Legal Regulation Of "Tunneling" By Controlling Shareholders Of Listed Companies

The core of the governance of China’s securities market lies in controlling shareholders,and the regulation of controlling shareholders of listed companies has become extremely important because of the large number of public shareholders(also called small and medium-sized investors).The contradiction between controlling shareholders and small and medium shareholders has become an important issue in the governance of listed companies in China,among which the "tunnel digging" behavior of controlling shareholders is a common means,which seriously damages the interests of listed companies,small and medium investors and creditors.The existing legal system has many problems,which is not conducive to the rights of the injured subjects.Therefore,it is necessary to explore the specific problems of such behavior and improve countermeasures.The act of "tunneling" refers to the act of transferring the company’s assets or profits out of the company by the controlling shareholder for personal gain.In China’s securities market,the specific situations are: capital appropriation,illegal guarantee and non-fair connected transactions.Article 20 and Article 21 of China’s Company Law are the legal provisions regulating the act of "tunnel digging",and the China Securities Regulatory Commission(CSRC)promulgated the "Guideline No.8 on Supervision of Listed Companies-Supervisory Requirements on Financial Transactions and External Guarantees of Listed Companies" and the "Regulations on the Regulation of Financial Transactions and External Guarantees of Listed Companies".However,there are still many shortcomings,which need to be further combined with the situation of front-line supervision in the securities market and the experience of mature securities markets such as the United States.From academic research and legislation in mature securities markets,the regulation of "tunneling" by controlling shareholders of listed companies is mainly related to the concentration of equity in the securities market,the convenience of small and medium-sized investors to defend their rights and the perfection of laws and regulations.This paper adopts the case study method,literature analysis method and comparative method to carry out the research and finds the following problems: the Company Law does not sufficiently regulate the abuses of controlling shareholders,the internal control regulation is not in place,the responsibility of information disclosure is too light,the independence of independent directors is not clear,the supervisory letter of the stock exchange lacks attention and the creditors are not well protected.Therefore,in view of the above-mentioned problems,we propose the following recommendations: firstly,to introduce the concept of corporate soft law in internal governance and the concept of responsive regulation in external governance,so as to change the rigid regulatory concept from the conceptual point of view;secondly,based on the means of direct regulation of controlling shareholders in China,to impose internal control obligations on controlling shareholders,to give them the right to make major financing decisions,to play their role in financing and to restrain their behavior;lastly,to impose the duty of information disclosure on controlling shareholders.Lastly,we will take the responsibility of information disclosure as a remedy,including act,result,causation and exclusion of liability.