Study On The Stock Transfer Of Stock Limited Company

The stock transfer mechanism is an important part of the stock limited companymechanism. This article will firstly analyze the practice of the court on ruling the validityof stock transfer through detailed discussion on the basis of jurisprudence and basicprinciples, then explore the status and existing problems of present stock transferlegislation in depth by parallel comparison of different stock transfer mechanisms ofstock limited company, and lastly, on the footing of perfect the legislation, suggest onhow to refine the legislation of stock transfer mechanism of the stock limited companymechanism on the basis of jurisprudence study and combination of the advancedlegislative skills and legal practice in China. This article will be divided into5chaptersand the total words are14thousand.Chapter1The theoretical basis of stock transfers. This part will focus of two majorquestions. The first one is the analysis of the nature of stock through its concept andclassification. That is, equity is a new kind of right besides property right, debt andpersonal right. The other question is, circling of the private, property and capital nature ofequity, to discuss the private nature of equity as precondition of stock transfer, and theproperty nature of equity as the basis of stock transfer and the capital nature of equity asthe requirement for the stock to be transfer freely. The principles that should be followedin stock transfer of the stock limited company. This chapter mainly focuses on freetransfer principle and publicity of information principle. Firstly, the free transfer principleis admitted by commercial legislation of most countries, and the capital nature decidesthat the equity is transferrable, and the private right nature of equity decides that thetransfer of stock can be determined by the shareholders’ free will. However, there isalways limit for freedom. To protect the company and the right of other shareholders, it isnecessary to limit the stock transfer on the basis reasonableness. Free transfer is the basicprinciple for stock transfer and restriction as exception. Secondly, the principle ofinformation publicity should be emphasized in transferring the stock in stock limitedcompany, which is admitted by legislation of most countries. Especially for the listedcompany, publicize the information is a compulsory obligation stipulated by law. Thisarticle analyzes the authentic, accuracy and in-time principle of information publicity forlisted company.Chapter2The comparison of the stock transfer mechanism and other relevant mechanisms. This part points out that the transfer of stock is actually transfer of equity,their relation is form and content, and then concludes on the features of specified subject,no changing the independent personality of the company, formality, integrated and notdividable of stock transfer. And this article continues to compare in depth the legal nature,subjects, aim, procedure, legal rules and stipulations and legal effect between equitytransfer and asset transfer, equity transfer and equity contribution, equity transfer andequity acquirement, equity transfer and contractual debt transfer, equity transfer andequity guarantee.Comparison of stock transfer mechanisms between stock limited company andlimited-liability company. The author will make comparison and analysis in depth intheoretical basis, legal rules, domestic and oversea legislation and the content of relevantregulations circling the mechanism of stock transfer restriction, transfer of equityregistration and repurchase right of the disagreeable shareholders. In the aspect ofrestriction of equity transfer, the stock transfer mechanism of limited-liability companyshows a characteristic of human joining, and the regulation on stock transfer limitationare largely of procedure, and such restriction are the precondition for contract to be valid,without such transfer condition, the contract will not be effective, and the contract isunder a condition that its validity is pending；and the restriction of stock transfermechanism of stock limited company shows the characteristic of capital joining, suchlimitation of stock transfer are mostly substantial law, and the restriction is the necessaryelement of contract validity, the contract of stock transfer should be deemed void if suchrestriction is not complied with. In the aspect of equity registration, the legislation of ourcountry adopts the model of multi-polarization notice. Limited Liability Companyrequires the combination of shareholders’ name list registration and registration incompany registration organ as the legitimate notice requirement. Non-listed stock limitedcompany requires the combination of shareholders’ name list registration and delivery ofstock as the legitimate notice requirement and listed company of stock limited companyrequires the combination of shareholders’ name list registration and record on securityaccount as legitimate notice requirement. As to the question of influence of registrationon the validity of stock transfer in the theoretical world, most of the scholars agree that itshould have the setting-up effect against others, but the scope of setting-up against othersshould be different. That is to say, the name list registration of the limited liabilitycompany should only have the effect of setting-up against the company, and the registration in company registration organ should have the effect of setting-up against thethird party, and the name list registration of the stock limited company should have theeffect of setting-up against the company and third party. Through comparison, the authorthinks that a unified registration organ should be set up to implement the “accumulatedequity registration entrustment” mechanism. In the aspect of mechanism of disagreeableshareholder repurchase right, the author, through comparison of domestic and oversealegislation, introduce the Model Company Law of United States which contains thedisagreeable shareholders’ repurchase right mechanism that has clear claimant, widescope of