Study Onthe Assignment Of The Detective Share In The Limited Liability Companies

In December of 2013, the latest modification of company law in China(the “Company Law”) established the fully subscribed registered capital system of the limited companies. This modification of the company law would and has witnessed a large embracing of the investment. However, it also brought lots of challenges to the control of the registered capitals. Due to the resolution of company law occurred in 2005, and the subscribed registered capital system was allowed by law, the shareholders of the limited companies(the “Shareholders”) could not pay out all the capital he or she agreed to buy at the very first of the establishing of the company. Instead, they only need to subscribe the proportions and pay those proportions actually in a certain term set forth by law. In practical, due to the subscription system and the deficient social credit mechanism, the Shareholders tend to not pay, not fully pay as well as withdraw their paying in the establishing or operation term of the companies. Besides that, the non-paid shareholder, not-fully-paid shareholder, as well as withdrawer of the capital would also transfer his or her share to the company, to other shareholders of the company, as well as the third party outside the company. The assignment of those detective stock rights has given rise to a lot of disputes. And along with the establishing of the fully subscribed registered capital system, more and more issues and disputes would occur in the foreseeable future.After the preliminary researching of the academic materials and the relative status with regard to the assignment of the defective share in the limited companies(the “Assignment of the Defective Share”), it is not so hard to find out that there are not so much distinct and comprehensive status and rules in this area, neither a unified and integrated theory in this regard. Consequently, the research on this issue is indispensable and meaningful. Excluding the introduction and the conclusion, this article has been divided into three(3) parts as follows:Chapter I: The Formation of the Assignment of the Defective Share. This article resolved that the defective capital contribution for the limited companied raised the defective share. It is the material base of the defective share, as well as the defective shareholder rights. Besides, it is can be analyzed that the defective capital contribution would not influence the obtaining the shareholder’s qualification. Thus, the assignment of his or her legally rights entitled could not be declined so easily.Chapter II: The Effectiveness of the Assignment of the Defective Share. Four(4) kinds of the academic theories are been introduced in this part with their different analyzing measures along with their different conclusions. On the premise of the most updated and valid law in China regarding the assignment of the defective share, it is can be resolved that it is legalized that the shareholder qualifications of the defective shareholder should be restricted due to the defective performance, but those kind of restriction do not have an impact on the assignment of the defective share.Chapter III: The Consequences of the Assignment of the defective Share and the Resolutions. In this issue, who should undertake the responsibility of the defective contribution after the assignment is the fundamental question. Through the thoroughly analysis of the academic theories as well as the judicial interpretation of the company law, it is can be resolved that, generally, the assigner and the assignee of the assignment contract should be jointly and severally liable for the defective contribution. And under the circumstances where the assignee was affected by the fraudulent conduct of the assigner, he or she could claim for contract cancelling or recover from the assigner. The judicial relief measures are also been discussed in this part.Through the thoroughly analysis of the above chapters, this article finally resolved the following conclusions: the failure of the shareholders to performance its contribution in the limited companies formed the defective shareholder rights. The assignment the defective share is effective in principle and the exceptions of validity would occur after taking the assignee’s real intentions into consideration. The responsibility of the assigner and the assignee should also be duly analyzed on this basis.In one word, after the witness of the newest modification of the company law, research on the issues as well as the resolutions regarding the assignment of the defective share in the limited companies has strong significations. It is very appreciated that this article could serve as a modest spur to induce someone to come forward with his much valuable contributions.