Research On The Defective Share Transfer

Although the strict liability of capital contribution from the contributors has beenregulated by many countries, the behavior of the defective capital contribution occursfrequently in practice. The existence of the defective capital contribution results in thecreation of the defective share, which is the material foundation of the defective share transfer.In recent years, caused by defective capital contribution defective share transfer disputesemerge continually; however, there is no definite regulation for it in our country. How tobalance the conflicting interests between company, its shareholders and its creditors? There isno answer according to our company law. As a result, there are different judgments by courts,and it is not keeping with justice of the law. Defective share transfer is defined herein as shareof defective capital contribution. Therefore the article mainly discusses the problems of thedefective share transfer in the limited liability corporation, with the aim to help solving thedisputes on defective share transfer.This thesis consists of four parts. Methods of comparison, analysis and induction areadopted in this study for reaching a specific analysis on defective capital contribution ofshareholders.Chapter one is concerned of general overview of defective capital contribution. Thischapter first introduces the concept, characteristics and the form of the equity and defectivecapital contribution. Second, the chapter analyzes the new issues of capital contributionaccording to newly amended company law and Company law of the judicial interpretation ofthree.Chapter two analyzes whether the violators can be recognized as shareholders, andwhether the violators’ share can be transferred. Firstly, the violators can be shareholders invirtue of the contents of shareholders’ roster, the registration in administration of industry andcommerce, etc. Secondly, shareholders have legal rights to transfer their shares, which can notbe limited by the articles of association or whatever. Thirdly, the transferor shall responsiblefor his defective capital contribution, while only the malice-will-transferee shall take the responsibility.Chapter three is the analysis on the effects of the defective share transfer. In this part theauthor mainly focuses on the usual theories on the effects of defective share transfer,including absolute no-effect theory, absolute validity theory, middle theory, and thediscriminating theory; Besides, the basic principle and thinking of judging the effects of thedefective share transfer is illustrated from the following aspects: the link between corporationlaw and contract law, and the dialectical application of the thought from commercial law andcivil law, after that the influence of the defective capital contribution and inner meaning of theparties on the effects of the defective share transfer is discussed. At last, it is the recitation ofthese theories and the conclusion. After analyzing the merits and faults of all the theories, theauthor draws the conclusion, according to the basic principle and thinking.Chapter four is how to bear the burden after the transfer of the defective stock right. Thispart mainly solute whom should be bored to the burden, who should bear the burden, and howthe burden should be bored. The author respectively analyzes the general rules that theshareholders of defective capital contribution bear burden to the shareholders performingcapital contribution, to the company, and to the creditors, and the special rules after thetransfer of the defective stock right. After the transfer of the defective stock right, the issue iswhether the transferee should take responsibility. The author insists that whether thetransferee was in good faith at this time should be distincted. If the transferee was in goodfaith, and did not know or should not have known the defect of the transfer shares, thetransferee did not bear the burden of the plenary payment for the difference, but the transferand the other shareholders when the corporation was founded should undertake joint liability;if the transferee did know or should have known the defect of the transfer shares, and did notpay reasonable consideration, that is the transferor conspired with the transferee to keep awayfrom the law, which means the transferee was not in good faith at this time, so the transferorand the transferee should bear joint liability, and the other shareholders when the corporationwas founded should undertake joint liability.Even though the contents of the article is not mature enough, but along with the development of practice and study deep-going and more and more people pay attention to it,the theory of the transfer to defective capital contribution will be more perfect and becomeorganic and systematic.