Research On Limited Liability Company Repurchasing Its Own Shares

Company Law of the People’s Republic of China only has provisions on joint stock limited company repurchasing its own shares and also stipulates the dissenting shareholders’ right to request limited liability company to repurchase his or her shares.It does not mention whether the limited liability company can repurchase its own shares in accordance with the articles of association or in agreement or not.The theoretical circles have different opinions on whether a limited liability company can repurchase its own shares.There have also been a large number of cases of limited liability companies repurchasing its own shares in judicial practice,and the judgments of local courts vary greatly from each other.It is of great practical significance to study the system of the limited liability company repurchasing its own shares.There are no theoretical obstacles in limited liability companies repurchasing its own shares.Through reasonable system design,there is no logical obstacle for limited liability company to hold its own shares,neither will it break the principle of shareholder equity equality,let alone infringe on the principle of corporate capital maintenance.The historical evolution of the share repurchasing system shows that it aims to enhance market vitality and solve companies’ financial problems.This also explains from one side why there are share repurchasing clauses in many gambling agreements and investment agreements.It also shows that the construction of the system is of great significance to economic life.In addition,the construction of the share repurchasing system of the limited liability company is helpful to achieve the similar treatment of similar cases and to maintain judicial authority.Based on the characteristics of privacy of limited liability company,repurchasing its own shares should be permitted by principle,prohibited by exception.In terms of specific institutional design,principle of capital maintenance,principle of equality of shareholders’ equity and protection of creditors’ interests should be persisted.And limitations of pricing,financial source as well as procedure should be adopted to avoid the abuse of limited liability company’s share repurchasing system.When the above restrictions are violated,the effectiveness of share repurchasing will be affected.Defects in effectiveness varies depending on the limitations that be breached.When the pricing of repurchased shares is obviously unreasonable,if it meets the relevant requirements,it can be handled according to fraudulent repurchase or unfair repurchase.If the share repurchasing violates the financial resources restriction,the share repurchase is not invalid,the transfer shareholder shall bearsupplementary responsibility for the company’s debt within the scope of the share transfer price,and the directors who violates the fiduciary obligations shall also be liable to the company.If the share repurchasing violates the procedural restrictions,the effectiveness of the repurchase varies according to the types of defects of the resolutions of shareholders’ meeting.After a limited liability company repurchases its own shares,it has the right to transfer all or part of these shares to a third party before the write-off deadline arrives.During the period when the limited liability company holds its own shares,it’s just a state of fact that the company holds its own shares.The company shall not exercise any shareholders’ rights that arising from that part of the shares,any exercise shall be null and void.