the end of the commitment period combined with the reduction of holdings had affected the normal development of the company to a certain extent,and also caused damage to the interests of small and medium shareholders.Hareon PV is representative as an example of research performance commitment and the protection of the interests of small and medium shareholders.During the application of Hareon PV's performance commitment,large shareholders use information advantages and position advantages to evade the performance compensation responsibility by manipulating the cash dividend plan and using excessive cash dividend dividends as performance compensation funds;on the other hand,in spite of the company's poor operating conditions,the company issued a "high delivery",bringing a high stock price,when major shareholders started to reduce their holdings to gain benefits.These two methods not only endangered the normal operation and development of the company,but also damaged the interests of small and medium shareholders.Such methods can be achieved in the context of performance commitments mainly due to the inherent internal and external governance deficiencies.It also reveals that there is still something to be perfected in terms of performance commitments,such as the source of funding for performance compensation.For example,when the performance is not completed,the dividends received by the major shareholders during the commitment period should be refunded.The protection mechanism for the interests of small and medium shareholders still needs to be strengthened.The case also reveals the need to pay close attention to the dividend policy of listed companies and the reduction actions of major shareholders during the use of performance commitments,and the need for more standardized information disclosure.This paper studies the protection of the interests of small and medium shareholders in performance commitments,and analyzes how the self-interested behavior of large shareholders affects the company's operations and the interests of small and medium shareholders.