application reasons and detailed procedure for making the claim. Then theauthor points out that the disagreeable shareholders’ repurchase right mechanism of ourcountry has no clear claimant, narrow scope of application reasons and no specificprocedure for making the claimChapter3The validity of the stock transfer of stock limited company. This chapterstates the holding of court practice on the validity of the stock transfer with reference tothe hot issues and difficult problems. The emphasis of discussion will be focused on thefollowing three aspects:Firstly, This article put emphasis on the analysis of validity of contract of defectivestock transfer and the question of bearing of liability. The defective capital contributionwill result in the defective equity directly, and transfer of such stock will necessary resultin liability of validity of defective contract of stock transfer and defective capitalcontribution. As to the validity of the contract, there are different opinions, such asopinion of absolutely invalid, comparatively valid, and absolutely valid. The authorthinks that in judging the validity of the contract of defective stock transfer, it isimportant to insist the basis value of commercial law which is achieving “efficiency” onthe basis of “fairness”. And under the guidance of the notion of “protect the safety oftrading, and promote the efficiency of trading” of modern commercial law, to take theopinion of absolutely valid will be more suitable for the modern commercial practice.Whether or not a defective stock transfer contract is valid will be depended on whether ornot the holder of defective stock has the quality of shareholder and enjoy the equity right.From the point of view of present legislation, the laws of different countries all directlyor indirectly admit the shareholder’s quality and right of equity of the person who makesthe defective capital contribution; from the point of view of the doctrine of publicity ofcompany law, the shareholder or the promoter who makes defective capital contribution, as long as his or her name is recorded in the corporate memorandum and shareholders’name list, without a due procedure of eliminating the right, should be deemed to have theshareholder’s quality of the company and enjoy the right of equity and to deal with thestock. The third party who trusts such publicity and accept equity therefore should not beaffected by such defect even if the equity under publicity is defective because of thedefective capital contribution. Moreover, it is necessary to clarify the validity of thedefective stock transfer contract for the claim of liability of defective capital contributionof the person who makes such contribution to be made. If his or her shareholder’s qualityis denied because he or she fails to make capital contribution, the logical precondition forrequiring he or she to make such contribution in full afterward. Therefore, the defectivecapital contribution should not affect the validity of the defective stock transfer contract.There are different points of view as to how to determine the subject who should bear theliability of defective capital contribution, such as the opinion of transferor shareholderfully responsible, transferee shareholder fully responsible, the transferor and transfereeshareholders jointly responsible, and determining by whether or not the transfereeshareholder is in good faith. The author thinks that according to the legislation of othercountries, the capital contribution liability of the shareholder will not be eliminated bythe transfer of the stock, and the transferee will not be exempted from contributionliability because of the transferor have bear such liability. The design of the mechanismof determining the subject which bears the liability of defective contribution should be onthe basis of the balance of the interest of transferor shareholder (promoter), transfereeshareholder, company and the creditors of the company. In the civil action that thecompany requires the transferor shareholder, transferee or other promoter to bear the civilliability, the transferee in good faith should be exempted to bear liability of compensatingthe difference of contribution on the consideration of the doctrines of publicity and outerformality of commercial law and the company’s remising in fulfilling the obligation ofpressing; in the action that the creditors of the company require that the transferorshareholder, transferee or other promoter to bear the civil liability, the author thinks thaton the basis of the subrogation right theory, it should admit the legitimacy of the claim ofthe creditors, and the law should stipulate that the transferor and the transferee of thestock should bear the joint liability to the creditors, the defense of good faith and fraud ofthe transferee should be excluded, and the transferee should only have a right to claimrestoring afterward, in order to protect the interest of the creditors and maintain the safety of the trading.Secondly, the notice and validity of the stock transfer of the stock limited company.The change of stock holding needs to be shown to public in certain way, in order toenable the third party to understand the existence and belonging of the equity and ensurethe order and safety of trading. The method of publicity of transfer of the stock is todeliver the stock, change the registration of the shareholders’ name list and the record oftransfer of security account. As to the effect of equity publicity in stock transfer, theregulation of different country will be different due to different theoretical basis.According to the “will doctrine of property change”, the change of equity is caused bythe agreement of debt independently, and the formality such as endorsement, registrationis not stipulation of validity, that is to say, publicity is only a setting up element, but not aelement of validity. According to “debt formality doctrine of equity change”, for a stocktransfer to be legally valid, it needs not only the agreement of stock transfer between theparties but also certain legal form as the necessary outer formality