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Related party asset restructuring existing problems and countermeasures

Author: MengXianHui From: www.yourpaper.net Posted: 2009-07-27 15:16:02 Read:
Abstract: a means to configure resources as a listed company, the reorganization of assets in the stock market plays an important role in the widespread concern by the market. However, the reorganization of listed companies behavior has some short-term speculation, asset restructuring has not really improve and enhance operating results of the reorganization of the company. Especially in recent years related party transactions phenomenon prevalent in the reorganization of listed companies in China, to become one of the most concern of recent years. This analysis and discussion.
Keywords: asset restructuring; related party transactions; problems; countermeasures

A related party asset restructuring problem

With the increasingly fierce market competition, enterprise groups, the trend is increasingly obvious. Looking at the market, the strength of large enterprises are almost always associated enterprises, followed by the presence of a large number of related party transactions. The asset restructuring associated with the transaction because of its specific features and benefits has become an effective means for enterprises in the fierce market competition to resist external risks, however, we have to admit non-fair related party transactions has brought a series of negative impact.
(1) damage to the ability of operating independently of the listed companies. Listed companies by non-fair related transactions, can easily raise the net profit, manufacturing existing illusion. However, the continuing connected transactions, in the long run, will harm independent operating capability of listed companies. Can be found in the annual report published in recent years, many listed companies and holding company between the occurrence of a large number of transactions, almost lost cause listed companies should have the ability to, against external risk is also declining.
Since independence of the poor on the business of the listed company, excessive dependence on related parties, leading to the decline of its market competitiveness, and turn between the listed company and the controlling shareholder and other related parties to maintain the personnel, assets, financial inextricably linked, it is difficult to truly "Three separate." The help of the related parties listed companies to buy low sell high, there is not much difference in operating results with other companies, even far better than other companies. However, once the related parties can not protect themselves, the listed companies in the fragile ability to resist external risks, results of operations may fall into the trough, and even huge losses. This shows that the related party transactions of listed companies overly rely on the association, impaired ability of independent operators, the ability to embrittlement of the main players in the market.
(2) the results of assessments to lose objective foundation. Currently, the vast majority of China's listed companies are related party transactions, but also from the development trend, not only the number of intensified the transactions form of the ever-changing. Between listed companies with related parties by means of divestitures, asset replacement, artificially manipulate profits of listed companies, the performance of listed companies development complete loss of continuity and predictability, the performance prediction valuation has lost its practical significance.
(3) Related party transactions become an important tool for listed companies with the secondary market speculation China's stock market is still very short time established the legitimacy of the regulatory agencies on the secondary market, stock trading, regulatory compliance is not yet in place for two class provides a convenient market stock speculation. In order to open the imagination of the stock price rise, the institutions need to find the bright spot of the listed companies, earnings are expected to manufacture medium and small investors, with unscrupulous agencies chips to collect completed successfully "shipped". Listed companies tend to various forms of asset restructuring and related parties everywhere filled with good news about listed companies, making the entire stock market, in order to help the agency to complete the "shipping" process.
(4) prejudice to the medium and small shareholders' interests. Profits increased use of non-fair related party transactions is not sustainable profits brought by non-fair related transactions with an extremely deceptive. Short-term non-fair related transactions can cause the illusion of the operating results of listed companies, to meet the needs of eventually acquiring the interests of the related parties, disguise the risk of a listed company. Can not hide the extent of risk accumulation and release of listed companies and the interests of small investors suffer irreversible damage. A large number of facts have proven that non-fair related party transactions failed to safeguard the professional investment institutions and investment interests of small investors, and significantly increase the risk of the investment in the securities market, market speculative rise further, in the long run, it will undermine the the basis of the entire capital market, increase market instability factor will eventually damage the credibility of the capital market, leading to a lack of confidence of investors in the capital market.
(5) other subjects brought to the stock market. First of all, the interests of the creditors of the listed companies have little protection. In the case of related party transactions exist, the listed companies under the control of the largest shareholder can take advantage of the various interests output connected transactions, profit manipulation, earnings will be output to the largest shareholder, while the loss for themselves, this direct "hollowing out" of listed companies, have little protection against medium and small shareholders equity practice, the interests of the creditors of the company also makes. Case in the debt restructuring with creditors to reach a debt agreement, often incidental or terms and conditions, the company's second year earnings more than is necessary to reach a certain level also part. If the company does not want the recent return of the debt, usually they take advantage of the related party transactions to shift profits as much as possible to make statements reflect the low level of profits in order to escape creditors dunning.
Second, increase the risk of third-party intermediaries practicing. Related party transactions in the listed company and its related parties, usually with the involvement of third-party intermediaries. Related intermediaries in respect of related party transactions, asset valuation, financial audits, legal proceedings and other aspects of professional judgment jointly and severally bear the corresponding legal responsibility. Listed company and its related parties is precisely to take advantage of related party transactions to artificially manipulate the profit, so, the parties to the transaction will be a variety of ways, such as related party transactions non-associated and other related party transactions in the form of more complex and hidden, and thus greatly increase practicing the risk of third-party intermediaries.
Again, the regulatory agencies regulatory difficult. Association usually the advantages of the use of information about listed companies operating in the secondary market, insider trading, manipulation of. Secondary market speculation profitable purposes. Even in the process of reorganization of assets, related party transactions can bring significant results, but fundamentally, it is not conducive to the establishment of a market economy under the principle of fairness, but also not conducive to play the function of the securities market allocation of resources. These circumstances increase the difficulty of the work of the regulatory agencies, the specification of the related party transactions has gradually become the focus of attention of the national regulatory authorities, especially in China, the laws and regulations on related party transactions involving less, how to regulate the reorganization of listed companies associated transactions, increase the transparency of the securities market information to regulatory authorities, including the relevant market management agencies, such as the tax department made a serious challenge.

