Study On Effect Of Articles Of Association Which Force Or Limit Share Transfer

The Company Law of the People's Republic of China amended in 2005 has extended the right of autonomy for a company. As paragraph 4 of Article 72 in The Company Law of the People's Republic of China (Article 72) goes:" Where the articles of association stipulate otherwise, such stipulations shall apply". This provision demonstrates the specific law on share transfer arrangements, but not limited to the manner and form, made by a company itself. Therefore, people can take it as " no legal prohibition" which means freely transferring. A company can make any arrangement relating to share transfer, even if the arrangement goes conflict with the former three paragraphs in Article 72. Thereafter, in the practices, many companies have set articles and provisions that go conflict with Article 72, among which the most common are the articles and provisions of compulsory share transfer and the ones that prohibiting or in a disguised form prohibiting shareholders to transfer the shares. To what extent do these articles and provisions take effect? Do the rule-makers fully possess the meaning and essence of Article 72? This essay will do analysis on both situations. Upon compulsory share transfer, the analysis will be on the basis of equity properties and autonomy limits. The result comes out as no matter from equity properties'or autonomy limits'point of view, articles and provisions that compulsory share transfer shall withhold no legal effects. For the articles and provisions that prohibiting or in such disguised form prohibiting shareholders to transfer the shares, which goes conflict with the shareholder's wishes to recover their investment through share transfer, this essay will start the analysis from the theoretical basis for prohibition of share transfer, arriving at the deficiency of the theoretical basis. The theoretical deficiency and the conflict with the former three paragraphs in Article 72 go to the conclusion that articles and provisions that prohibiting or in such disguised form prohibiting shareholders to transfer the shares shall withhold no legal effects. The last part of the essay will, through analysis and further research under reference from relative legislation from other countries and Chinese academic studies, make suggestion on solution on conflicts between share transfer and the company articles and provisions.