Analysis On The External Equity Transfer Of Limited Liability Company

Limited Liability Company is the product of market economy. Its appearance greatly stimulates the development of market economy. It is one of the most important enterprise organization forms. With the acceleration of China's reform and opening and the development of China's economy, the development of limited liability companies has entered a new stage. Along with this rapid development come many disputes over equity transfer. Limited Liability Company has the characteristics based on shareholders and on capital. The characteristics based on capital determine that registered capital of the company cannot be reduced. If a shareholder wants to withdraw from a company, s/he has to transfer his/her equity to others. The characteristics based on shareholders determine that it is very important to maintain the mutual trust among the shareholders. Therefore, it is necessary to impose some constraints on equity transfer, which could avoid irresponsible equity transfer which is motivated by the pursuit of interests. Based on the spirit of the Company Law, establishing a set of rules that can resolve the contradiction among the shareholders within the company and that between shareholders and the potential buyers and can maintain the management order of the company and the freedom of transaction have great theoretical and practical significance.Equity transfer, which is related to the rule of transaction, is concerned by both the theoretical and the practical circles. The Company Law sets up a separate chapter to elaborate the regulations concerning equity transfer. However, theoretical discussion in this area is weak, due to the fact that modern enterprise system is established a short time ago and that not much experience and data are accumulated. In China, consensus is not reached on the specific rules of equity transfer. No unified dispute solution system is established because the divergence in theory and practice. Therefore, it is of great significance to provide a thorough analysis of the related regulations and the theoretical basis to guide the solution of dispute in practice.Based on the related articles in the Company Law and the characteristic of market economy, this thesis provides a detailed analysis of the basic issues and principles of the equity transfer. Based on this, the author gives the suggestions on the regulations of equity transfer. The thesis centers around the analysis of regulations which consists of three parts, the analysis of the basic concepts concerning equity transfer, the analysis of the related regulations, and the analysis of the rules of equity transfer.The first chapter introduces the basic theories of the equity transfer of limited liability companies. It consists of three parts. The first part deals with the determination of the nature of the equity of limited liability companies. Firstly, the concept of equity is specified. The broad and the narrow sense are distinguished. The purpose, nature and operation pattern of equity are analyzed. This helps clarify the logic characteristic of equity. Comments are made on the criteria of the classification of equity, and associator theory is approved. Secondly, the function and nature of equity transfer are analyzed. We first introduce the concept of equity transfer. The function of equity transfer is introduced. According to the author, equity transfer has three functions: the guarantee of freedom, accepting investment and improving efficiency. Finally, the legal characteristic of equity transfer is specified. Equity transfer is defined as civil and solemn legal behavior, and it is different from transfer of normal property. Thirdly, the principles of equity transfer are introduced. First, equity transfer is free and voluntary. Second, equity transfer consists of the transfer of the status of shareholder and as well as equity, in this way, it is different from the right and thing defined in Civil Law. Lastly, equity transfer must take into consideration the interests of all parties and realize the win-win situation. This part of the thesis establishes the framework of the study, and introduces basic definitions and theoretical tools and lays a solid foundation for future discussions.The second chapter analyzes the legal regulations related to the external equity transfer. It consists of three parts. The first part analyzes the constraints on equity transfer from the point of view of law. This lays the foundation for the determination of applicable law. Then the conditions and basis of equity transfer is analyzed. Three legal bases are proposed. The second part analyzes the articles in Company Law that are related to equity transfer. Through the interpretation of the articles, the procedures of equity transfer are deduced. The third part studies the four possible situations in equity transfer through real cases. This chapter lays the foundation for solution of specific problems.Chapter three is the core of the whole thesis. It analyzes the specific rules of equity transfer. The first section analyzes the rules applicable to the situation when one party breaks the promise and proposes the exception for some special cases. In addition, the constraints on short-term transfer is proposed to prevent the situation in which the buyer and shareholder work together to cheat. In the second section, based on the analysis of its legal basis and the comparison with foreign laws, the author gives an analysis of preemption and provides some exclusion for some forms of preemption. The third section gives an analysis of equivalent terms. The concept of equivalence is defined,and the principle of bidding is analyzed. The main purpose is to protect the maxim interests of the transfer. In the fourth section, the regulations of repurchase are analyzed. It is proposed that repurchase is compatible to the current situation in China and that reasonable application of repurchase can enhance the development of enterprise and protect the shareholder's interests. The fifth section discusses effectiveness cognizance. Different rules are analyzed with illustrations of different specific cases. The sixth section analyses Severability cognizance. The focus is on the validity of equity transfer when the subject and the object cognizance exist. The related rules are discussed in order to seek a system to apply the law.The analysis of rules is based on the related regulations in Company Law and is illustrated with real cases. With the comparison of relevant literature, the author proposes his opinions on entity transfer and tries to establish a system to solve problems in practical cases of equity transfer.