Research On Shareholders’ Irrevocable Delegation Of Voting Rights Of Listed Companies

In recent years,as an innovative practice of acquisition methods of listed companies,irrevocable delegation of voting rights has been widely used in China’s securities market.From a positive perspective,this arrangement can integrate advantageous resources,give play to synergy and enhance the strength of the company.However,because current regulatory provisions have not made an accurate characterization of such irrevocable delegation of voting rights and taken reasonable regulatory measures,the application in practice is chaotic,which brings challenges to corporate governance.Given that the control and corporate governance of listed companies are tightly connected with the operation of the securities market,this paper intends to study the legal relationship,nature and effectiveness of shareholders’ irrevocable delegation of voting rights of listed companies and on this basis,propose a corresponding normative approach.The full text is divided into five parts:The first part of this paper is a realistic investigation of the shareholders’ irrevocable delegation of voting rights of listed companies.Through the retrieval of cases in "cninfo.com",the delegation of voting rights cases from 2015 to 2021 were analyzed and summarized.On this basis,clarify the commonalities and reasons of irrevocable delegation of voting rights,and form an overall understanding and grasp of China’s irrevocable delegation of voting rights.This paper holds that,in practice,in order to maintain the stability of transaction relations,the agreements have agreed on "irrevocable";The trustee can exercise voting rights according to its own will,which is completely different from the traditional proxy;Moreover,in such delegation of voting rights,the trustee obtains a wide range of rights,including almost all the common interests.For the purpose of establishment,shareholders usually use it as a transitional arrangement for equity transfer,a relief for listed companies or a tool to consolidate control.The second part of this paper is to sort out the problems caused by the irrevocable delegation of voting rights.The delegation of voting rights provides many conveniences for shareholders to achieve a variety of purposes,but it also impacts the market order to a certain extent.This paper argues that behaviors such as shareholders’ random signing,revocation of voting rights,and repeated delegations may cause corporate governance turmoil.The delegation of voting rights is usually closely related to the change of control rights of listed companies.Frequent changes of control rights and even control rights disputes affect the company’s operation and the interests of minority shareholders.In addition,the emergence of irrevocable delegation of voting rights may make the voting right become a tool for the private interests of major shareholders and increase additional governance costs.The academic and practical circles have different views on the nature and effectiveness of delegation of voting rights,which is detrimental to the implementation of the agreement and the settlement of disputes.Besides,delegation of voting rights may also be used to evade the obligation of tender offer,depriving minority shareholders of the opportunity to exit the company and share the premium.The third part of this paper is to deconstruct and sort out the legal relationship of irrevocable delegation of voting rights.Scholars have different views on the nature of irrevocable delegation of voting rights.Analyzing its background and legal relationship,This paper believes that the delegation of voting rights is essentially the transfer of voting rights based on the separation of voting rights and income rights,which borrows the superficial meaning of "entrustment".On the basis of clarifying its nature,we find that delegation of voting rights is an arrangement made by the contracting parties for the ownership of different interests in the same equity.The relationship between the contracting parties is not a simple principal-agent relationship,but a community of interests.From the perspective of external relations,the entrusting party is still the shareholder of the company,and the trustee has obtained rights or increased obligations through agreement,the exercise of these rights and the performance of obligations will ultimately affect the company and other shareholders of the company through voting rights.Under the delegation of voting rights,the entrusting party sets more obligations for itself,and the trustee should still exercise the attention of good managers when exercising relevant rights such as voting rights.The fourth part of this paper aims to identify the effectiveness of irrevocable delegation of voting rights.Under the logic of the organizational law,The property attribute of voting right enables it to become the object of entrustment,and the breakthrough of the principle of prohibited separation of shares gives theoretical justification to irrevocable delegation of voting rights.As a practice of shareholder agreement governance,the existence of delegation of voting rights reflects a certain practical demand.Therefore,unless there is legal invalidity,the party’s autonomy should be fully respected.On this basis,this paper compares the delegation of voting rights with the invalidity of legal contract one by one,it can be seen that the delegation of voting rights is a false representation of conspiracy,and the validity of the hidden behavior—the transfer of voting rights should be judged.This paper believes that only the irrevocable delegation of voting rights between shareholders,the trustee’s exercise of voting rights forms a positive interest binding with the contracting parties,and no violation of mandatory provisions of laws and administrative regulations,is valid.Based on the above analysis and demonstration,the fifth part is about how to regulate the irrevocable delegation of voting rights.For one thing,it is essential to improve its macro supervision.On the whole,such commercial innovations should be treated with a tolerant and prudent attitude,and the regulatory path to include persons acting in concert should be revised to prevent the evasion of mandatory offer obligations.Secondly,we must strictly supervise the waiver of voting rights to avoid the failure of many regulatory measures.Furthermore,it is necessary to refine the information disclosure requirements for delegation of voting rights,to fully disclose the reasons for delegation of voting rights,and the information disclosure must be timely.On the other hand,it is necessary to clarify the corresponding binding rules to regulate the exercise of the rights of both parties.For some essential terms of the agreement,both parties should follow the guidelines of the model agreement issued by the regulatory authorities when designing the agreement.It shall also be required to specify the minimum period of irrevocable delegation of voting rights,and it is forbidden to set the delegation period to be perpetual.In addition,in order to reduce the randomness of signing and revoking delegation of voting rights agreements,the performance of the "irrevocable" clause should be strengthened.Even if a termination announcement is issued,the parties should still abide by the original commitments and perform their obligations within the original deadline,for the sake of realizing the priority protection of the interests of the company and minority shareholders.