Research On Articles Of Association Restricts Transfer Of Shares Of Joint Stock Limited Company

For a joint stock limited company, the article138of the company law provides that "The shares held by the stockholders may be transferred according to law", which is no excessive provisions for ordinary shareholders but the restrictions to the initiators, the directors, supervisors and senior managers of the company. In practice, if there is a provision of share transfer in the article of a joint stock limited company, whether it is the listed company or not, judges always directly affirm that kind of provision is invalid which is based on the principle of the share transfer free. In reality, there are a large number of unlisted companies, who occupy the most number of joint stock companies, have the same characteristics with the closed companies. But in trial practice, there are a lot of problems caused because judges do not pay attention to distinguish the different characteristics between unlisted company and listed company.And also, judges could not deny the effectiveness of the provision including shares transfer restriction. Because the shares transfer free principle is just treated as a provision of principle instead of basic principle. With having the same basic of understanding and trust relationship required by the private company, it is also feasible to limit shares transferred in the unlisted company. According to the autonomy of company, it should be fully respected how to transfer share by shareholder’s will, which does not involved the other people’s affair. It is also ruled that restriction of share transfer can be allowed in the stock company by the other countries’company law, which just show that they notice the unlisted company having the same basic of understanding and trust relationship too. The specific provision about the shares held by the stockholders can be transferred according to law, which for law rationally making and social developing, is not the reason for denying the rationality of the provision including shares transferred restriction. According to the characteristics of the commercial trade and the balance in the fairness and efficiency, it is necessary to restrict share transfer in the unlisted company. By the view of Coase, the provision about limiting share transfer is the essential requirements of the company, which can also effectively reduce the transaction costs of private stock company.About limited liability Company, article72has clear ruled thaf"unless it is otherwise provided for of the transfer of stock rights in the articles of association, the articles of association shall be followed." For the same characteristic between unlisted company and limited liability company, whether it is reasonable to deny the article of association about limiting share transfer only because it is the basic principle of company law.This paper mainly discusses whether it is valid when the unlisted company makes the restrictive provisions in the articles of association on the issue of transfer of shares. First of all, the paper states that transfer of share freely is not a basic principle and exceptions sometimes may be exist. Then, combining with the introduce of extra territorial company law and analysis of the nature of articles of association and share, the paper illustrates the rationality of the restrictions on transfer of shares in the articles of association of unlisted company by studying the evolution of the law about transfer of shares and the theory of company. Finally, the paper explores the root that caused this problem in trial practice is the judges confuse the difference between unlisted company and listed company, and provides some improvement suggestions about related system by reference to the result that Japan in the reform of the company law.