Research On Preemptive Right By Share Transfer

The personality in company has been conceived as one of important features that differentiate limited liability companies from other types of companies. Therefore, the distinctiveness of this system consists in its preemptive right of shareholder which is used for the maintenance of personality. Even though Company Law of China has made explicit regulations towards it, the flaw existing in the system still arouse controversy both in theory and practice. With the increase of disputes concerning the preemptive right of shareholder in practice, Judicial practice demands that analysis should be made to the existing problems and that measures should be worked out to the settlement of problems for resolving these problems will have far-reaching impacts upon the perfection of company legislation, the advance of theory and the operation of judicial practice. This paper studies relevant issues of Preemptive Right with the methods of value analysis, semantic analysis, law and economics analysis, standard analysis, case research and comparative research.The thesis is composed of three components: foreword, body part, and concluding remark and four subsections constitute the body part.The first section makes introduction to the basic theory of the preemptive right. The author holds the idea that the system of preemptive right can be applied in stock interest transfer of limited liability companies and preemptive right is the concept of species of priority in Civil Law. Then the author is engaged in analyzing the nature of preemptive right, thinking that preemptive right, defined as formation right, has five different properties: generating right when exercising formation right, affecting others when exercising formation right, only needing the approval of party when exercising formation right, asking for the particular identity and gaining benefits on wealth when exercising formation right, and acquiring interests when exercising formation right. At the same time, the conclusion that the ground of the existence of preemptive right is to preserve the personality of limited liability companies after analysis of the system of preemptive right in stock interest transfer can be arrived at.The second section puts emphasis upon the subject of preemptive right. This part is devoted to the discovery of problems in judicial practices in light of cases and the settlement of these problems in accordance with relevant theories. The performing subject throws light upon the entitlement to preemptive right of companies and whether nominal shareholders are entitled to preemptive right should be based on given criteria.The third section inquires into the exercise of preemptive right in particular situations. Through analyzing controversial points of cases both in theory and practice, this part is devoted to the discovery of problems in judicial practices in light of cases and the settlement of these problems in accordance with relevant theories. This part mainly probes into time limit, declaration of will, duty of disclosure for stock interest transferor, the exercise of preemptive right in stock interest grant and bona fide third party. Time limit discusses the fixing of time and the author thinks the fixing of time should be classified into the issue of legislative technique which can be perfected through modifying Company Law or promulgating judicial interpretation. Declaration of will expounds the identification of reticence form and its legal effect, the author thinks that the reticence can be applied to the exercise of preemptive right. Duty of disclosure stock interest transferor is to explore the obligor of disclosure, objects, contents, forms, and validity without performing the duty of disclosure in stock interest transfer agreement, thereby contributing to the ideas that the object of disclosure ought to be extended to companies, the contents of disclosure should include transferee, shares which will be transferred and conditions of stock interest transfer, and the validity of stock interest transfer varies in accordance with the good faith of the third party when transferors do not perform the duty of disclosure. Through analyzing controversial points of cases both in theory and practice, conclusion that in view of maintaining social custom and reliance interest preemptive right can not be applied in stock interest grant and the assign of bona fide third party can be drawn.The importance of the fourth section is attached to the analysis of existing problems in the exercise of preemptive right of shareholders and the examination of preemptive right of shareholders. This part firstly defines Standard in Article 72 of China Company Law. In association with judicial practice the author considers the Standard as Exclusion arbitrary gauge. Meanwhile, reasonable examination about the preemptive right conducted results in the conclusion that the party's entitlement to preemptive right is in the hands of their own.