The Conflict And Balance Of Shareholders' Interests Under The Company's Subscription Capital System

The reform of corporate capital system in China's Company Law in 2013 is aimed at relaxing capital control and expanding shareholders' investment autonomy.Because of the reform of the company's capital system "take the lead and move the whole body",the reform of corporate capital system has triggered a new round of interest conflicts among corporate participants.Currently the conflict and balance of interests among companies,shareholders and creditors are highly concerned by the theoretical and practical circles.But after the implementation of the subscribed capital system in China's Company Law in 2013,many conflicts of interests among shareholders have arisen under the premise of respecting the autonomy of shareholders' investment autonomy which need to be answered,such as how can it be handled if the individual shareholder set up the capital contribution period too long leading to fulfill its capital contribution obligation is impossible.Can the company require shareholders to contribute in advance when the shareholder's investment obligation is undue but the company's operation is short of funds?Do shareholders have shareholder qualification and shareholder rights when they subscribe to the company's capital but have not actually contributed?How should the non contributive shareholders and the invested shareholders enjoy their rights?How to solve these problems and balance the conflicts of interest among these shareholders is an unavoidable problem after the reform of the capital system.Therefore,this paper analyzes the conflicts of interests between shareholders under the subscribed capital system through empirical analysis,and puts forward legislative proposals to balance the conflicts of interests between shareholders under the subscribed capital system by means of comparative analysis,literature analysis and normative analysis.The full text is divided into five chapters besides the introduction.The introduction introduces the motivation and background of this study,research methods,research status and defines the core concepts of this paper.According to the Company Law of China in 2013,in principle in addition to the Limited by Share Ltd established,companies can be established if shareholders subscribe to the all registered company capital.Therefore,this capital system is called the subscribed capital system by many scholars.However,the subscribed capital system is still practiced under the statutory capital system in China.From the evolution and comparison of the capital formation system of the two legal systems,it is a general trend to loosen the restriction on the capital formation and shareholders'contribution,so as to facilitate the establishment and operation of the company.However,at the same time various countries have set up a complete set of systems such as shareholders' contribution reminder system and shareholders' contribution confiscation rules,etc.,in order to protect the balance of interests between company participants.Because of the lack of confidence in market self-regulation,the theoretical and practical circles pay too much attention to the protection of corporate creditors' interests in the process of the reform of corporate capital system.Scholars have also devoted a great deal of research energy to this issue.However,Scholars have not paid enough attention to the conflicts of interests among shareholders caused by the implementation of subscription capital system and how to establish institutional arrangements for shareholders' rights and obligations in accordance with the subscribed capital system.The company capital system reform of the Company Law in 2013 is also a little hasty in legislative preparation.At present,the rights and obligations of shareholders in our country generally follow the institutional arrangement under the original paid-in capital system.How to realize the linkage between the company capital system reform and the related supporting system reform needs further study.The first chapter puts forward and analyses the impact of the reform of corporate subscription capital system on shareholders.At the beginning of the establishment of our company capital system,we emphasized the control of shareholders'investment under the concept of strengthening the protection of creditors.However,with the failure of the protection function of company capital to creditors,the emergence of the substitution system of company creditors' protection,and the low investment efficiency brought about by capital control,our country's company capital legislation has transited from paying attention to ensuring the safety of transactions to giving consideration to both efficiency and efficiency.The subscription capital system makes shareholders'contribution show strong autonomy,which not only impacts the protection rules of creditors,but also impacts the rights and obligations of shareholders under the traditional paid-in capital system.Different requirements for shareholders'contribution are important signs to distinguish different company capital systems.Shareholders' contribution obligation is not only the obligation stipulated by the initiator's agreement and articles of association,but also the basic obligation of shareholders stipulated in company law.Shareholders'contribution obligation can not be exempted by shareholders' autonomy.The subscription capital system has not changed that shareholders'contribution obligation is the attribute of legal obligation.But under the subscription capital system there are no mandatory restrictions on the duration of shareholder's investment,no minimum limit on the amount of shareholder's investment when the company is established,no mandatory requirement on the proportion of shareholder's diversified investment methods,and the procedure of legal capital verification has been cancelled.There should be different considerations in the criteria of shareholder qualification confirmation under different company capital systems.Under paid-in capital system,some scholars regard actual investment as the substantive criterion of shareholder qualification confirmation.However,in limited liability companies and joint stock companies initiated with subscribed capital system,investors can become members of the company and acquire shareholder Identity and status when the company is established,at this time the contribution may not be paid,so we need to reconsider the criteria of shareholder qualification confirmation.The legal relationship between shareholders and companies is created when a company is established.Therefore,the legislative attitude adopted by the Company Law of our country to the rights of shareholders who subscribe to capital but fail to pay their contributions is to acknowledge in principle and restrict in exceptional circumstances.Some shareholders' rights allowed to enjoy without actually contributing capital can initiate imbalance of interests among shareholders,so it is necessary to limit these rights.The second chapter analyses the conflicts of shareholders' interests caused by the company's subscription capital system.The two legal systems have different corporate capital systems,but in