elements, andpublicity is the necessary element for the stock transfer to be valid. According to thepresent stipulation of the company law of our country, the legislation model is debtformality doctrine which takes the publicity as the necessary element for the stocktransfer to be valid. So, this article takes the difference between validity of stock transfercontract and equity change as precondition for distinction. Moreover, there should bedifference between the validity of registration of equity change and stock transfer, that isto say, the publicity of equity should not influence the validity of the stock transfercontract, which means that the validity of the contract should be determined by thecontractual theory; while the publicity of equity should have influence on the validity ofequity change, that is to say, the delivery of the stock is a sign of the change of equity tobe effective between the parties of the stock transfer contract, and the registration of thechange of shareholders’ name list is a sign for the equity change to have the setting-upeffect. And the record of equity change in the security account of listed company andnon-listed company which has the stock registration putting up together and entrusted isa sign for the stock transfer to be effective and having the setting-up effect.Lastly, the restriction mechanism of stock transfer of the stock limited company andvalidity of stock transfer will be discussed in this part. In stock transfer, free dealing isthe principle and transfer restriction is an exception. In the trading practice of equity, theshareholders will break the restriction in stock transfer because of different kinds of reason. Base on the doctrine of debt formality of equity change, the publicity of deliveryand registration of the transferring stock is a necessary requirement for the equity changeto be legally effective besides an agreement of stock transfer. The publicity of the equityis merely a fact behavior, and no agreement of transfer of stock is needed. So theregulation of restriction of stock transfer will have influence on the validity of the stocktransfer contract. The regulation of restriction of stock transfer should be deemed as akind of forbidden regulation from its aim of legislation, which is compulsory regulation;from its true meaning of legislation, base on the requirements of standardizing thestructure and behavior of the company, adjusting the relationship of the company and theshareholders, the law should have reasonable restriction to the stock transfer activities, inorder to ensure the public investors interest in the security trading dynamically andrealize the fairness and order of the security market, so in this sense, such regulationshould be validity regulation. Therefore, the stock transfer contract that is against suchrestriction regulation should be deemed null and void. Analysis of the legitimacy of thecompany memorandum should be the starting point in determining the validity of thestock transfer contract that is against the restriction in company memorandum, which isthe stipulation of company memorandum on “other restriction stipulation” according toarticle142item2of Company Law which meets the requirements of “not below thecondition of legal restriction, not forbidding the transfer of stocks in disguising form, notagainst public policy and public interest”. The enforcement mechanism of the courtallows the restriction stipulation of stock transfer to be broken, the shareholder holdingthe share that are not allowed transfer sometimes create the case of being sued in order toavoid the restriction regulation of stock transfer, and transfer the stock with the hand ofcourt. So it is important to amend the law and perfect the enforcement mechanism of thecourt in order to perfect the restriction regulation of stock transfer.Chapter4The regulation of anti-monopoly law in stock transfer. The transfer ofstock is a normal kind of activities in the market, but if the centralization of the stock istoo high, it will result in monopoly which will impair the normal competition of themarket. The merger of listed company is good for forming scale economy and improvingthe ability of competition of business person. But the merger that is possible to result ineliminating or limiting competition or have the effect of monopoly will bring problems ofmonopoly of industry and destroy the structure of the market. So to limit such merger is acommon practice of the anti-monopoly authority of every country. The anti-monopoly law in America and European Union is complete and sound. The relatively perfectmechanism of “application-censor-deal” provides a model for legislation of the activitiesof merger with foreign investment for other countries. The author uses a comparativeanalysis method to introduce the successful experience of the anti-monopoly applicationand censor mechanism of merger with foreign investment of America and EU, and thenpoints out the weakness of anti-monopoly law of our country which leaves too muchfree-judging power for the anti-monopoly authority because of the ambiguity of theanti-monopoly application standard and the uncertainty of the anti-monopoly censor. Soour country should learn the successful experience of America and EU in anti-monopolylegislation, establish the anti-monopoly legislation system of merger with foreigninvestment, implement the detailed practicing rules of anti-monopoly law and “guidanceof merger”, and perfect the merger mechanism of companies.Chapter5Review of stock transfer mechanisms of stock limited company of China.The author will, on the basis of analyzing the status and existing problems of presentstock transfer legislation of stock limited company of China, provide suggestions andideas on perfect the mechanisms of values selection of stock transfer mechanisms ofstock limited company, liability-bearing legislation in transferring defective equity,legislation on equity registration, restriction mechanism legislation, anti-monopolylegislation and legislation on mechanism of repurchase equity right of the disagreeableshareholders.