| Supplementary company law rules are generally a combination of default rules and exclusion paths. In the selection of default rules, setting the rules preferred by most companies as the default can reduce transaction costs. For example, the rules for external transfer of equity in the limited liability companies should be simplified to a single rule of preemptive rights for other shareholders. If the majority default is in favor of major shareholders or the management, penalty or reversible default standards should be applied, and rules that are unfavorable to major shareholders or the management should be set as default to reduce agency costs. For example, the cumulative voting system in the election of directors and supervisors in a joint-stock company should be the default rule. In terms of setting exclusion paths, reducing the difficulty of exclusion can save transaction costs, but in order to suppress opportunistic deviations that may harm the interests of some entities, it is necessary to tighten the exclusion paths until all shareholders agree. Default rules which are difficult to be excluded are closer to mandatory rules, thus there are clearly more changes in the rigid sequence of company law rules compared to the simple dichotomy of mandatory/supplementary. Beyond this binary construction, providing alternative solutions in the form of enabling rules that can replace default rules, or regulating deviations from default rules with time-based and event-based sunset clauses after the event, can both reduce the transaction or agency costs when excluding default rules, but the law-revision-based sunset clauses should be limited in its application. |
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