Analysis On The Dispute Over Equity Transfer Of Huang V. Chen

In judicial practice,the equity transfer disputes often occur,and There are a lot of lawsuits about the infringement of other shareholders' preemptive right,which is caused by the dormant shareholders transfer the equity.Our laws protect the rights of dormant shareholders and the preemptive right of shareholders in the equity transfer,but there is no provision on whether the dormant shareholders can directly transfer the equity with a third party which is non-shareholder,and the validity of the contract that infringes upon the preemptive right of other shareholders has not been stipulated.There are different understandings of this in the theoretical circle,and the adjudication results of different courts in judicial practice are also distinct.Therefore,the research on this problem has high practical value.The dispute case of huang vs.Chen concerning the equity transfer is such a case,in which the equity transfer between an dormant shareholder and a third party directly prejudice the preemptive right of other shareholders.According to the appeal of the parties and the main points of the court judgment,there are three controversial focuses in this case :(1)whether Chen can transfer the equity directly to non-shareholder third party;(2)How about the validity of the equity transfer contract signed by Chen and the third party huang;(3)whether the equity transfer contract signed by Chen and huang should be cancelled.Based on the analysis of the case,this paper makes a theoretical and legal analysis of the qualification standard of the dormant shareholders,the validity of the equity transfer contract signed by the transferring shareholders and the non-shareholder transferee,and whether the equity transfer contract should be terminated,at the same time,through the case analysis:(1)The prerequisite and necessary condition for an dormant shareholder to transfer its equity is that it is qualified as a shareholder,When the interests of a third party are involved,the qualification of the dormant shareholders must be determined according to the formal standards.Other courts have decided to confirm that Chen enjoys the qualification of shareholder of tianli company,Therefore,Chen has the objective conditions to transfer his shares to huang,and his act of direct transfer the equity is effective.(2)Chen failed to transfer the equity in accordance with the 71 st regulation of the company law,he did not inform other shareholders,and other shareholdersr did not make clearlyindicate whether to exercise the preemptive right,which is flaw in the legal procedures,it's not a violation of the potency mandate.At the same time,the validity of the equity transfer contract does not necessarily lead to the change of equity.The equity transfer contract between Chen and huang shall be valid if it meets the requirements for the contract to take effect.The transfer contract between Chen and huang is legal and effective,because it meets the requirements for the contract to take effect.(3)Due to Chen's delay in performing the contractual obligations,the purpose of the equity transfer contract signed by Chen and huang cannot be realized.Therefore,the equity transfer contract can be terminated according to the request of the non-breaching party huang,and Chen should assume the liability for breach of contract and return the equity transfer payment to huang.