On The Confirmation Of The Title Of Shareholders

Confirmation of the title of shareholders concerns itself with the allocation of rights and assumption of responsibilities by the contributors in the legal process with company as the connecting point. Besides, it is a preposed and unavoidable matter in lawsuits with companies involved, such as the exertion of shareholders'right, objection against the efficacy of decisions by the general meeting of shareholders, responsibility of contribution by shareholders, transference of shareholders'right, etc. It may be safely said that this is a forever controversy between judges and lawyers. With the confirmation of title of shareholders becoming a focus and a difficulty in company practice, it receives more and more attention from legislators as well as theorists. However, the immaturity of theoretic system and the uncertainty of the validity of relevant legislations lead to the many-folded-standard hindrance hard to do away with in actual practice, and hence the significance of further research on the confirmation of the title of shareholders. With as its cutting point the basic questions in the confirmation of the title of shareholders, this paper mainly centers on the formal and substantive requirements of the title of shareholders and the analysis on the function and position of articles of association, register of shareholders, record of the registration authority, credence of actual contribution, certificate of contribution, documents of actual exercise of shareholders'right, etc. in the process of the confirmation of the title of shareholders, and with the above-mentioned efforts as a basis, further efforts have been directed to concrete discussion on several important controversies in the confirmation of the title of shareholders, namely, confirmation of the title of flawed contributors, that of silent contributors and title confirmation in the transfer of shareholders'right.This paper consists of three parts, namely preface, main body and conclusion. The main body comprises five chapters.Chapter one is about the basic matters in the confirmation of the title of shareholders. In this paper, the title of shareholders is a synonym of the position or identity of shareholders, and it is different from investment qualification while at the same time covers the meaning of the latter. The title of shareholders to shareholders is what the soul is to the body. It witnesses its origin together with shareholder's right and they are not in a relationship of cause and consequence. It is independent of and at the same time relying on the personality of company. The key here lies in that the title of shareholders and the shareholders'right are different facets of the same legal relationship. The granting of the title of shareholders means the enjoyment of the shareholder's right and vice versa. Therefore, the confirmation of the title of shareholders is on the other hand that of the shareholder's right. In real life, conflicts of interests on the title of shareholders exist between shareholders and the company, between shareholders and the third person outside the company and between shareholders themselves, and the above-mentioned conflicts is the internal cause for the confirmation of the title of shareholders. In the process of the confirmation of the title of shareholders, attention should be paid to the consistence of directions and approaches on a macroscopic level and it manifests itself mainly in the following three respects: first, the adoption as theoretic basis the priority of efficiency and safty and the due attention on justice and the recognition as the fundamental principle public summons and openness; second, the adoption of the two-layered procedural mechanism of the combination of recognition by the company and that by the court with court recognition playing a leading role; third, the title of shareholders as the legal relationship between shareholders and the company and the company as the logic direction in the confirmation of the title of shareholders.Chapter two dwells on the analysis of proofs in the confirmation of the title of shareholders. The confirmation of the title of shareholders in essence is about the adoption and discernment of relevant evidences. The Anglo-American law system rely on register of shareholders, the continental law system accepts the theory of dichotomy, while most of the scholars in our country advocate the application of substantive and formal requirements respectively in relations inside and outside the company according to different functions. Recently, a three-layered structure of evidences has been proposed by some scholars of our country, namely, source evidence, validity evidence and counterevidence. However, the register of shareholders does not meet the present need of our country, the three-layered structure is too idealized and the theory of dichotomy is much more practical though its functional application is not very scientific. Therefore, this paper approaches this question via the theory of dichotomy and a functional investigation has been performed in terms of concrete evidences like articles of association, register of shareholders, record of registration authority, credence of actual contribution, certificate of contribution, documents of actual exercise of stock rights, etc. It is found that these can all be adopted as evidence in the confirmation of the title of shareholders. The difficulty here lies in that these evidences often contradict each other or they may be flawed, which leads to multiple standards in the confirmation of the title of shareholders as well as confusion in individual cases. As a result, the efficacy and levels of efficacy of the evidences become the key in the confirmation of the title of shareholders. This can be contemplated from two perspectives. Macroscopically speaking, the standard for formal or substantive requirements alone cannot stand the test, while on the other hand, the preferential application of formal requirements and the exceptional application of substantive ones should be a general principle. The preferential application of formal requirements means the formal requirements are at a relative preferential position, which is derived from the corporate law nature of company law; the exceptional application of substantive requirements indicates that if there are enough evidences to help substantive requirements to rule out formal ones, the court should adopt the former ones, which is derived from the nature of private law of company law, never independent of the autonomy of the will. Microscopically speaking, according to the current legislation, shareholders can claim their shareholders'right via register of shareholders, which indicates that register of shareholders enjoys a preferential position. Because of the fact that articles of association are signed by shareholders at the initiation of the company, they are of importance in the confirmation of the title of the initiators. Record of registration authority is granted the efficacy to oppose the third party, but their weight of proof is limited to the third person of good faith outside the company, not inside of it. In terms of prospects of these means of evidence, the register of shareholders is more likely to become the dominant way of registration of shareholders.Chapter three focuses on the confirmation of the title of flawed contributors. Flawed contributors provide contribution against their relevant duties. Most of the foreign legislations do not stipulate clearly the relationship between contribution and the title of shareholders. Countries with no matter what kind of system of company capital do not require a correspondence between contribution and the granting of the title of shareholders and they also