The Research On China’s Shareholders’ Pre-emptive Right System Of Limited Liability Company

The shareholders’ preemptive right system is of great importance in China’s Company Law. In the process of share transfer, the interests of the shareholder who wants to transfer his equity, the shareholders’ who own the preemptive rights and the bona fide third parties need protection. The effect of this system is sought to balance the interests at the intersection time, to reconcile the conflict to the maximum extent and safeguard the interests of all parties above. This paper is divided into four parts, and strive for making a more comprehensive discourse of what is shareholders’ preemptive right and how to exercise shareholders’ preemptive rights and how to improve these two issues.The first part is the beginning with the classic case happened in Beijing, which includes the brief summary of the case and judgment of the court. Combined with judicial practice and various existing academic theories, learning from foreign advanced legislation modes, the paper is trying to clarify the nature of pre-emptive rights of shareholders, to explain clearly who are the shareholders who own this right, what are the exercise conditions, exercise duration, and how to exercise this right. Combined with pre-emptive rights reality issue put forward,the paper proposals to the thoughts and advice of making this regulation better in the near future.The second part starts with the concept of the shareholders’ pre-emptive right system. It is concluded that the shareholders’ preemptive right is the right of formation, also expectant right. And then, shareholder’s preemption right is designed involving the co-features of society theory, the nature of pursuing efficiency shown in the commercial charter and business operation, the balance of the interests of the three main parties in law, showing the value and base of this system.The third part makes explanation on the practical problems involving the subject of this right, how to understand “the equal conditions” comprehensively, when to exercise the right and the affirmation of the validity of contract between the shareholder and the bona fide third party. Comparing with the views of various theories and other countries or regions of the legislation, combined with some of the existing judgment cases, the views and suggestions of these controversial points are put forward. The subject of shareholders’ pre-emptive rights includes all the other shareholders of the company except the shareholder who wants to sell the equity. Equal conditions require comprehensive understanding. The main conditions such as equity transfer price, payment method and payment deadlines need to be absolutely identical. Regarding the condition of equity transfer, the substantive part of the equity trial should be denied except that the articles of association or the shareholder approval part of exercise of shareholders’ pre-emptive rights. Because of vacancies legislative proposal, articles of association to the term of exercising pre-emptive rights of shareholders need to regulate, in order to prevent abuse of the rights of pre-emptive rights of shareholders. Transfers between shareholders and third parties to fulfill the contract shall be deemed a valid contract, so as to protect the interests of a third person.The forth part tries to offer proposals on perfecting the shareholder’s preemption. It mainly focuses on the establishment of right relief mechanism of the shareholder who wants to transfer his equity, the shareholders who own the preemptive rights and the bona fide third parties as well as function of articles of agreement.