The mandatory bid rule under China's takeover law: A comparative and empirical perspective

In a two-tier partial bid, the acquirer may set different bid prices for the controlling shareholder and the minority shareholders.7 Minority shareholders usually lack information about the decisions of their peers and feel strongly coerced to sell their shares for fear of being locked in the target company.8 The accepting shareholders may be more successful than the rejecting shareholders, so it is imprudent for a shareholder to reject such a bid.9 Due to the difficulties of launching shareholder litigation in the U.K. and Australia, the U.S. fiduciary duty rules cannot be used to prevent the acquirers' exploitation.10 In 2006, China significantly reformed its corporate takeover law, permitting the use of a partial bid by an acquirer to discharge the MBR duty triggered by his crossing of the thirty percent shareholding threshold.11 This represents a profound deviation of the Chinese MBR from the U.K. MBR.12 On the other hand, the 2006 reform indicates a new trend that China's corporate takeover rules move towards the Japanese model of mandatory partial bids, which exists in China's neighboring Asian jurisdictions like Japan, Taiwan, and South Korea.13 When certain conditions are met, an acquirer in Japan is obligated to launch a partial bid to acquire the number of target shares which it plans to purchase in the first place.14 There are no extra financial burdens or risks of delisting associated with launching a general bid for all the remaining target shares beyond the purchase plan. [...]Hong Kong had the opportunity to persuade Chinese authorities to learn from Hong Kong securities law, including takeover rules. In the process of drafting its securities law, Chinese legislators also sought "suggestions and opinions" from Hong Kong experts.16 As a consequence, the influence of the Hong Kong takeover law on mainland China was so significant that the 1993 ITS, the first key regulation containing a takeover legal regime in China, faithfully transplanted the MBR from Hong Kong, which can in turn trace its origin to the U.K.17 The Chinese MBR, as stipulated under the 1993 ITS, bears close resemblance to its British counterpart: it requires an acquirer to launch a general bid, which means a full bid to all target shareholders for all remaining shares.18 Specifically, within forty-five working days of any legal person's direct or indirect acquiring of thirty percent of the target shares, such person should make a bid to buy all target shares.19 The Chinese MBR