Research On Preemptive Rights Of Shareholders By Equity Transfer Of A Limited Liability Company

With the rapid development of the socialist market economy and China’s business environment, the liquidity of equity has become increasingly prominent.More and more disputes arising out of equity transfer are flocking around China.Among this, the issue of preemptive rights of shareholders has been bothering academia and practical realm. The case Shanghai bund Diwang has been so well-known that it brought a new hot debate on the shareholders’ preemptive rights.The main point of this case is whether the plaintiff’s preemptive rights has been intruded by indirect equity transfer and how to define the effect of the involved contract. Starting from the case aforesaid, this paper, with the method of comparative analysis, case analysis, historical analysis, law interpretation, shall make concrete analysis on the preemptive rights of shareholders related to this case.This paper mainly divided into five chapters.Chapter One mainly introduces the basic facts and then analyze the controversial points of the case: whether the plaintiff’s preemptive rights has been intruded by indirect equity transfer and how to define the effect of the involved contract.Chapter Two analyzes the juris theory hidden in the case. First, from the perspective of source of rights, preemptive rights can be divided into statutory preemptive rights and conventional preemptive rights. Statutory preemptive rights can not be applied to the indirect equity transfer. Then it identifies how should the shareholders opt-in or opt-out of the statutory preemptive rights. At last, it discusses the effect of equity transfer contracts which intrude other shareholders’ preemptive rights.Chapter Three analyzes the evasion-of-law actions involved with preemptive rights of shareholders. Firstly, it introduces the basic theory concerning evasion-of-law actions. Then it discusses several such actions to avoid other shareholders’ preemptive rights and points out the risks hidden therein: acquiring identity of shareholders through increasing of registered capital, creating non-equal terms and conditions, changing the actual controller through indirect equity transactions, modifying the articles of the corporation.Chapter Four analyzes the above-mentioned case. It attempts to answer the controversial pints of the case, discuss whether the plaintiff’s preemptive rights has been intruded and the effect of the equity transfer contract.Chapter Five offers some proposals to improve our existing system of shareholders’ preemptive rights: changing the legislative mode of shareholders’ preemptive rights; clarifying the effect of equity transfer contracts which intrude shareholders’ preemptive rights; stipulating explicit period for shareholders to exercise their preemptive rights.