Research On The Equity Bona Fide Acquisition Of Limited Liability Company

Bona fide acquisition is an important ownership-acquirement institution in theProperty Law, which has a significance of protecting the legitimate rights of bonafide third parties and maintaining the dynamic security of transaction. The SupremePeople’s Court released The Third Explanation on Several Issues of Application ofCompany Law of the People’s Republic of China(hereinafter referred to as the ThirdJudicial Interpretation) in January27th,2011, in which item26and item28firstlystipulated that nominal share holders with unauthorized disposal and equities beingsold twice shall refer to the item106of the Property Law. With the promulgation andimplement of the Third Judicial Interpretation, the equity bona fide acquisition isfinally determined by legislation. For one thing, the Third Judicial Interpretationprovides the legal support of discussing the equity bona fide acquisition of limitedliability company; and the above regulations summon the legal personnel to establisha set of specific and effective application rules of the equity bona fide acquisition.Based on the unity of achieving practical wisdom, institutional rationality andvalue solicitude, the paper deeply sorts and discusses the fundamental theory, legalcomposition and legal application of the equity bona fide acquisition, in order toachieve a balance between theory and practice in the Company Law and its JudicialInterpretations.Besides the introduction and conclusion, the paper is divided into three parts:The first part introduces the nature of the equity in the point of separatism, andthen discusses the representation and transferring mode of the equity. The rightrepresentation of the equity is the logic starting point of applying the equity bonafide acquisition. However, the confused phenomena are extremely commonin the practice. The separate of the right representation and the real right isapparently the obstacle of applying the equity bona fide acquisition. Therefore, therepresentation of the equity need external form, thus satisfies the judicial evidenceelements. In addition, the establishment of the equity bona fide acquisition is obliged to clarify the equity alteration rules. Research on the equity bona fide acquisitionwithout the rules is futile. The Company Law does not prescribe the specific rules ofthe equity alteration of the limited liability company. The paper points out that theresearch need to confirm the company’s status in equity transferring and thetransferring mode of the equity shall adopt the very autonomous revisionism.The second part focuses on the special composition of the equity bona fideacquisition (the real obligee’s imputation and the reasonable reliance of the thirdparty) in the opinion of referring to apply the item106of the Property Law for thesake of making the judicial application more plentiful and specific. In the generalcomposition, the paper maintains to distinguish that if the following transferee is theshareholders or not. Indeed, if the transferee is the shareholder, he ought to get aclear cognition of the equity owners. Thus, the transferee shall be subject to higherattentive duties. Specifically, if the transferee is the shareholder, he shall be withgood faith and without general negligence; if the shareholder is the third party otherthan shareholder, he shall be with good faith and without gross negligence.The third party expounds on the nominal shareholders with unauthorizeddisposal by clarifying the legal relationship in dormant investment combined withthe Third Judicial Interpretation. Next, in the terms of the equities being sold twice,the paper discusses its unauthorized disposal and the third party’s good faithjudgment starting from the validity of the contract of the share transfer. After that,the part introduces the typical cases of the equities being sold twice and indicates tomake a distinction between the above cases to ensure the application of the equitybona fide acquisition or not.