On The Exercise Of Shareholders' Preemptive Right In Equity Judicial Auction

Article 72 of the current "Company Law" stipulates that other shareholders enjoy the right of first refusal under "equivalent conditions" in the enforcement of equity,which guarantees the priority status of other shareholders in the special procedure of equity enforcement.How to exercise it is not clearly stipulated in the law,and there are many disputes in the theoretical and practical circles.According to the relevant content of China's current laws and judicial interpretations,the first way to deal with the compulsory transfer of equity is auctions,but the auction system is based on the principle of "the highest bidder wins" and emphasizes fair value.All bidders in the auction compete on the same stage and have equal status.The selection of the auction target is entirely determined by the bidding level,but the limited purchase company's shareholders' right of first purchase refers to the priority under "equivalent conditions".Once the shareholder proposes the "equivalent conditions" given by a third party within a legal time "Purchasing equity,then the shareholder will be given the opportunity of priority transfer.Obviously,both in terms of the literal meaning and the connotation of the system,there is a natural conflict between the two.The former has no "equivalent conditions" and the latter has no manifestation of equality.There is a dilemma to ensure the fairness of judicial auctions and respect the priority purchase rights of other shareholders.The "People's Court's Provisions on the Auction and Sale of Property in the Civil Execution of the People's Court" and "The Supreme People's Court's Provisions on Several Issues of the People's Court's Internet Judicial Auction" provide that when a judicial auction of a limited liability company's equity is exercised The general rules relatively make up for the shortcomings of the relevant content of the Company Law,but because these two judicial interpretations are mainly for the auction rules and are not specifically designed for the Company Law,multiple shareholders have asserted the right of first refusal There are many conflicts with the "Company Law" on the handling of issues,such as the confusion of the basis of application of the people's courts in judicial decisions.And the current judicial interpretation of equity auctions is conducted in accordance with the "following method".According to the "following method",shareholders who wish to exercise their preemptive right must participate in the auction process with ordinary bidders.When other bidders give if the bidder raises the price again,the shareholder will lose the opportunity to acquire equity if the bidder does not raise the price.It can be seen that there is no difference between the status of the ordinary bidder and the priority of the preemptive right.Therefore,the "inquiry method" rules for judicial auction of equity should be implemented.After the auction,other shareholders are asked if they are willing to exercise the right of first refusal.If so,the shareholder will obtain the equity.If not,the highest bidder will obtain it.Only in this way can the "equal conditions" be formed at a more appropriate time,so that other shareholders can carefully consider whether to exercise the right of preemption and ensure their priority status.At the same time,in order to make up for the regret that the bidder may lose the equity even if the highest price is given,the executive court should give first priority and declare in advance in the auction announcement that there is a problem of pre-emptive rights in the auction target.The price increase gives the bidder and other shareholders the opportunity to win or lose based on the price,in order to balance the interests of the bidder.In addition,for multiple shareholders claiming the right of first refusal,they should be allocated in accordance with the proportion of shareholders' capital when negotiations fail according to the "Company Law".It should not be determined by the lottery method and chronological order in the judicial interpretation.If the preemptive right is in breach of contract at the time of payment and causes the target equity to be reauctioned,the shareholder shall be barred from claiming the pre-emptive right again in the new auction.In a nutshell,in the judicial auction of equity,the exercise of shareholders' right of first refusal should not be at the expense of the interests of the person being executed and other bidders,and the interests of all parties should be balanced to improve the enforcement efficiency of the people's court and maintain Good referee order and social order.