Limited Liability Company Effect Of Shareholding Pledge

In the modern society, as the wealth is becoming apparent and papery, the pledgeof shares is an innovation and breakthrough to the traditional security system whichtakes real object to be the subject matter. It's the result of the development of thecommodity economy and the credit economy. The pledge of shares, as one of thefinancing methods, has powerful function of financing. Along with the developmentof our country's economy and being a member of WTO, the pledge of shares is takingmore and more important position in the security area. But in our country the theoryand practice seem think a lot of the value of the pledge of shares in the stock company,and neglect the value of the shares in the limited company. The author thinks that it'smeaningful to establish pledge on the limited company's shares. It's the practical needto take the limited company's shares as a financing measure.The article aims at the study on the validity of the pledge of shares in the limitedcompany. Based on the relative legislations and judicial practice in our country andusing the other countries and areas' legislations and experience for reference, thearticle analyses the validity of the pledge of shares in the limited company in asystematic way. So it's hoped that the article can help the legislations and judicialpractice of the pledge of shares in the limited company. Besides the preface and theconclusion, the whole article contains the following four parts.The first part is about the definition of the shares in the limited company. First itanalyses the nature of the shares and brings about the view that the shares is anindependent civil rights. Then the article generally reviews the origination of pledgesystem and the reasons why the shares in the limited company can be pledged. So itconcludes that the shares in the limited company can be the subject matter of thepledge. This part also introduces the relative legislations in our country.The second part tells the validity scope of the pledge of shares in the limitedcompany. There are two problems discussed. One is the scope of guarantee of thepledge of shares. It first discusses the common practice, and then analyses theparticular scope of guarantee of the pledge of shares. Second is the validity scope tothe subject matter of the pledge of shares. It denies the view that only the propertyright of the shares is the subject matter,and points out the validity scope to the subjectmatter should contain the shares that is pledged, the offspring and the substitutes. Italso concludes that the subject matter of the pledge is the whole content of thepledged shares.The third part which is the emphasis of the whole article expounds the validity tothe parties who are involves in the pledge of shares in the limited company. This partstudies the rights that the parties enjoy and the obligations that the parties take duringthe period of the pledge of shares. This part is divided into three parts which analysethe different validity of the pledge of shares to the shareholder, the pledgee and thethird party, and then it points out that the pledgor is still the shareholder and just theexertion of the shares is restricted. Afterwards, the article discusses the rights ofpledgee one by one, and this paragraph is collected with the restriction of the exertionof the shares. For the validity against the third party, first the pledge of shares shouldnot against the creditor of the limited company, but it can against the creditor of thepledgor. Next, when the shareholder transfers the shares, it should protect interests ofthe third party who is unblamable if the pledge of shares didn't fulfill the procedure ofregistration. Besides the above, this part as well deals with the obligations that all theparties should take.The fourth part puts forward the fulfillment of the pledge of shares in the limitedcompany. This part probes into the detailed regulations from the conditions, ways,period of the fulfillment.The conclusion sums up the validity of the pledge of shares in the limitedcompany.