reach the common understanding that the acquirement of the title depends on share rather than on contribution. The new Company Law of our country indicates that flawed contribution is not a cause to deny the title of shareholders. However, in theory, concerning the title of flawed contributors, some hold that it does exist, some deny it and some believe there is only a limited title. In practice, there are cases which affirm or negate the title of flawed contributors. It is held in this paper that the negation of the title of flawed contributors is losing its legislative, theoretic as well as practical basis, the doctrine of limited title is not rigorous in terms of semantic expression or in theory, and the doctrine of affirmation should be upheld because it agrees with the capital system, the duties and responsibilities of contribution, the value of company law, jurisprudential values and the priority of formal requirements. As for the exceptional application of substantive requirement, it manifests itself in the influence of the flawed contribution on the title of shareholders: the exercise of shareholders'right should be limited, and the different means of redress determines the keeping and canceling of the title of shareholders. The above-mentioned influences have all been testified via positive analysis on specific contribution situations. Furthermore, concerning the creditors of the company and the transferees of shareholders'right with flawed contribution, the good faith of relevant subjects should be taken into consideration. As to the former, the title of shareholders is confirmed on the basis of record of registration authority, while as to the latter, the transferees enjoy a scope of choice as to the title of the shareholders dependent upon the fulfillment of the duty to inform by the flawed contributor. Once the transfer is completed, the responsibility of the transferees for the company and the creditors of the company should be determined by different concrete situations.Chapter four centers on the confirmation of the title of silent contributors. The silent contribution in this paper is a concept in the narrow sense of it, which refers only to the silent contribution to the company. The controversies of silent contribution have been nicely solved in the Anglo-American law system by the trust system, while controversy arises between the formal and the substantive doctrines in the continental law system. In China, there is no clear stipulation concerning silent contribution, depriving the confirmation of the title of silent contributors of any legal basis. Theoretically speaking, there are the formal doctrine, the substantive doctrine and the doctrine of compromise. And the doctrine of the differentiation of outsiders and insiders, as a branch of the doctrine of compromise, is upheld by most of the legal scholars. In practice, the difference of inclinations of different courts leads to the diversity of court decisions. It is claimed in this paper that the two branches of the doctrine of compromise are either theoretically rigorous, or comprise double standards. The substantive doctrine accords seemingly to the requirements of justice, but it cannot direct the founding and operation of companies. The formal doctrine may lead to the loss of contributors, but this loss is the logical consequence of their silent contribution and furthermore, their loss can also be redressed via personal act. Therefore, the principle of preferential application of formal requirements and the exceptional application of substantive ones should be endorsed. The formal doctrine should be rectified by substantive and procedural laws and therefore becomes the standard for the confirmation of the title of shareholders. It can be addressed as"relative formal doctrine". The"relative formal doctrine"stands the check of practice in positive analysis, the specific application of this doctrine runs like this: the silent contribution can be further divided into complete and incomplete silent contributions; in case of the former, the open contributor will be deemed as shareholders, while in case of the latter, the silent contributors will be regarded as shareholders. Besides, when a third party is involved, record of registration authority will be resorted to in the determination of the title of shareholders. Further, in the cases of open and silent contributors, the identification of the responsibility of flawed contribution, the enjoyment of the right to transfer, the preservation and execution of shareholders'right of relevant creditors should all take into consideration the good faith of relevant subjects.Chapter five concentrates on the confirmation of the title of shareholders in the transference of shareholders'right. The transference of shareholders'right is the formal juristic act consisting of juristic act of credit and that of quasi real right. The diversity of the participants and the periodization of the procedures in the transference of shareholders'right lead to the multi-layers of the efficacy of the transference of shareholders'right, each of which is intimately connected with the change of the title of shareholders. The validity of the contract of transference of shareholders'right is the precondition of the change of the title of shareholders. The validity of the transference of shareholders'right identifies itself with the change of the title of shareholders and is at the same time indication and sign of it. The counter effect of the transference of shareholders'right is the fact that the change of the title of shareholders is publicized. In foreign legislations, the relationship between the transference of shareholders'right and register of shareholders consists of three modes: counter effect by registration, efficacy after registration and transference by declaration. In terms of the relationship between the transference of shareholders'right and record of registration authority ,there is only one mode, that is, registration against the third party. In China, the new Company Law stipulates the efficacy of the change of the record of registration authority against the third party, but it does not specify the efficacy of the change of register of shareholders. Theoretically speaking, there have long been controversies concerning the efficacy of the change of registration. Before the amendment of the Company Law, the focus of the controversies was the efficacy or counter effect of record of registration authority and after the amendment, the focus becomes the efficacy and counter effect of register of shareholders. Transference upon notice is now coming into the scene, too. In practice, some courts hold that unregistered transference is invalid, some hold that there is no necessary connection between registration and transference, while some view de facto possession of shareholders'right as transference. However, the controversies between register of shareholders and record of registration authority are rare. It is held in this paper that the change of register of shareholders is the symbol of the change of the title of shareholders, the record of registration authority grants the title efficacy against the third person, and the transference upon notice can act as useful reference in judicial procedures. This accords to the general principle of the preferential application of formal requirements and the exceptional application of substantive ones. When conflicts arise between register of shareholders and record of registration authority, the scope of efficacy of each should be coordinated. Of course, lack of change of registration may prevent stockholders from the efficacy of change and the efficacy against the third person, hence the necessity to provide effective redress for the transferees and other victims.