Conflict Between Shareholders’ Right Of First Refusal And Shareholders’ Right To Be Admissible

The current “Company Law” is deficient in detailed regulations both on the exercise period and manner of the right of first refusal, and on issues like what is equal terms. Therefore it may occur in the judicial practice, the shareholders’ right of first refusal conflicts with the shareholders’ right to be admissible. Resolving the conflict involves affirming the exercise condition of shareholders’ right of first refusal. This dissertation selects a case of share transfer torts to discuss the aforementioned issue, which states shareholders request the right of first refusal to the share in the company.Chapter Introduction, introduce the basic information to the case. This dissertation takes Shanghai Shenghua Company versus NiMing and the like case to discuss and analyze the equal terms and rational exercise period of the right of first refusal, hence to conclude the contention of the case. In the case, Shanghai Shenghua Company believes the latter infringed its shareholders’ right of first refusal in the process of transferring share.Chapter one, shareholders’ right of first Refusal effect on the equity transfer agreement. Whether the priority is how to shareholders as well as its mandatory level of peremptory norms, which directly determines the effectiveness of the equity transfer agreement; effectiveness of the equity transfer agreement is directly related to the protection of the rights of non-bona fide assignee shareholders. However, our law is not to be clearly articulated to shareholders priority in nature, resulting in judicial practice around the court recognized the validity of the equity transfer agreement mixed. In this paper, the shareholders of priority legislative purpose and trends as a starting point for analysis, forced to prove their relative nature, which introduced the principle of equity transfer agreement should be considered as a valid proposition.Chapter two, affirm equal terms of shareholders’ right of first refusal. While "equal terms" is the indispensible segment of right of first refusal, incurring obligation shall be considered as a substantial element of equal terms. The incur obligation, though not directly performs as money, brings share transferor tangible economic benefits in the process of the transfer, thus should deserve adequate assessment, and be counted in the equal terms. The share transferor’s deliberateness based on individual or company interest, affecting the long-term interests and development of the individual or company. Hence share transferee’s promises the share transferor to staffing, hire executives and other indirect interests, shall be deemed to be an equal term. The irreplaceability of the specific payment determines the impossibility of measuring its economic value; thereby shareholders can not exercise the right of first refusal. Particular relationship cannot be evaluated into any price, therefore, if consideration consists of special physical and emotional relationship, other shareholders will not enjoy the right of first refusal. The share transferee’s approach of paying the consideration should be treated and compared as one factor of equal terms, for the approach largely affects the share transferor’s realization of interests.Chapter three, affirm the rational exercise period of the shareholders’ right of first refusal. The rational exercise period is another important condition of shareholders’ right of first refusal. It protects the shareholders’ right to be admissible when the obligee delayed in the exercise of rights, Given the lack of specific provision about the excise period of the right of first refusal, according to the legislative experience at home and abroad, making the excise period three months long would be a perfection to our shareholders right of first refusal system in the Company Law.