The Balance Of The Limited Liability Company Shares Pledged Party Rights

As a new form of security, share pledge is different from the conventional pledges in creation, publicity, perfection and foreclosure. Such share pledge requires clarification in theory and problem solutions in legislation. Yet the current laws and regulations in the area of share pledge in China are more in principle than in details, scattered among many regulations in a non-coherent way, leaving blanks on many legal issues. This is particularly true when regarding the share pledge of the limited liability companies, as compared to that of corporations. Legislative on hare pledge in limited liability companies has been very immature and blank, not operative, and not able to meet the practical requirements in business. This thesis starts by analyzing share pledge and its relevant legislation in both common law countries and civil law countries, discusses share pledge's creation, perfection and foreclosure, and gives advice on the improvement of regulation on the limited liability companies' share pledge in China, expecting to fully utilize this form of security.Part One of the thesis focuses on the analysis of the share pledge system. It first introduces the definition of the shares in a limited liability company. Second, it compares the individual interest and common interest among the shareholders. Third, it further discusses the definition, features and nature of share pledge, and compares the features between share pledge in limited liability companies and that in corporations. Finally, it appraises the safety value, efficiency value and equity value of share pledge.In Part Two of the essay thesis the author tries to balance the rights and interests in the creation of share pledge. In this part, it first introduces the provisions in Chinese law on the creation of share pledge. Then further discussion and analysis is made on such provisions, with focuses on Security Law and Corporate Law concerning the reasonableness of conditions on shareholders to make share pledge, the effect of perfection after publicity and the method of publicity. The discussion is followed with advice on legislation. Finally, it gives clear rules on the rights and obligations for the share pledgers and pledgees.Part Three is about the balance of rights and interests in the operation of share pledge. The author discussed the priority that a pledgee has on the share pledge against other shareholders. And then the author compared three different ways of foreclosure of share pledge in practice, and forms a most feasible way for that purpose. Finally, the author explained the high risk of share pledge in case of company bankruptcy.