Research On Legal Issues Of Pooling Of Contractual Right Of Farmland Into Limited Liability Company

Since premier Zhou Enlai put forward construction of "modern agriculture " on the government report in1954, the transition from traditional agriculture to modem agriculture has been our pursuit. Modern agriculture is high-efficient agriculture with scale, specialization and standardization, which needs to change land fragmentation caused by "average-land-system".Otherwise, agricultural modernization would never be available for hope.The pooling of contractual right of farmland is conducive to not only large-scale and more stable land management by lower cost, but also specialization and standardization by limited liability company which has unique advantages of governance structure, organizational degree, operating mechanism, business decision, and market penetration.It breaks the bottleneck of capital shortage in agriculture, brings into management personnels which are scarce in rural area, and therefore helps to improve modernization level of agricultural management.As a result of the de facto security function of contractual right of farmland, for the time being, the regulation of its pooling is more policy than law.The situation of inadequate legal regulation has caused some distortions in pooling practice. Therefore, the pooling of contractual right of farmland should come back to the path of legal regulation. It is of important theoretical and practical significance to study how to resolve the conflicts between the real right and the de facto security function of contractual right of farmland, how to choose suitable organizational form of pooling scientifically, how to balance the conflicts of interests among the stakeholders, how to put forward legal countermeasures so as to facilitate the pooling of contractual right of farmland.Except "introduction" and "epilogue", This dissertation includes seven chapters.The first chapter is "definition of the pooling of contractual right of farmland and relevant issues". Accurate definition is the foundation of any research. This chapter discusses around the definition of two concepts which include contractual right of farmland and its pooling.As for contractual right of farmland, this article analyzes some issues,such as the subject, the control of agricultural use, the real right in law and the de facto security function. The author thinks that the "initial subject" should be "member of household"rather than "household", that the "successor subject" should be expanded to all units and individuals. The control of agricultural use lies in the stringent monitoring of government authority, which has nothing to do with the transfer of contractual right of farmland and the rganizational form and business scope of its alienees. The point of view that contractual right of farmland can be devided into contract right and management right,is useless for protecting farmers from losing land,and also without any legal basis. The doctrine of " registry as essential "for the establishment of contractual right of farmland, helps to maintain the security of market transaction without increasing the cost of establishment, as long as certain technical transformations of the present system are implemented. Contractual right of farmland is exclusive,and more preferential than collective land ownership. The theory called ’conjoint ownership" cannot be appropriate legal basis for the reform of collective land operation mechanism. Pooling of contractual right of farmland is often generalized in both theory and practice circles,and should be defined as investing contractual right of farmland which is of usufructuary into limited liability company in order to obtain company equity. Pooling will lead to the transfer of the contractual right of farmland from farmer to company. The current regulations which restrict pooling to "contracting household" and "cooperative production" are more ideology than legal consideration. This dissertation mainly studies the legal issues deriving from pooling of contractual right of farmland into limited liability company.The second chapter is " research on the legitimacy of pooling of contractual right of farmland. This chapter testifies the legitimacy of pooling of contractual right of farmland from economic motives, legal norm analysis and comparative law, and falsifies the viewpoint that pooling would lead to "enclosure movement" From the points of economics, pooling of contractual right of farmland has unique advantages and value for realizing large-scale land management. The capitalization of contractual right of farmland, will be beneficial to increasing farmers’property income,and to improving the level of urbanization and agricultural modernization. At present, the provision of article41of "rural land contract law" is a barrier to pooling of contractual right of farmland into limited liability company.This chapter demonstrates that the above provision is not scientific in terms of farmers’constitutional rights, the control of land use, and proprietors’protection. From the perspective of comparative law, there are all no legal barriers to pooling of farmland in the investigated countries and regions, although they have different social system, per capita resource, and land ownership."Enclosure movement" has nothing to do with the transfer of farmland, which can only attribute to the lack of stringent enforcement on land use.The third chapter is" empirical research on pooling of contractual right of farmland ".It studies the actual operation mechanism and effects of typical models in pooling practice. Such study helps to find new legal issues proposed by practice and their more effective solutions. This chapter studies the advantages and disadvantages of several influential models:i.e "Nanhai model","ZhengLong model","TangYing model","Qilin model"," Dongjiang model", and finds out the legal issues which need in-depth study:ie, the organizational forms of pooling, the conflicts and balance of interests between farmer shareholders and non-farmer shareholders, the conflicts and balance of interests between farmer shareholders and creditors, the conflicts and legal choice between company law systems and household contract systems,etc.The fourth chapter is "choice of organizational forms of pooling of contractual right of farmland". The choice of organizational forms is not only a policy issue,but also a legal one.Of course, we can’t abide by policy regardless of legal feasibility. It is undoubtedly of great theoretical and practical significance to analyze the advantages and disadvantages of typical organizational form in pooling