The Resolution Of The Legal Dilemma Of The Share Transfer Of The Non-listing Joint Stock Limited Companies

The majority of the Joint Stock Limited Companies in the PRC are the non-listingJoint Stock Limited Companies. The share transfer of such companies should bepursuant to the Article139of the PRC Company law, which states that, shareholdersshall transfer their shares through the OTC market established in accordance with lawor through other forms prescribed by the State Council. Meanwhile, existing casesnegates the legitimate of the share transfer outside such the OTC markets. However,the Article10of the PRC Security Law and the Circular99in year2006and Circular38in year2011promulgated by the State Council strictly limit the shareholdernumber of the non-listing Joint Stock Limited Companies under200after sharetransfer, which contravene the principle of high openness adopted by the OTCmarkets and constitute the main legal dilemma of the share transfer of the non-listingJoint Stock Limited Companies. That is also one of the main reasons of the lowparticipation in the OTC markets. This Article adopts the public listing as the standardto divide non-listing Joint Stock Limited Companies into non-listing public JointStock Limited Companies and non-listing private Joint Stock Limited Companies,stands in the prospective of the OTC market, concludes the mismatch of the theoryand the practice of the share transfer of the non-listing Joint Stock Limited Companiesin the OTC markets through illustrating the difference between the share transfer of the two types of companies in the OTC markets, intends to resolve the dilemma viareform of the structure of the PRC Company Law, and redefine the different levels ofthe OTC markets to better serve the construction and development of the capitalmarket accordingly.This Article is composed of five chapters.Chapter One-The present legal system concerning the share transfers of thenon-listing Joint Stock Limited Companies. The author analyses the basic laws i.e. thePRC Company Law and the PRC Security Law, illustrate the present legal systemconcerning the share transfers of the non-listing Joint Stock Limited Companies,express the intention to discuss the practice of the different types of share transfers inaccordance with the public listing standard adopted by the Article10of the PRCSecurity Law.Chapter Two-The present practice of share transfers of the non-listing Joint StockLimited Companies. The author illustrates and compares the share transfer practicesof the two types of companies i.e. non-listing public Joint Stock Limited Companiesand non-listing private Joint Stock Limited Companies in existing the OTC marketssuch as Agency Share Transfer System Market, Tianjin Stock Exchange, local equityand assets exchanges, and regional OTC market.Chapter Three-The mismatch of the theory and the practice. Based on the illustrationand comparison in the previous chapter, this chapter reviews the limitation of theshareholders number and the restriction of the stock exchange markets provided bythe Article139of the PRC Company Law and the Article10of the PRC Security Law,spot the key issue restricting the development of the OTC market in China.Chapter Four-The resolution of the legal dilemma of the share transfer of thenon-listing Joint Stock Limited Companies: the reform of the structure of the PRCCompany Law. This Chapter compared the Limited Liability Companies and thenon-listing Joint Stock Limited Companies, finds out that there is no difference in theentrance of the capital market and in the level of transparency between the two typesof the companies. The author further discovered that the operation of the two types ofthe companies has merged and dissolved. Therefore, it is possible to learn the reform of the Company Law in Japan, annul the limited liability companies, develop the newtypes of company: public company, thus resolve the dilemma of the share transfer ofthe non-listing Joint Stock Limited Companies, and redefine the different levels of theOTC markets to better serve the construction and development of the capital marketaccordingly.