On Change Of Equity

So far there is no special dissertation to systematically discuss issues on changeof equity in China. This author, under the present structure of laws and regulationsrelated to company law and securities law in our country, based on legal practice, tryto review and discuss the major issues related to change of equity and build up abasic legal structure of change of equity.This research begins with the basic theory on change of equity. It clarifies thedefinition of equity and change of equity used in this article and analyzes the relatedjurisprudence basis. Equity should be used with a more comprehensive meaningwhich could cover shareholders rights of the Limited Liability Company and sharesof the Joint Stock Limited Liability Company under the Company Law of the PRC.We should observe the whole process from equity’s acquisition, alteration andelimination. Change of equity could refer to two forms of transfer: whole equitytransfer or partial rights transfer.It is the normative facts that set the change of equity in motion. Therefore, thediscussion on the main cause of the change of equity should be concentrated uponthe typical normative facts, the most significant aspect of which is the legal act,including donation, withdraw, transfer, merger, split-up, capital increase anddecrease, equity pledge and its implement, stock repurchase and margin trading, themost fundamental one of which is transfer. Due to the difference of the rightstransferred and transfer methods, there are various specific forms of transfer. Asgood cases in point, there are the transfers of equity related to Limited LiabilityCompany, non-public and public company, which could be categorized asconventional and normal cause of transfer, the transfers of preferred stock, stockrepurchase and margin trade, which could be depicted as new and abnormal cause oftransfer. Additionally, there are factual causes including bequeath, inheritance andthe dissolution of marriage, which lead to distinguished types of change of equityaccordingly. Some involve holistic change of rights and duties, while the othermerely affects partial rights and interests. Premised upon the discussion on the cause of change of equity, it could besafely to proceed this research with the mode of change and the effect of change.Founding the legal attribute of equity upon quasi-property right, the followingdiscussion focuses upon the comparative study of change of quasi-property rights.Simultaneously, this research also includes the inductive analysis of our domesticlegislative status, the principle of which is defined as the mode of register ofshareholder. Change of equity begins from the change of register, with slightexceptions such as ones explicitly defined by statutes or stipulated by contracts.The research ends upon the issue of current domestic legislative limitation onchange of equity in China, from the sector perspective of Chinese law such asCompany Law, Securities Law and other statutes. Moreover, contractual limitation ispermitted by Chinese law as well as. Once written in Articles of Association, theclause of limitation could affect corporation, shareholders and other relational parties,while promised in the agreements among shareholders, the clause of limitation onlyinfluences those signed. These clauses of limitation, which could be classified as therequirement of validity, prepositive procedure and those irrelevant to change ofequity, should not violate the mandatory requirement of law, and comply with thestandard of reasonableness. Otherwise, party in fault or those who breach contractswould incur legal liabilities and internal punishment.It is the perspective and depth of view that suffice the salient innovative andoriginal contribution. Firstly, the systematic research on change of equity covers allimportant aspects of relative legal matters. Secondly, the assertion of study thechange of equity from the sector perspective of the acquisition, change andelimination of equity rather than the holistic one is sounding and persuasive. Thirdly,this research processes the change of equity upon the enlightening division ofconventional and new modes of transfer. The study on change of equity shouldpositively correspond to the practical needs that evolve rapidly from time to time, inorder to maintain updated and utility.