Studies On Legal Issues About Equity Donation

Equity donation as a new form of charity donation in recent yearshas gradually accepted by the community through the practice. Since2009, China has changed its attitude towards equity donation from strictlyprohibition to gradually loosen. However, as a result of China’s lack ofregulation of property between the non-profit area and profit-making area,there is a defect in the supporting system. It’s difficult to support equitydonation from the legal perspective. Equity donation is actually in thetrouble of operation. Therefore, it’s essential to break the inappropriatelegal constraints and introduce more advanced and mature legal system.China’s equity donation is now facing legal trouble in three areas:Equity as the original fund of the Foundation has no legal basis. Theoperations of Equity donation have encountered legal shackles. Rightsand obligations of all parties have faced unreasonable allocation. Thedesired effect of the stability of the company and the public welfare can’tbe achieved. Tax policies have restricted the development of the equitydonation.This paper in the light of the plight of the above laws, proposed: Thesystem learned from the contribution of company’s registered capital cansolve the plight of setting the original fund. On the basis of following thegeneral procedures of transfer of the equity, the special procedures shouldbe achieved for equity donations. Introduction of the Voting Trust system to achieve a result that the company is stable and the public effect is good.The rights and obligations of all parties can be set within the frameworkof donation system. The rights and obligations of all parties can be fixedin the Limited liability company by the association preemptive system.China should improve tax incentives for equity donation. Tax incentivesof equity trust should be considered during building trust tax law inChina.