The Analysis On An Implementation Path Of The Shareholders Preemptive Right In Limited Liability Company

Equity transfer dispute, which involves disputes of the priority right of shareholders, is one of the difficulties in the judicial practice. In the disputes of the priority right of shareholders, the legal relationship is complex, involving three parties and a wide range of interests. Article 71 of our country's Company Law is brief and general, but the judgment standards in judicial practice vary a lot, which becomes a difficult problem for judicial practice workers. The difficulties arouse in the application of Article 71 has caused high attention in theoretical and practical circles, and there are a lot of academic articles of shareholder's right of first refusal. The 2015 Judicial Interpretation of Company Law(Fourth)(Draft) is the second draft version, the fifth part of which involves the relevant contents of priority right of shareholders, but many key issues are still unresolved. This article aims at combing academic theory, existing law and cases, and trying to analysis the shareholders' preemptive right in depth from the aspects of the produce, exercise and relief of legal rights, in order to seek better ways to solve the disputes, and to build an implementation path for shareholders to realize their preemptive right. This paper consists of three parts, which include introduction, body and conclusion. The body is divided into four chapters.The first chapter introduces the prepositional procedure of priority right of shareholders. This part includes two aspects: the informative obligation and the right of consent. In the collection of 109 cases, 11 disputes are aroused by notification obligations, and in the practice, the parties and the judges have different views over the content and the ways of performance of notification obligation. Based on former judgments, the Principle of Efficiency and the basic theory of Game Theory, this article suggest that we could treat the intention to transfer as the content of the notification; exercise the notification in writing or other proven ways; and make the holder of the preemptive right involve in negotiations in advance instead of just passively waiting for the emergence of a third person so that we can reduce total contracting costs. In addition, the right to consent in the Article 71 of the Company Law means that each shareholder shall enjoy their own right of consent, the shareholding changes shall not be against the shareholder who doesn't agree without the consent of that shareholder.The second chapter clarifies the elements in the execution of priority right of shareholders. The elements mainly include three contents: the subject element, the substantial element and the time element. Executive elements are the backbone of the right, supporting the whole system. But the law is abstract and not operable in this issue. This article holds that the subject of the right is the shareholders who disagree with the majority of shareholders in the condition where the agreement of more than half of the shareholders is needed. Equal condition is a dynamic condition through the Game Theory, mainly including price, payment method, time requirement and object number. In a normal business, absolute standard should be the condition and the relative standard should act as reference under special circumstances. Generally, we should not take personal relations into consideration. At the same time, judges should analyze specific issues in each specific case. About the time to exercise the right, this article mainly discussed that the right starts from the date one obtains the status of shareholder, and the shareholders can exercise the right from the date they receive the notification from the transferor.The third chapter discussed the exercise of the right under special circumstances. First, it's the compulsory enforcement procedure. Article 72 of the Company Law still too general and operability is low. This paper theoretically supports the idea that compulsory execution procedure can be used to enforce preemptive right of shareholders. Also, this article made it clear that the court only need to inform other shareholders of the procedural matters of the share auction. The shareholders should be arrived at the scene on auction's day to exercise their right. The auction process should use inquiry method and the match method in different stages. When encountering the conflicts of multiple shareholders' claim, we solve the problem according to the proportions of their investment. Second, the company's articles of association can restrict the right. If the company's articles of association make damage, the shareholders could change or revoke it. Third, the preemptive right is applicable to donation, division of property ownership between husband and wife and equity transfer. But the right should not, in principle, be applied in inheritance.The fourth chapter is a summary, and it also proposed some suggestions of remedies. No remedies, no rights. The issues of specific relief measures are the primary goal of perfecting the legislation. Combined with related theories, this part mainly discussed the nature of the rights and held that the preemptive right of the shareholders is a right of claim, which can't be invaded. By analyzing the case, the author found that in practice, some situations where the infringements of the shareholders preemptive right were used as grounds for defense or complaint is not really a violation of shareholder's right of first refusal, this article made a distinction. For shareholders preemptive right involves the tripartite subjects of interest, and they all can affect the realization of the rights, so the author provide different methods according to different subjects in this paper. In addition, this chapter focuses on the analysis of whether the transferor should be given the right of revocation and what the validity of the equity transfer contract. On the one hand, the article wants to ensure the transferor can exercise right reasonably and smoothly, so as to realize the purpose of limited liability company's personal characteristic; On the other hand, taking into account the capital characteristic of the limited liability company, the author balanced the interests of the transferor and the third party in order to give respect to the commercial concept and to maintain the trading order.