Seminar paper from the year 2009 in the subject Law - Civil / Private, Trade, Anti Trust Law, Business Law, grade: B+, Tsinghua University, language: English, abstract: The Company Law of the People’s Republic of China was revised in the year 2005. This paper analyses the protection of the minority shareholders under the new law.

Seminar paper from the year 2009 in the subject Law - Civil / Private / Trade / Anti Trust Law / Business Law, grade: B+, Tsinghua University, language: English, abstract: The Company Law of the People's Republic of China was revised in the year 2005. This paper analyses the protection of the minority shareholders under the new law.

In view of the increasingly severe exploitation of minority shareholders and the existence of double agency costs in China, it is necessary to provide strong protection for minority shareholders in China in order to build an investor-friendly system. By enabling minority shareholders to prevent misconducts of majority shareholders and managers, legal system has made significant progress in the past twenty years. Nevertheless, many defects still exist. The first enactment of the PRC Company Law was passed in 1992 with primary goal to serve reform of state-owned enterprises and therefore protection for minority shareholders was excluded by the scope of these reforms. The revision of the Company Law in 2005 was regarded as historical progress of Chinese company law in respect of providing protection for minority shareholders as many rights are conferred on shareholders and more measures were adopted to restrain the power of directors and controlling shareholders. However, this paper identifies that these various rights and protective mechanisms have certain deficiencies, which means that the interests of minority shareholders suppose to be guaranteed would be inevitably affected. Without improvements and clarifications of the existing legal protection in the future, interests of shareholders and company as a whole will be obstructed ultimately and development of capital markets will be significantly impeded.

Minority shareholders in China face the risk of exploitation by both managers and majority shareholders. This is due to owner absence and concentrated ownership structures. In reducing these double agency costs, non-legal protection has a key role to play. Four market forces have been identified as reducing these double agency costs; each of these will be evaluated. Whilst their effectiveness may be recognised in some countries, this paper will conclude that certain factors hamper their function, thus rendering them ineffective in today's Chinese context.

This monograph aims to provide an in-depth analysis of the legal protection of the private equity (PE) investors in China. In an academic sense, this research mainly focuses on the agency problems in the life cycle of PE investment under the business organization law system in China. Briefly speaking, the agency problems of PE investment derive from the two-level separation of ownership and control, one of which is the principal–agent relationship between the PE investors and the fund manager, and the other is the principal–agent relationship between the PE shareholders and the management of investee companies. It is the first research to provide an in-depth examination on the investor protection in the PE investment under the business organization law system in China.