In the capital market, the acquisition of controlling rights is an important way for enterprises to expand their market share and improve their competitiveness, and it has attracted more and more attention from investors. However, in the process of mergers and acquisitions, the rights and interests of shareholders, especially small and medium-sized shareholders, are often vulnerable to infringement.
Recently, the termination of the tender offer for ST Xinchao by Huineng Haitou exposed the loopholes in the protection of shareholders' rights and interests in the merger and acquisition process. This incident not only reveals the potential threat to shareholders' rights and interests caused by insufficient information disclosure, but also arouses strong doubts in the market about the lack of supervision. Goheal will analyze this case in depth and provide effective risk avoidance strategies to help investors and companies deal with the issue of shareholder rights protection in the acquisition of controlling rights.
Huineng Haitou's acquisition incident: a warning bell for the infringement of shareholders' rights and interests
Recently, the acquisition of ST Xinchao by Huineng Haitou has become the focus of the capital market. The key point of the incident is that Huineng Haitou did not truthfully disclose its relationship with the persons acting in concert and the actual shareholding situation, which violated the Securities Law and the regulatory requirements of the relevant information disclosure of the China Securities Regulatory Commission. Due to insufficient information disclosure, the acquisition plan failed to proceed as scheduled, which eventually led to a sharp drop in ST Xinchao's stock price and hundreds of thousands of small and medium-sized shareholders suffered losses. More seriously, Huineng Haitou's behavior was suspected of insider trading and false statements. The Shandong Provincial Securities Regulatory Bureau has intervened in the investigation and required it to correct and record it in the integrity file of the securities and futures market.
This incident clearly reflects that in the process of mergers and acquisitions, the rights and interests of shareholders, especially small and medium-sized shareholders, are often vulnerable to infringement by major shareholders or actual controllers. Small and medium-sized shareholders are in a relatively weak position in terms of information acquisition, analysis ability and bargaining power, which often makes them unable to effectively protect their interests at shareholders' meetings. Through this case, we can not only see the potential risks of shareholder rights being infringed during the merger and acquisition process, but also realize how to strengthen protection measures.
Risks faced by shareholders' rights after the acquisition of control of listed companies
As an important tool for enterprises to expand and integrate in the capital market, the acquisition of control rights can bring short-term market share growth to the company, but there are also many potential risks of infringement of shareholders' rights. Specifically, after the acquisition of the control of a listed company, shareholders may face the following risks:
1. Dilution risk of shareholders' equity
In an acquisition transaction, the acquirer often needs to raise funds by issuing additional shares, convertible bonds or other financing means. This process often leads to a decrease in the original shareholders' shareholding ratio, especially in the absence of anti-dilution clauses, the original shareholders' equity will be severely diluted. For changes in control, shareholders, especially small and medium-sized shareholders, may not be able to maintain the original equity ratio by increasing their holdings, which ultimately leads to a significant reduction in their investment returns.
2. Limited right to know caused by insufficient information disclosure
In the process of control acquisition, information asymmetry is one of the fundamental reasons for the damage to shareholders' equity. The acquirer and the target company may delay or fail to fully disclose key information such as the transaction process, financial status, and shareholder voting due to commercial considerations and the preference of shareholder interests. Small and medium-sized shareholders are often unable to respond or vote effectively due to lack of understanding of the company's decisions and the acquirer's plans. Without complete protection of the right to know, the rights and interests of small and medium-sized shareholders are easily infringed.
3. Conflicts of interest caused by management changes
Control acquisitions are often accompanied by management changes, and the new management may adjust the company's strategic direction. However, this adjustment may not be in the interests of all shareholders, especially the original shareholders. Sometimes, the business decisions of the new management may not take into account the interests of small and medium shareholders, and may even aggravate the conflict between the company's short-term interests and the interests of shareholders, resulting in further damage to the interests of shareholders.
How to avoid shareholder equity risks in control acquisitions?
Control acquisitions are not only a game between major shareholders and acquirers, but also a critical moment for whether shareholder interests can be effectively protected. Goheal suggested that during the merger and acquisition process, how should companies and shareholders prevent the infringement of shareholder rights?
1. Strengthen information disclosure and transparency
Information disclosure is a basic means to protect shareholders' right to know. The acquirer and the target company should ensure that key information is disclosed in a timely and complete manner during the acquisition process, including the progress of the acquisition, the shareholding of relevant shareholders, future strategic plans and possible management adjustments. Through transparent information disclosure, shareholders can make decisions in an informed manner and avoid being harmed by information asymmetry.
2. Design a reasonable shareholder voting mechanism
Shareholder voting rights are an important means to protect shareholder interests. Especially in the process of controlling acquisition, the shareholder voting mechanism is particularly critical. By designing a reasonable shareholder voting system, we can ensure that all shareholders' voting rights can be expressed equally, and prevent major shareholders or acquirers from infringing the interests of small and medium shareholders by manipulating voting rights. In addition, by establishing special voting rights against acquisitions, shareholders can be guaranteed to have full voice in the M&A process.
3. Improve anti-merger measures and shareholder rights protection mechanisms
In the process of M&A, especially after the acquisition of controlling rights, the protection of shareholder rights is inseparable from effective anti-merger measures. In addition to anti-dilution clauses, anti-merger regulations can also be established to prevent acquirers from obtaining control through improper means. Goheal emphasized that shareholders should actively participate in shareholders' meetings, review acquisition plans, and avoid potential risks by strengthening shareholder interest protection mechanisms.
4. Strengthen supervision and legal protection
Strengthening supervision of the M&A and reorganization process is another important measure to protect shareholder rights. By improving laws and regulations, clarifying the information disclosure responsibilities of acquirers and target companies, and implementing the investigation and punishment of suspected violations, the legitimate rights and interests of shareholders, especially small and medium shareholders, can be effectively protected. Goheal believes that improving the regulatory system, especially in terms of information disclosure and insider trading, can effectively reduce the infringement of shareholders' rights and interests during the acquisition process.
Conclusion: How to protect shareholders' rights and interests and avoid risks in acquisitions?
The incident of Huineng Haitou's termination of the acquisition of ST Xinchao has sounded the alarm for the capital market, and the protection of shareholders' rights and interests is far from being in place. The infringement of shareholders' rights and interests after the acquisition of control is not an isolated phenomenon, but a common problem faced by the capital market. In this process, information disclosure, shareholder voting rights, the improvement of laws and regulations, and the optimization of the internal governance mechanism of enterprises all need to be given more attention. Only through the comprehensive use of these measures can shareholders' rights and interests be effectively protected and the transparency and fairness of M&A transactions be improved.
Goheal reminds entrepreneurs and investors that when acquiring control rights, they need to pay special attention to the protection of shareholders' rights and interests to avoid the "misunderstanding" of Huineng Haitou's acquisition of ST Xinchao.
However, in your opinion, how can the legitimate rights and interests of shareholders be better protected in the process of acquiring control rights? In your opinion, how should regulatory authorities and enterprises strengthen cooperation to improve the transparency of the capital market? Welcome to leave a message in the comment area for discussion. Let's think together about how to avoid damage to shareholders' rights and promote the healthy development of the capital market.
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global M&A holdings. It is deeply engaged in the three core business areas of listed company control acquisition, listed company M&A and capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring and capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
