Analysis On The Law Application Of The Upper Stockholder’s Equity Transfer

The Bund Land Dispute went through first-instance judgment and the reconciliation in trial of second instance, finally ended in 2015. The case is known about its result, but the discussion it caused about the equity transfer of the limited liability company deserves further discussion.A limited liability company has both characters based on capital combination and people combination, sincere cooperation between shareholders is a reflection of the character based on people combination, and it is also a key factor to the stability of the company, but shareholders’ outward equity transfer will have a significant impact on the character based on people combination,so Corporation Law’s 71 th article set down the rules of the equity transfer of the limited liability company.The equity transfer in the Bund Land Dispute is by the upper shareholders(the shareholder of an institutional shareholder), Corporation Law’s 71 th article is not in this situation. Court of the first instance took the plaintiff’s preemptive right been violated as an excuse, affirmed the equity transfer contracts in this case is in legal invalid situation, so the equity transfer contracts in this case were judged invalid, obviously, the judgment substantially quoted Corporation Law’s 71 th article and expanded the range of application,then the question is its legitimacy and the reason. This paper will begin with this case and the result of judgment, conclude the essential questions,then analyze the proper application of Corporation Law’s 71 th article, and discuss how to improve the judicature.The first chapter of this paper will summarize the conditions of this case and comment on the judgment and related views,define the concepts at the same time. After generalization, the essential question of this case is the application of Corporation Law’s 71 th article on upper shareholders’ equity transfer, when and how to apply is the key point. In addition, what problems will be encountered.The second chapter of this paper will discuss when to apply Corporation Law’s 71 th article to upper shareholders’ equity transfer. Under normal circumstances, the answer is no, because: it does not fit the characters of LLC; The rights and duties in the relationship between shareholder reflected by Corporation Law’s 71 th article has relativity; Improper application will lead to negative effects on upper shareholders. Under special circumstances,the answer is yes. Firstly, by the convention of articles of association or shareholders’ agreement and the agreement of upper shareholders. Secondly, the upper shareholder will transfer the control of the substantial shareholder. A brief summary about the Bund Land Dispute is followed.The third chapter of this paper will discuss how to apply Corporation Law’s 71 th article to upper shareholders’ equity transfer. Company’s shareholders’ obligation of notification and the other shareholders’ preemptive right are key points. Under special circumstances,the obligation of notification should be performed by the upper shareholder or the shareholder,the upper shareholder will be better,the notification is an invitation to offer. In order to avoid delay,the period for exercising shareholders’ preemptive right should be clear. The transferor’s interests should be protected. The conflict between two preemptive rights should be properly solved.