Research On The Regulatory System For Large Shareholding Increases In China

The Securities Law,which came into effect in March 2020,revised the regulatory regime for substantial shareholding disclosures with its Article 63 at its core.However,in practice,the current regime has proven to be ineffective.To explore the deficiencies of the current regime,the author examined and analyzed the origins,localization process,and institutional value of the regulatory regime for substantial shareholding disclosures.The regulatory regime for substantial shareholding disclosures originated in the United States capital market legislation.In the 1970 s,based on the practice of securities market phenomena such as hostile takeovers,the Williams Act amended the Securities Exchange Act and established the regime for substantial shareholding disclosures.As early as 1992,China introduced a prototype of this regime in the "Regulations on Joint Stock Companies," which was subsequently incorporated into the Securities Law and continuously adjusted in subsequent revisions.The value of the regulatory regime for substantial shareholding disclosures includes: strengthening information disclosure,reducing information asymmetry in the market to protect the interests of investors;maintaining market order,promoting fair information channels between investors,reducing high-risk behaviors such as leveraged buyouts and offmarket margin financing,and avoiding systemic risks;promoting the formation of control markets,supervising the management and controlling shareholders of listed companies,promoting their internal governance,and creating corporate value.Based on an examination of the regulatory system for large-scale share acquisitions,the author believes that there are certain imbalances in the current system’s design that have led to its ineffectiveness.Therefore,it is necessary to reflect on the design of the regulatory system in China in light of market practice.Firstly,the existence of a regulatory system for large-scale share acquisitions is necessary.Secondly,the value of hostile takeovers should be re-examined from a more positive perspective,so that the current regulatory system for large-scale share acquisitions in China may be considered imbalanced and overly strict on investors while lacking restrictions on target companies.Finally,a specific path for improving the regulatory system for large-scale share acquisitions is analyzed.Firstly,the "mandatory offer" rule should adhere to the standard of "materiality" to determine the boundary of information disclosure.Secondly,the "slow walk" rule is not suitable for the current era,and the negative effects of this rule have gradually become more pronounced.Thirdly,the legal liability system needs to be improved,the illegal costs of acquiring shares need to be increased,and the voting rights restriction period needs to be re-evaluated,as the current period is too long.Finally,it is necessary to establish private law remedies for illegal share acquisitions.Based on the above analysis,in order to improve China’s regulatory system for large-scale acquisitions,the following aspects can be considered.Firstly,a multi-level regulatory system for large-scale acquisitions can be established based on differences in acquisition purposes,with reference to the experience of the United States system.Through regulatory measures that combine regulatory attention with the securities market credit mechanism,persons who fail to comply with disclosure requirements can be regulated to avoid moral risks.Secondly,regulatory measures can be adjusted based on market practices,including gradually phasing out the slow-walk rule,mandating the transfer of illegally acquired shares,and restricting the trading of the target company’s shares by persons engaged in illegal acquisition within a certain period.Finally,the legal liability system should be improved: on the one hand,the calculation method for fines should be improved to increase the cost of illegal behavior,and a proportionate fine standard can be established based on relevant provisions of Japan’s Financial Instruments and Exchange Act.On the other hand,following the provisions for shortterm trading,illegal gains can be attributed to the company.In addition,a private law remedy system can be improved by introducing the Investor Protection Center as a means of implementing measures to protect the interests of the majority of small and medium investors,following the operational methods of "short-selling" false statements.