The Study On Legal Issues About The Main Property Transfer Of The Company

With the constant development of the socialist market economy in our country,transfer of property as a way to optimize the allocation of resources and maximize interests, has become a means to handle pressure of competition and enhance competitiveness of the company. Nevertheless, when the property transferred is the main property of the company, this transfer will likely lead to the scale-down or even changes of the company’s business. Furthermore, it will exert tremendous impact upon operation, shareholders’ investment expectation and counterparty credit of the company. Therefore, it is necessary to carry out rules and regulations regarding the transfer of main property in the legislation of company law.According to our regulations--“Act of Company” Article 74,104,and 121 regarding the transfer of main property, when the main property of limited liability company is transferred, the shareholders who dissent to the transfer are entitled to the appraisal rights. But neither the definition of main property, nor the requirement of shareholders’ decision of the transfer is specified in the regulations. The transfer of major assets in non-listed limited company is regulated by articles of incorporation,most of which are the copy of company law. And the definition of major assets, the resolution authority and procedure regarding the transfer are also not specified. Listed companies selling major assets more than 30% of the total property has to go throughby the special resolution of the shareholders’ general meeting. But with this rule, the transfer of crucial property which is less than 30% of the total assets will be missed,and the daily trading with more than 30 percent will be excessively intervened.Noticeably, the definition of property and main property is not stated clearly in our law. In addition, the only definition standard of the major assets in listed companies is inappropriate, and the provision that the transfer of the main property is decided shareholders’ meeting differs in various types of companies. In judicial practice, the different definition between the property and the asset is often neglected. Furthermore,one of the ways to define the main property has referred to the definition standard of the major assets in listed companies. Another one is to comprehensively inspect both quality and quantity in companies. But the issue which process of which authority to perform to the transfer of main property has been barely officially discussed.Most countries and regions have corresponding rules for the action of the main property transfer in our company law.In terms of the definition of related concepts,the determination of resolution authority and procedure, this article has investigated the regulations of total property transfer or the substantial property transfer in America, the requirements of the total property transfer in Germany, the provisions of the transfer of the crucial part of business in Japan, and the rules of the total or main part of the business or property in Taiwan, China. Therefore, this article has stated the situation and problems of the main property transfer system in our company law. Also,it has studied the feasibility and necessity of the main property transfer being decided by shareholders’ meeting, from the perspectives of power distribution between the board of directors and the shareholders’ meeting, agency cost theory and shareholders’ expectation theory. At last, it has introduced both the internal and external validity of the main property transfer when the decision is flawed. The following points have been stated by my research: First, different types of company should not be taken into account, uniform standards with respect to the definition of related concepts, the determination of resolution authority and procedure, should be applied to all limited liability companies and joint stock limited companies. Second, the judgement standards of both quantity and quality should be introduced into the definition of themain property. In terms of quantity, the property to be transferred should make up to at least 30% of the total property in the company, same for the earning of the property to be transferred(with reference to the listed companies standard in company law). If the property to be transferred has occupied less than 30%, then it will not be defined as the main property. In terms of quality, the property to be transferred should be defined as the one which will substantially impact the aims and development of the company, or will suspend the business of the company, At least, the property to be transferred should drastically scale down the business of the company. Third, the provision that the main property transfer will be decided by shareholders’ meeting should specified in company law, because this transfer is as important as merge and division, which are all major decisions of the company, and also for maintaining the expectation interests of shareholders, and reducing the agency cost.At last, when the shareholders’ meeting is flawed, the system of non-existed resolutio ns should be introduced to avoid appraising validity of the decision which is non-exist ed. And the resolution which is decided by shareholders’ meeting may be canceled,invalid or non-existed. But, for the interests of counterparty with good intention is involved, the defective resolutionmay not influence the invalidly of the main property transfer. This invalidity should be comprehensively judged with the combination of the purpose of shareholders’ meeting according to law(to protect the interests of the company or shareholder), and the stability of the transaction security.