The Effectiveness Of The Preemptive Right And The Consent Right When Shareholder Transfer The Shares To The Third Party

Because modern business activities are more and more complex,businessmen in the field of relevant business activities,especially in the capital market,began to realize that limited liability companies' function as special purpose vehicles(SPV)to achieve the goals of risk isolation between shareholders' personal responsibilities and company's responsibilities.Therefore,whether in foreign investment or overseas investment,or in fields of real estate or equity investment funds,there is a large number of limited liability companies as the shareholder in other companies.In the process of transfer shares,indirect merger and acquisition is a major method for the reason that indirect merger and acquisition can not trigger the preemptive rights of other shareholders.China's current "Company Law" Article 71 of the statutory preemptive rights should not be directly extended to the case of indirect transfer of equity.In addition to the statutory preemptive right.If the company has special requirements on the merging,the "precondition of the change of control" may be used to set the agreed preemptive right.The agreed preemptive right objectively leads to "one share sale twice",but the transfer of equity should not be directly applied to the double-sale rules of the contract law.At the same time,since the agreed preemptive right recorded in the articles of association does not belong to the company registration as stipulated in the Company Law and the Regulations on the Administration of Company Registration,it can not directly obtain the effectiveness against external parties.Therefore,when other shareholders advocate the exercise of their right of agreed preemptive right,the judge should be measured the interest between the external third party and the existing shareholders.When the existing shareholders have no special needs for the comparability of the company,in the case of preemptive right,if there is no substantial damage to the legitimate rights and interests of non-transferring shareholders in the equity transfer agreement,the merger and acquisition transaction by indirect purchase shall be affirmed.In this case,as far as the comparability of a limited liability company,because the shareholders did not change and therefore did not undermine the comparability of the limited liability company.Then non-transfer shareholders may claim the remedies from the transfer shareholders in the contract law.Text of this paper is contained three chapters:The first chapter introduced the problem occur from the A71 of the Company Law.There are no direct rules regulate the acts of external shares transfer in regard of the preemptive right.Then through the collect and analysis of the judgements awarded by different courts,we found that different courts in different areas have different opinion about the indirect transfer of shares.For example,a judgement awarded by Si Chuan superior people's court thought that in the case of indirect transfer of shares,no changes happened in company's shareholders.So there are no damages to the company.But in the other famous case named ”the dispute of the land of 8-1”,the court awarded that the indirect transfer of shares avoided others preemptive right and the transfer agreement should be ineffectiveness.The second chapter analysis the situation where the preemptive right can apply.The agreed preemptive right can used in the situation of the indirect transfer and the agreed preemptive right will no lead the external transfer agreement ineffectiveness.Besides,the agreed preemptive right shown shareholders' arrange their private right dependently.But the agreed preemptive right can only been effective among the company's shareholders.The third chapter analysis the shares should be allocate to which party in case of indirect shares transfer proceed.Because the agreed preemptive right can only effective among shareholders.The apply of the preemptive right will cause “one share sales twice”,and two contracts are both effective.But the agreed preemptive right recorded in the articles of association does not belong to the company registration as stipulated in the Company Law and the Regulations on the Administration of Company Registration If the shareholders alleged the agreed preemptive right,their proposition can not against the external party.So,if the indirect share transfer agreement is effective,the share should be allocate to the external party.