On Legal Validity Of Defective Equity Transfer Of Limited Liability Company

Equity, which is obtained by the company’s shareholders based on their funded, is acomprehensive right including several empowerments such as assets earnings and thecompany’s operating management rights. The most direct source of the equity acquisition isthe shareholder’s contribution of capitals to the company. However, due to our company lawwhich was revised in2005pursued the compromise capital system, and expressly providedthat the shareholders could not only contribute in currency but also invest in kind, thuscausing the defective equities abounds in real life because of the shareholders did not fulfilltheir contribution obligation according to law，false investment, capital flight and thedefective equities which caused by the registration procedure matters of equities. The disputesincreasingly arising from the defective equity transfer process. However, our currentlegislation does not define and regulate the defective equity together with several theoriesemerged to the legal validity of the defective equity. The imperfection of the law and thetheoretical controversy made the judicial practice field emerged different results when theydeal with this kind of disputes that seriously affect the judicial authority and the fairness.This paper would tease and summarize the academic research status of the defectiveequity transfer, combine with identified cases of current legislation and judicial practice in thekind of disputes，meanwhile, reference the useful experience of the foreign related legislation,think and analyze the legal effectiveness of the defective equity by use the legal researchmethod of balancing of interests, empirical analysis, comparative study and so on. In additionto the introduction, the paper is divided into the following sections:The first part, the legal definition of the defective equity. Firstly, explain the connotationof the defective equity, indicate that China’s current legislation does not directly use the term,but it have been widely used in the theory and judicial practice, and then introduce its narrowsense and broad sense，moreover, analyze the particularity of defective equity. Finally, classifythe defective equity based on a combination of theory and practice.The second part, the particularity of the defective equity transfer. Firstly, analyze thetransferability of the defective equity and the relationship between the defective equity andthe shareholder’s qualification. Then on this basis, analyze the particularity shown from the defective equity transfer dispute in the judicial practice.The third part, the theory and evaluation of the validity of the defective equity transfer.Introduced each of the four existed theories, including absolutely invalidity theory, absolutelyeffective theory, compromise theory and distinguish treat theory. And give a brief comment.The fourth part, the legal identification of the defective equity transfer effectiveness.Tease our existing files and the defective itself, learn the foreign legislative experience, andanalyze the details of the validity recognition of the defective equity and its reasons in thejudicial practice.The fifth part, conclusion: the thoughts and suggestions of the validity recognition of thedefective equity. Reflect on several key problems of the validity recognition of the defectiveequity in our judicial practice, additionally, propose that introduce case guidance system toguide the courts to affirm and resolve this kind of disputes.