A Study On The Legal Issues In The Transfer Of Flawed Equity

The capital contribution of shareholders form the independent character of a corporation, meanwhile, the diversion of shareholders’personal assets of and the company’s assets ensures the limited liability of shareholders. Therefore, capital contribution is the most important obligation of a shareholder to a company, it is the basis of the incorporation of a company, moreover, it is the prerequisite for a shareholder to bear limited liability. However, in legal practice, circumstances where promoters, capital contributors or shareholders who are obligated to pay capital contribution fail to perform such obligation usually occur, which as a result, incur the defective equity.These years, there are many equity transfer disputes arising from defective capital contribution, as the present effective Company Law pays more attention to whether the capital contribution has been fulfilled in the form when a company is incorporated, but lacks of provisions regarding issues as the actual payment of the capital contribution, the capital maintenance during the operation of a company, and timely stopping the transaction and minimizing the loss when the company is insolvent, the market order is in a chaos, disputes resolution is without legal merit. This article intends to research from a prospective of protecting and equalizing the interests of the company, shareholders and creditors, wishes to give suggestions to resolve defective equity transfer disputes.This article is been divided into five chapters, Chapter 1 is about the theoretical basis of defective equity, emphatically introduces the concepts of defective equity, and the causes, types and characteristics of defective equity; Chapter 2 is about the issues before the transfer of defective equity, and provides research on issues as whether defective capital contribution may cause the forfeiture of shareholders capacity, whether defective capital contribution may restrict shareholders’rights and whether special defective capital contribution may affect shareholders capacity; Chapter 3 analyzes the transferability of defective equity and provides analysis on the current studies regarding transfer of defective equity; Chapter 4 compares different studies regarding the legal effect of transfer agreement of defective equity, analyzes the major pros and cons of different opinions; Chapter 5 provides simple analysis on the obligation undertaking issues arising from defective equity transfer disputes.