A Probe Into The Division Of LLC Equity While Filing For Divorce Property Division

In1993, the first Company Law in China was promulgated and then formally setup the system of modern Limited Liability Company. With the trend that hugeamount of private capital was invested into the Limited Liability Company, thenumber of Limited Liability Company gradually increases at the same time. As anew type of property rights, company shares are gradually known and accepted byChina’s legal system. Meanwhile, company shares, as the property rights of naturalperson, appear in the field of traditional Civil Law. Under the category of MarriageLaw, the Supreme People’s Court, at the year of2003, firstly and explicitly put theLimited Liability Company shares into the boundary of community property inChina, via the way of Interpretation of the Supreme People’s Court on certain issuesconcerning the application of the Marriage Law of People’s Republic of China ’’(two)(hereinafter referred to as Judicial interpretation (two)). However, ten yearsafter the issuing of the Company Law, the Supreme People’s Court still uses capitalcontribution to define the Limited Liability Company shares, defined to no completeequity theory at that time.Gradually, with deepening understanding of the equity and equity theory in ourcountry, not only the academic circles but also the legislatures have already changedthe old definition on company shares which in the past referred to the capitalcontribution of companies, especially after the amendment of Company Law at theyear of2005. And the time which company shares were merely understood as theproperty rights with the nature of Claim has passed. Limited Liability Companyshares now are regarded as a new form of community property and appeared in thedivorce proceedings. In fact, the segmentation of shares becomes a legal problem in the divorce proceedings which refers to both Marriage Law, including the principleand method of shares segmentation as well as the evaluation of shares, and CompanyLaw, including the transference of Limited Liability Company shares, restrictions onthis transference and the specific procedures. And another problem in the legislativemode is that the amendments of Marriage Law and Company Law are notspontaneous, resulting in that a lack of legal basis to support shares segmentation inthe divorce proceedings.This dissertation points out that there are some imperfections in the legislationand practice of shares segmentation and figures out those difficulties and the specificways to segment the shares as one of community properties in judicial practice, viaanalyzing the current system of community property, segmentation of communityproperty, nature of the shares as well as the similarities and differences betweenstock equity, property rights and creditor’s rights. In the last, this essay summonsthat the legislative mode, judicial proceedings, and shares segmentation proceedingsshould be perfected to bring the judicial operability. Then, the evaluation of the stockequity and the principle of shares segmentation should also be perfected and clarified,aiming at perfecting the segmentation system of Limited Liability Company sharesamong community property in China.