recent years,the common trend of reform is to better balance the security of transactions and investment efficiency,as well as the interests of the company,shareholders and creditors.In addition to the factors contributing to the reform of corporate capital system in China,such as the transformation of government functions,the deepening of market system reform,and the change of legislators' understanding of the company's credit basis,another important factor is the institutional arrangement in order to adjust the stringent capital control which lays too much emphasis on protecting creditors' interests and neglects shareholders'interests.The company subscription capital system emphasizes the autonomy of shareholder's contribution,which brings about such problems as the period of investment stipulated in the articles of association may be too long,individual shareholders may control the amendment of the articles of association to extend the period of investment indefinitely,overestimate or underestimate the value of shareholders' non-monetary property,and shareholders' subscribed contribution is too high or too low.It not only causes conflicts and imbalances of interests between shareholders and creditors,but also causes conflicts and imbalances of interests between shareholders.If the time limit of individual shareholder's contribution is set too long,which makes it impossible for them to fulfill their obligation Or the time limit for individual shareholders to contribute capital has not reached,but the company is short of funds or unable to pay off its debts,the shareholders' conflicts of interest will arise if the shareholders are required to pay the unexpired capital in advance.If individual shareholders control the modifying of association articles of the company and maliciously extend the period of investment to avoid the obligation of investment,shareholders' conflicts of interest will also arise.When the actual value of non-monetary contributions is higher or lower than the amount fixed in the articles of association,it will lead to the imbalance of interests of shareholders in determining the corresponding rights of shareholders according to the proportion of contributions.The excessive amount of capital contribution pledged by shareholders leads to their inability to contribute,which will lead to the failure of other shareholders' trust in their commitment to contribute.The subscription capital system relaxes the control of shareholders' obligation to contribute capital,and it becomes a normal phenomenon that shareholders subscribe capital but do not contribute capital.Whether shareholders who do not contribute should become shareholders and whether shareholders who violate the obligation to contribute have shareholder qualification may lead to divergence of interests among shareholders.The process of shareholder qualification confirmation at the same time is the process of preventing the parties from obtaining illegal interests,safeguarding the legitimate rights and interests of the parties and balancing unbalanced interests.If a shareholder subscribes to capital but does not actually invest it,it will cause imbalance of interests between shareholders if treats his equity as well as other shareholders who actually invest it.Of course the enjoyment of shareholders' rights which is beneficial to the realization of the overall interests of the company and other shareholders,will not lead to conflicts of shareholders' interests.The third chapter discusses the basic theory of balancing shareholders' conflicts of interest under the system of corporate subscription capital.The legitimacy of balancing the conflicts of shareholders' interests through external intervention under the subscription capital system stems from the possible defects of shareholders'autonomy that need to be remedied.The real purpose of deregulation of corporate capital is to realize the flexibility of corporate financing,not to let shareholders be autonomous.Based on the differences of shareholders' autonomy ability,status and information,the shareholder's autonomy behavior concerns the interests of others and other reasons,the shareholder's autonomy in investment can not be laissez-faire autonomy.The authorized capital system in Anglo-American legal system attaches importance to the autonomy of shareholder's contribution,but at the same time it also stipulates supporting systems,such as expedited contribution and information disclosure to regulate the autonomy of investment.Under the subscription capital system,introducing external intervention to balance shareholders' conflicts of interest and promoting the balance of interests should be limited to the occasion of failure of autonomy.Guaranteeing shareholders' investment autonomy is still the basic principle.Equilibrium of interests is the value orientation of corporate justice system,and the design of corporate capital system itself should be the result of the balance of interests of all parties.Therefore,the ultimate goal of balancing the conflicts of interests of shareholders caused by the reform of corporate subscription capital system is to achieve the balance of interests of shareholders.The principle of shareholder equality is the criterion of adjusting the interest relationship between shareholders in company law.To balance the conflict of shareholders' interests under subscribed capital,we should first follow the principle of formal equality,but when we insist that formal equality will lead to substantive inequality,we should follow the principle of substantive equality to intervene.The fourth chapter puts forward countermeasures to balance the conflict of shareholders' interests under the system of corporate subscription capital.As far as shareholders' contribution is concerned,if the company's articles of association stipulate too long a time for shareholders to make capital contributions and have no possibility of fulfilling them,or if the individual shareholder modifies the articles of association and maliciously prolongs the time limit of capital contribution which he has not paid in full,it should be identified as abuse of rights,the relevant provisions should be attributed to invalidity,and there is a shortage of operating capital in the company or if the company fails to pay off the debts of the company,the company shall require the shareholders to fulfill the obligation of capital contribution.If the time for the shareholders to fulfill the obligation of capital contribution has not come,but if there is a shortage of operating capital or the company's debts can not be paid off,waiting for the bankruptcy of the company will be detrimental to all parties,the shareholders who want to use the form of the company to conduct business should promptly enrich Company assets.Therefore at this time the company should be able to require shareholders to fulfill the obligation of capital contribution in advance.In the above circumstances,involving the adjustment of the time of fulfilling the obligation of capital contribution in articles of association,because the board of directors has no right to set up shareholder's capital contribution obligations and no right to amend constitution,and the shareholders' meeting in company which