Protection of Shareholder Equality in Selective Share Repurchase

Selective share repurchase is common in practice. Such repurchase is likely to damage the interests of creditors, but also easily lead to conflicts of interest between shareholders . In order to protect the interests of shareholders, it is necessary to follow the principle of equality of shareholders, and to protect all shareholders’ trust in the company’s being a going concern. Following these principles, we should conclude the standards to evaluate the legitimacy of selective repurchase, these include the selective repurchase has a reasonable business purpose, the valuation of shares is fare, and the company should continue to be a going concern after the repurchases. In order to improve the efficiency of the protection of shareholders’ interests, we should introduce a special resolution procedure. This requires that China’s Company law should provide special decision-making rules for selective repurchase. And the court should examine whether there is abuse of shareholders’ rights in selective repurchase from the three aspects of substantive review.