On The Exercise Of Preemptive Rights In The Transfer Of Shares Of Limited Liability Company

Limited liability company is a business organization form created by 1892 the German Limited Liability Company Law. It has a dual nature of human resource and capital integrity. In order to maintain the human resource integrity and protect stable operation of limited liability company, the freedom of shares transfer is usually restricted. Preemptive rights is one of the methods. By setting up appropriate restrictions, it promise the liquidity of shares and maintain the human resource integrity. It is the result of balancing the interests among transferring shareholders, non-transferring shareholders, the third party and the target company.In China, the restriction method is known as the preemptive rights of shareholders. Neither the abuse of rights nor the lack of exercise can achieve the purpose of legal settings. The article 71 of Company Law of the People's Republic of China provides preemptive rights who's provisions are too general, resulting in the exercise problems theoretically and practically. Based on some decided cases, this thesis sorts out the exercise problems and brings up some suggestions to solve the problems by referring to domestic and foreign as well as theories of law and economics.This thesis consists of five parts except introduction and conclusion.The first part introduce the problems of the exercise of preemptive rights based on some decided cases.The second part discuses the elements of the exercise of preemptive rights in the transfer of shares of limited liability company. By comparing with foreign laws, this part suggests add the target company and the third party the board of shareholders choose to subjects of the right, in order to better play its value. The same trading conditions shall be deemed as relatively equal conditions, which contains the quantity, price, way and time of performance. What's more, the subject of the right shall participate in bidding. In terms of the exercise period, the minimum period of 30 days shall be determined and allowed to be extended according to the complexity of the transaction.The third part discusses the stipulation of the constitution. This part gives affirmation to the restriction of constitution from the aspect of law and economics. The original constitution and the amendment shall have different autonomous space. What's more, the stipulation shall respect the just and the liquidity of shares of limited liability company.The forth part discuss the legal effect of the exercise of preemptive right in the external transfer of limited liability company shares. This part starts from internal and external aspects, claiming that it establish a valid contract between the right holder and the transferor and whether it is an infringement of the preemptive right does not affect the validity of the contract between the transferor and the third party, once the third party fulfill his duty of care.The fifth part discusses the role of the company in the exercise of the preemptive right. In this part, the company shall have the right to review when it receive the applicant which asks the company to assist in changing the register of shareholders and help to change the business registration. What's more, it shall have the right to refuse to assist when there is a violation of preemptive right.The sixth part puts forward some suggestions about the exercise of preemptive rights during the external transfer of the limited liability company shares, on the basis of the above argument.