Countermeasures

(1) improve the corporate governance structure. Improve the corporate governance structure of listed companies is the inner assurance solve the reorganization of assets, improper related party transactions, optimize the equity structure of listed companies is a necessary condition to improve the corporate governance structure. The current shareholding structure of listed companies due to the dominance of the phenomenon is widespread, this shareholding structure of the corporate governance structure should not be underestimated. The powers of the general meeting of shareholders is difficult to implement, the Board lacks independence, the liability of directors play down the formality of the board of supervisors, the supervisors functions weaken difficult to play a real role in oversight, coupled with the small and medium-sized retail investors less constrained and can not form the company managers effective supervision of company managers do whatever they want, asset restructuring external difficult to know, insider trading and unequal trading despite repeated prohibitions. Therefore should improve their corporate governance, to prevent the occurrence of black-box operation from the company's internal institutional asset restructuring behavior in the open and fair environment.
(2) the establishment of a credit system of listed companies. From the transactions motive, the process of reorganization of listed companies, the profit manipulation, false restructuring and related transactions, information disclosure is not timely, the ultimate purpose of untrue behavior is to the stock market go misappropriating. However, the price paid for this purpose is quite huge and deadly, it is the public's distrust of the stock market listed company credit widely suspected. Therefore, have to face such a severe problem: create a listed company credit system is desperately needed. Create a credit system of the listed companies should first start from intermediaries, strictly in accordance with the Accounting Law, the Lawyers Law and other related legal system, the establishment of the intermediary's credit rating system, available to the public, and the high credit rating to survive without trust or credit rating of poor to gain a foothold; Second, amendments to the Companies Act, the Securities Act, and other laws and regulations, to improve shareholder representatives litigation system, the disclosure of false information without trust and damage to shareholders, strictly subject to civil liability as well as criminal responsibility, the company internal governance structure, reasonable and perfect not cope passively into the inherent requirements of listed companies of their own development initiative; once again, the establishment of a credit rating system for listed companies. Regulatory authorities investigate the information disclosure of listed companies on a regular basis, based on the extent of keeping promises high to low ratings and public advertised, and not just for some company problems are identified in ST change post-processing of prevention in advance, so that The price truly become the barometer of the performance of listed companies situation.
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