A Study On The Compulsory Stock Transfer Clause Of The Amendment Of The Articles Of Asociation In The Limited Company

Article 71, paragraph 4 of the Company law gives Co., Ltd. the autonomous right to make special regulations on the transfer of shares, and there is a kind of this other regulations in the current commercial practices has bought the theory and judicial long dispute, such as limited company force shareholder to transfer shares under certain reasons by modifying the articles of association. The effect of this regulation, especially effect for dissent shareholders and relief issues is worth attention.In theory there are two interpretation paths to analysis the issue of compulsory share transfer regulation added by amendment of articles of association:the method of Law Hermeneutics and the method of law and Economics. Under the method of Law Hermeneutics, mainly there are several different viewpoints:effective in principle, invalid, distinguishing method and case review method. Under the method of law and economics, there are also three different interpretations under different frameworks, such as the company contract theory, the company welfare theory and the rights conflict theory. The focus of the method of Law Hermeneutics is on the construction of the criterion of validity judgment. On the other hand, the method of Law and economics are more concerned about the discussion of rationality.In judicial practice, by collecting and carding typical cases, rules of court documents, firstly we summarized common types of practice in the articles of association of the compulsory transfer rules, then the classification of the judicial views are mede. It is found that it is difficult to draw out the validity of the terms of the mandatory transfer from the existing cases.Due to the item of the compulsory transfer rules added by modifying the article of association, mainly involves two parties:the company and its shareholders (especially dissenting shareholders), under the inspiration of the theory of right conflict, we intend to analyze respectively from the company and the shareholders side.On the company side, adding compulsory transfer rules by modifying the article of association has the legitimacy of the procedure and the entity on two levels. In the procedure, the shareholders’ meeting resolution which adopt the amendment by the will of a majority, is consistent with the justice of procedural, not violating the principle of shareholder equality. The legal nature of the resolution further justifies the majority decision. The amendment of articles of association and the original articles of association are of the same nature, and the contents of the amended articles of association shall be binding upon all shareholders. In entity, it is necessary to modify the article of association for company:not only can respond to the changes in the business reality, but also meet the need to maintain the company’s overall interests. There are legal basis of the existing law on these two levels.In the connection between the company and the shareholders, what matters is how to consider the relationship between the company’s behavior and the issue of shareholder relief. The traditional method of Hermeneutics consider the boundary of company’s behavior on the extension line of the legitimacy of the company acts, then the relief of the shareholders is drawn out from the self governance boundary. The theory of right conflict of law and economics thinks that the essence of the problem is the allocation of the right of conflict. In the infringement of the rights of the shareholders of the company to be distributed to the company, the infringement of the shareholders of the relief is legitimate and necessary.On the side of shareholders, the traditional way of thinking about the relief of shareholders is:fully negate the validity of the articles of association or the transfer price clause. Traditional thinking is not reasonable. In the view of the conflict of rights, the remedy to the shareholders should not be considered from the entity that attempts to negate the effectiveness of the company’s behavior, but should be considered on the defects of the company’s behavior. In the present law, there are two feasible remedy paths. First is, when the shareholders’ meeting has procedural flaws, the shareholder may request the court to revoke or confirm the resolution is not established, thereby blocking the formation of articles of association. Second, when the mandatory transfer clause deprived the shareholders of the right to withdraw from the company, the shareholder may request the court to determine the fair transfer price. From the connotation and effect of relief, only the second method is real remedy.In conclusion, in the face of company law issues we should have a macroscopic view, realizing that the operation and management of the company is the process of constantly reconcile the agency costs and the conflicts of rights of the subjects of the company law, and the reality that one of the rules of company law and the theory’s function is to provide a benign management strategy for the company, reducing the operation cost and maintaining the company’s reputation and long-term vitality of the system.