Preferred Stock Structure: Theoretical and Practical Issues of Implementation in Chinese Foreign-invested Enterprises
China’s new Company Law increased possibilities for the adoption of a “preferred stock” structure. Greg L Pickrell and Judy J Deng of Pillsbury Winthrop Shaw Pittman explore the practicality of incorporating the two-class stock structure within China’s corporate law doctrines and interplay with other relevant segments of laws.
Issue: October 2008
Keywords (click to search):
Company Law
Foreign-invested Enterprises
preferred stock
China’s new Company Law increased possibilities for the adoption of a “preferred stock” structure. Such adoption would provide more incentives for private equity investments. However, there is no explicit two-class stock structure under China’s corporate law regime. Practices are expected to vary at different authorities regarding how much deference will be given to the preferred stock provisions in the agreements with investors. The authors of this article endeavour to explore the practicality of incorporating the two-class stock structure within China’s corporate law doctrines and interplay with other relevant segments of laws.1/2 (In this article, the different types of foreign-invested enterprises (FIEs), i.e. Sino-foreign Equity Joint Venture, Sino-foreign Cooperative Joint Venture and Wholly-Foreign-Owned Enterprise, will be referred to as respectively EJV, CJV and WFOE.)
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