practice, and to make right choice from legal perspectives. This chapter focuses on three typical modes,i.e. shares cooperatives, farmers’ professional co-operatives, limited liability company. Shares cooperatives is the product of ideology under specific historical conditions in lack of legal considerations, which is so different from the basic principles of international cooperatives,and therefore it is difficult to regulate by law.There are inner conflicts between the capitalization of pooling of contractual right of farmland and farmers’ professional co-operatives as a trading organization."Property-joint" and "for-profit" that limited liability company is characterized with,agree with the capitalization of pooling of farmland,while "person-joint "and "autonomy" are conducive to flexible arrangements for legal relationships between farmer shareholders and non-farmer shareholders,and therefore appropriate organizational form of pooling should be limited liability company.Other organizational forms.such as joint stock limited company, sole proprietorship enterprises, partnership enterprises, and one-person company, have scarce practical demands, although they have no legal conflicts with capitalization of pooling of farmland.The fifth chapter is "conflicts and balance of interests between farmer shareholders and non-farmer shareholders".Subject to the de facto security function of farmland, we should differentiate between farmer shareholders and non-farmer shareholders, and implement different rights and obligations on them respectively in agricultural company. But such arrangements will produce the conflicts of interests between them on profit-distribution, administrative power and voting rights of corporate affairs. Preferred stock as autonomy arrangement, is legal compatible with the stock of farmer shareholders.This chapter puts forward eight suggestions in the hope for balancing the conflicts in terms of preferred stock theory.ie.The stock of farmer shareholders should be treated as preferred stock with participating, cumulation, remaining-distribution, and veto;The voting rights of farmer shareholders should be regained under certain condition; Farmer shareholders should enjoy other rights except voting rights, the right of buying-back the pooled land and refund equity under certain conditions;Non-farmer shareholders should shoulder the guarantee liability for farmer shareholds’fixed income.In addition, in order to exercise farmer shareholders’procedural rights which is of high cost for a single farmer sharehold with limited knowledge and time,it’s a feasible choice to establish a farmers’professional co-operatives.The sixth chapter is "conflicts and balance of interests between farmer shareholders and creditors". Contractual right of farmland which has been pooled into limited liability company, constitutes company’s liability property for the creditors, but it has de facto security function for the farmer shareholders. The feature of liability property and the de facto security function form apparent conflicts, resulting in the conflicts of interests between farmer shareholders and creditors. This chapter discusses the conflicts of interests in establishment phase, operation phase, liquidation phase and their solutions respectively. Especially for the conflicts of interests in liquidation phase, on the basis of analyzing the advantages and disadvantages of various doctrines, the author puts forward the solutions which include "preemptive" and "pooling risk insurance"The seventh Chapter is "legal countermeasures to facilitate pooling of contractual right of farmland into limited liability company-----legislative perfection as center". It is the foothold of this dissertation. This chapter analyzes the conflicts between company law systems and household contract systems.Given the transition of the household contract systems, the maturity of the current company systems and theirs resilience to household contract systems to some extents,we should perfect the household contract systems, with company systems as a benchmark. This chapter puts forward eight suggestions of perfecting household contract systems.i.e. as for the subject system of contractual right of farmland, we should define "initial subject "as "household-member "rather than "household", and expand "successor subject "to all units and individuals; we should cancell the restrictive rules which confine pooling to "contractual household" and "cooperative production"; we should clean up the rules that the ownership of contractual right of farmland doesn’t be transfered during pooling,which is obviously against company law; we should transform the establishment of contractual right of farmland from "theory of will" to"doctrine of registry as essential"; we should cancell the restrictions on the transfer of contractual right of farmland so as to realize free transfer; we should cancel priority of the members of collective while ruralland circulation; we should make contractual right of farmland long unchanged;we should abolish the system of adjustment and withdraw of contractual right of farmland. In addition, we should have a correct orientation of the role of local government, limit the number of pooled farmland for reference of "two field system",and establish rural social security system step by step.The maybe innovations lie in:Firstly, since the policy from central government prohibited the pooling of contractual right of farmland into limited liability company, farmers’ professional co-operatives have become the mainstream of pooling in practice. In this paper, the author points out for the first time that there are inner conflicts between capitalization of pooling of contractual right of farmland and farmers’professional co-operatives as a trading organization, that suitable organizational form of pooling is limited liability company.Secondly, for the time being, academic circles pay more attentions on conflicts of interests between farmer shareholders and creditors while pooling, but overlook the conflicts of interests between farmer shareholders and non-farmer shareholders. This dissertation studies the relationship between farmer shareholders and non-farmers shareholders from the perspective of conflicts of interests, and puts forward new solutions to balancing the conflicts of interests between them in terms of preferred stock theory.Thirdly, as for the conflicts of interests between farmer shareholders and creditors in liquidation phase, on the basis of analyzing the advantages and disadvantages of various doctrines, the author puts forward the solutions which include preemptive and pooling risk insurance.