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

European Business Organization Law Review (2019) 20:363–398 DOI:10.1007/s40804-019-00148-w

36 Pages Posted: 3 Sep 2019 Last revised: 31 Oct 2019

See all articles by (Robin) Hui Huang

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law; 华东政法大学(East China University of Political Sicence and Law); University of New South Wales - Faculty of Law

Juan Chen

Independent

Date Written: August 15, 2018

Abstract

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.

Keywords: Hostile takeover; Takeover defence; Corporate ownership structure; China; Comparative perspective; Empirical study

JEL Classification: K22; G34

Suggested Citation

Huang, (Robin) Hui and Chen, Juan, The Rise of Hostile Takeovers and Defensive Measures in China: Comparative and Empirical Perspectives (August 15, 2018). European Business Organization Law Review (2019) 20:363–398 DOI:10.1007/s40804-019-00148-w, Available at SSRN: https://ssrn.com/abstract=3437697

(Robin) Hui Huang (Contact Author)

Chinese University of Hong Kong - Faculty of Law ( email )

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Hong Kong
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HOME PAGE: http://www.law.cuhk.edu.hk/app/people/prof-robin-huang/

华东政法大学(East China University of Political Sicence and Law) ( email )

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China

University of New South Wales - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia
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Juan Chen

Independent ( email )

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