The Research On The Transfer Of Defective Shares

The implementation of subscribed capital installment system and relaxation ofshareholder’s forms of investment in the newly Company Law, to some extent,provide institutional basis for defects of contribution behavior. In the company’spractice, the validity and the obligation are at the core of the dispute on transfer ofdefective equity, on which the Chinese Company Law does not include clearprovisions and it is still at issue among legal theory society, besides, in the judicialpractice the handling with such cases are not identical, severely weakening theauthority of the law and the credibility of the trial. This paper chooses theconfirmation of equity dispute appeal between Anda Giant Eagle Inc and the CapitalInternational Ltd. as case study and analyzes with relevant theoretical knowledge.This thesis studies the four representative problems summarized in cases and it isdivided into four parts to be discussed.In the first part, the paper focuses on the question wether the originalshareholder’s investment behavior is failure to the obligation of capital contribution ordefects of contribution to confirm their contribution behavior to be defects ofcontribution. The thesis starts with the conception of defects of contribution anddefective share to determine the connotation and denotation of defective contributionbehavior. Then the writer concludes that the investment behavior of originalshareholders is of defective contribution nature from the defective capital contributionbehavior ascertaining standard--the twenty-sixth article of new Company Law.Part two: The influence of defective contribution behavior on the share isanalyzed in the second section. In the case, the complaint maintains that the originalshareholders are not the stockholder of the company and shall not transfer theirshareholdings, with the original shareholder’s failure to fulfill the obligation of capitalcontribution as grounds. The rights of the share is subject to restrictions of defectivecontribution behavior. This part firstly analyzes that defective contribution behaviordoes not affect the enjoyment of shareholder’s qualification, then makes an assay thatdefective share is of transferability as the subject. Part three analyzes how to identify the validity of defective shares. Based on thetwo opinions on validity of transferability of defective shares and its legal ground, theauthor concludes that the identification of transferability of defective shares is nothingmore than the choice among legal concepts, and then brings forth the idea that thetransfer of defective shares is decided by the constituent elements of civil legal actswith that transfer of share is of both debting and quasi-property rights behavior natureas its theory.This part, from the perspective of that the plaintiff claims the defendant toassume the liability for breach of contract, systematically discusses liability ofcorporate capital sufficiency which defective capital contribution shareholdersassumes for the company, the compensation liability existing in expected interests,supplementary satisfaction liability to the creditors of the company, complianceresponsibility to other shareholders, contracting negligence responsibility to sharetransferee, liability of corporate capital sufficiency which assignmented defectivecapital contribution shareholders assumes for the company, the compensation liabilityexisting in expected interests, supplement liability to the creditors of the company,joint liability in corporate capital sufficiency which other shareholders bear for thecompany, supplementary satisfaction joint liability to creditors in the company, andthe company’s compensation liability in defective share transfer.