China’s evolving takeover regime represents a significant move toward a shareholderoriented, rule-based corporate governance framework essential for the continued growth of its capital markets. However, the practical application of these rules remains largely untested due to the rarity of hostile takeovers in China. The Vanke-Baoneng takeover battle offers a valuable case study to examine how China’s regulatory framework governs directors’ conduct in contested control transactions.
This paper analyses the Vanke-Baoneng case to identify key challenges within China’s corporate governance system, focusing on ambiguities and gaps in directors’ duties and the permissibility of defensive measures. It identifies previously unexplored issues, such as vague terminology in Article 8 of the Takeover Measures governing anti-takeover actions, the uncertain scope of directors’ duty of loyalty, and the lack of clear criteria for assessing duty breaches. These gaps allow directors considerable, and potentially unintended, discretion in takeover decision-making.
The research contributes to a deeper understanding of China’s corporate governance, demonstrating how transplanted legal norms can produce inconsistency and unpredictability in practice. The paper offers recommendations, which would clarify fiduciary duties and takeover defences through targeted guidelines or guiding cases, to promote a more coherent, reliable and effective legal framework for corporate control.
European Business Law Review