Several Legal Issues Research On Sino-foreign Joint Ventures Shareholders’ Equity Transfer

Sino-foreign joint venture enterprise is a kind of foreign-funded enterprise formin China, due to its investment subject specialty and national investmentmanagement complexities to foreign funds, whose legal issues are more complicatedthan ordinary limited liability companies. During recent years, as China’s Reformand Opening-up and its accession to WTO,there’re more fields opening for foreigninvestors. Sino-foreign JV set up in China by foreign investorsare increasing,Sino-foreigninvestors have big differences in their internal governance, managementphilosophy,capital operation, and operation management, and judicial disputesinvolving Sino-foreign JV are also yearly increasing, among which shareholders’equity disputes take the highest proportion. Thus, the author chooses Sino-foreignJVshareholders’equity transfer as research subject, aiming to clarify the theory ofJVshareholders’equity transfer.The author starts from practice, based on existing laws, regulations, rules andjudicial interpretation onexplicit provisions of Sino-foreign JVshareholders’equitytransfer, combined with force analysis on practical defects, made some valuablesuggestions or comments. The paper is divided into three parts:The first part introduces the basic theory of JVshareholders’equity. Throughconcept analysis, Sino-foreign JVshareholders’equity characteristics areaccuratelyinducted and combined with existing laws, several changeforms ofSino-foreign JV shareholders’equity and their consequences are also discussed.The second part mainly focuses on the conditions and procedures ofSino-foreign JVshareholders’equity transfer. The author believes that in the terms ofSino-foreign JVshareholders’equity transfer,"the corporate parties’ identicalagreement" is the most significant substantive condition,"authority approval," is alsoone important form condition. Combined with practice, the general process ofSino-foreign JVshareholders’equity transfer is summed up. While to the special formof Sino-foreign JV involving state-owned shareholders’equitytransfer, the paperexplains the particularity of conditions and procedures, such as transfer actionapproval, price approval, approach transaction and prior purchasing right.The third part mostly focuses on the identification of shareholders’equitytransfer efficiency under the defects of conditions and procedures. It separatelydiscussed the condition defects such as fund defects, and violation toprior purchasingright, and right of agreement, and shareholders’equity transfer force under theprocedure defects without foreign investment approval or without the state-ownedassets supervision and management approval, which obtained that the shareholders’equity transfer is divided into valid or revocable force, shareholders’equity transferforceof violation toprior purchasing right and right of agreement is revocable force,shareholders’equity transfer without foreign funds approval is undetermined forcethat could be approved afterwards. However, to the condition without thestate-owned assets supervision and management approval, for its specialty ofstate-owned assets, it is invalid based on legal rules. As to the defects above, theauthor proposes legal remedy or risk-averse measures.Finally, this paper made proposals and prospects to the legislation.