The Rise of Hostile Takeovers and Defensive Measures in China: Comparative and Empirical Perspectives

摘要

As the ongoing shareholding structure reform continues to reduce the level of ownership concentration of Chinese listed companies, hostile takeovers have been on the rise in China, so has the use of takeover defences. The recent high-profile case of Vanke vs Baoneng has generated an intensive social debate on the use of takeover defences and their regulation in China. This paper undertakes an in-depth study of the Chinese regime for takeover defences both in the books and in practice. From a comparative perspective, it reveals that Chinese law is a mixture of experiences transplanted from overseas jurisdictions, but functions differently due to the unique local conditions in China. It then empirically examines how takeover defences are used in practice, finding that takeover defences, particularly ex ante defences, are widely adopted by Chinese listed companies. This is a matter of concern given that takeovers have important economic functions particularly at the present stage of China's economic development. In spite of this, the paper refutes the idea of a blanket ban on the use of takeover defences, because takeover defences have both beneficial and detrimental effects. In regulating takeover defences, there needs to be a delicate balance between allowing the use of takeover defences and protecting shareholders' rights. It is submitted that the primary power to decide on the use of takeover defences should be vested in the hands of shareholders. Considering the local situation in China where the main agency problem of corporate governance is between majority and minority shareholders, it is further argued that the issue of takeover defences should not be left entirely to shareholders in the name of corporate autonomy, but rather need to have some legal intervention to protect the rights of shareholders, particularly minority shareholders, in relation to the use of takeover defences.