Examining the transplantation of takeover law into China: balancing shareholder protection with efficiency

Abstract

Chinese takeover regulation is a combination of rules transplanted from the UK, Hong Kong and US, which are adopted, adapted and put into practice according to Chinese regulatory needs and the influences of other local factors. This thesis explores the divergence between the Chinese rules and the relevant foreign rules, both the law in books and the law in action. It also evaluates the divergence and proposes further improvements.

The main divergence is that the Chinese takeover law often prioritises the aim of facilitating efficient completion of takeover transactions, while giving insufficient consideration to shareholder protection. The original contribution of the thesis is the use of legal transplantation theory to justify a reasonable emphasis on efficiency in Chinese takeover regulation. In order to do so, the author has developed general criteria for evaluating legal transplantation: the transplanted law fitting in with the legal demands, institutional capacity and culture of the law recipient country. The argues that based on the status of economic development and other local factors in China, it is justifiable for the Chinese takeover law to facilitate completion of takeover transactions, although such pro-takeover policy is often not emphasized to the same extent in developed regulatory systems such as the US and UK. Further, there is originality in the arguments justifying and identifying the ways in which Chinese takeover law needs to be further developed in order to satisfy the criterion of shareholder protection. The author argues that this in general can be achieved through properly increasing the involvement of minority shareholders in the law making and law enforcement process. Finally, there is originality in small developments of transplantation theory itself, such as the selective transplantation discussed in the conclusion chapter, which may have relevance for the transplantation of law in other areas of Chinese securities regulation and in other developing, particularly Asian, economies.