| Financial assistance for the purchase of one’s own shares straddles capital increase at the “front end” of the company capital system and distribution at the “back end” of the system. It has the attributes of both distribution and business and evolves into fraudulent behaviors such as circular capital increase and disguised distribution in practice. Financial assistance prohibition is brought onto the track of regulation of corporate distribution because of its creditor protection function, but because of its business attribute, it is unable to rid itself of the path dependence on business behavior regulation. Financial assistance can be typified by three aspects, i.e., the subject matter of the funded purchase, the credit of the funded party and the subjective state of the funder. China should, on the basis of the prohibition of financial assistance in principle, set up exceptions to the prohibition for business judgment and creditor security. The former allows financial assistance for the benefit of the company, approved by a special majority of the board of directors, or in the normal business of financial institutions, while the latter allows financial assistance realized by legal profit distribution, share repurchase, capital reduction, or financial assistance provided for employees’ share scheme limited by undistributed profits. In the design of liability, it’s advisable to expand relief subjects to companies, shareholders and creditors, and limit liability subjects to directors and senior managers. If a company provides financial assistance illegally, the effectiveness of the financial assistance depends on whether or not the recipient acts in good faith. |
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