implementing subscribed capital system should make a decision on behalf of the company whether to make a request to shareholders.The obligation of capital contribution is a direct legal relationship between shareholders and the company.Under the circumstances that the creditors of the company can apply for bankruptcy,it is not appropriate for the legislation to empower the creditors to request the shareholders to fulfill the obligation of capital contribution in advance when the period of capital contribution has not expired.We should improve the pricing mechanism for Non-monetary invested property of shareholders.Assessment only helps investors to find the value of the invested assets.The operating value of the invested assets should be judged by the investors.All shareholders may confirm the price fixed by shareholders' non-monetary property when the company is established on the consensus,and this is operable in limited liability companies and joint stock companies initiated and established.If the shareholder's non-monetary contribution is overvalued to the detriment of the creditor's interests,the creditor may relieve the company in accordance with the provisions of Article 30 of the Company Law.When the investor subscribes for an excessively high amount of capital contribution but is unable to pay it and the plot is serious,the company should remove the investor from the list after fulfilling the exigent procedures.Other initiator shareholders can demand that the shareholders who have violated the investment commitment shall liable for breach of contract.A shareholder who intentionally conceals the fact that he has no capital contribution capacity when signing the initiator agreement,he shall be liable for the contracting fault to the other initiator shareholders.As far as shareholder qualification confirmation is concerned,acquiring shareholder qualification is the result of autonomy of all parties in setting up a company.The articles of association are the documents made by the shareholders'autonomy,the register of shareholders is the documents of the company's autonomy,and the information of shareholders registered by the industry and commerce is also the result of the parties' autonomy.The confirmation of shareholders' qualifications based on these materials is a manifestation of the revision of the capital system of China's company to respect for the autonomy of the parties concerned.These materials are the performance of the parties' autonomy on different occasions,so they should play a role in different occasions of identifying shareholders' qualifications.If there is evidence to prove that the information of shareholders in articles of association,the register of shareholders or registered in industry and commerce is incorrect,the relevant interested parties may request correction.But the bona fide third party can claim that the qualification of shareholders should be confirmed by the registration of industry and commerce.The above criteria are also applicable to other shareholder qualification confirmation occasions,such as equity transfer.However,for companies requiring paid-in capital at the time of establishment,such as a company limited by shares raised and established,if the investor fails to pay the capital and the company can not be established,then there is no issue of shareholder qualification confirmation.Under the subscription capital system which allowing shareholders to autonomously invest,it is necessary to establish a shareholder qualification deprivation system,that is the shareholder delisting system,in order to balance the conflicts of interests between shareholders.Judicial Interpretation of the Company Law of China(3)has been established the system of shareholder delisting for a limited liability company.It is necessary to extend its scope of application to a joint-stock company established without compulsory requirement of shareholder's actual contribution at the time of its establishment.The reasons for the delisting should also be extended to serious violation of the obligation of capital contribution and severe violations of other obligations of the company by shareholders and so on.The Article 16 of Judicial Interpretation ? of Company Law in China revised in 2014 allows companies to restrict shareholders' rights on the basis of shareholders'violation of their investment obligations.However this paper mainly discusses the limitation of shareholders' rights of non-contributing shareholders.The non-contributing shareholders do not necessarily violate the obligation of capital contribution.The widely used category stock system based on shareholder heterogeneity also shows that different investors may have completely different behavior preferences and demand.When shareholder's contribution is different,it has different degree of interest relationship with the company.So it is feasible to treat shareholders' rights differently.As for the shareholder's right which directly contains property content such as the claim of profit distribution,the right of preferred subscription of new shares and the right of residual property distribution,the shareholder's enjoyment of these rights should be based on actual capital contribution;the company's assets controlled by the shareholder's resolution at the shareholders'meeting are formed on the basis of the capital contribution of the shareholder,in order to avoid the shares.If the capital is not invested in the end,the control of the company shall be controlled and the voting rights of the shareholders shall be restricted based on the actual capital contribution.There is no need to restrict the rights of shareholders who enjoy and exercise the rights and interests of the company and other shareholders.Whether it is a limited liability company or a company limited by shares,if the shareholders do not contribute and enjoy full equity will lead to the imbalance of interests between shareholders,it is necessary to restrict the autonomy of shareholders by restricting the rights of non-contributing shareholders.Therefore,the cause and scope of restricting the rights of shareholders in the Judicial Interpretation of Company Law(3)should be perfected.China may stipulate in the general principles of the Company Law that the shareholders enjoy the right to claim for profit distribution,the right to subscribe for new shares,the right to claim for the distribution of surplus property and the right to vote according to the proportion of paid-in capital contribution.Only when all shareholders agree,the applicable of the company law which restricting the shareholding rights of non-contributing shareholders can be excluded.This system is practical in limited liability companies and in the establishment of joint stock companies.In order to prevent the large shareholders from depriving the minority shareholders of their basic rights by controlling the company autonomy,the articles of association and the resolution of the shareholders(general meeting)can only arrange the limitation of shareholders'rights in accordance with their own needs within the scope of the shareholders' rights permitted by legislation.The fifth chapter is the conclusion of the article and suggestions for improving our relevant legislation.