Discusses The Validity Of Equity Transfer Guarantee

In the commercial activities of where equity as collateral,the factors affecting the value of stock rights include but are not limited to the corporation’s capital situation,efficiency and income of business,development prospect,inner and external risks etc.Equity value has the characteristics of activity and instability.In the form of equity pledge,creditors often have a lot of worries about the limited controllability of equity value,which reduces the possibility of debtor’s successful financing to a certain extent.However,under the non-typical guarantee mode of equity transfer and guarantee,on the one hand,both parties can break through the limitation of legal guarantee rights in terms of type and content,and give creditors more extensive rights through meaningful autonomy,strengthen the monitoring of the debtor’s behavior,prevent the debtor’s moral risks in advance,ensure the smooth settlement of claims,and also benefit debtors’ smooth financing.On the other hand,one of the distinctive features of the guarantee for the transfer of interest is to register the change of ownership of the guaranteed object,which makes the creditor become the owner of the underlying equity at least in appearance.This will help to prevent the debtor from disposing the collateral again,maintain the stability of equity value and increase the possibility of bond realization.Therefore,compared with traditional security real rights,equity transfer guarantees have gradually become more widely used in commercial activities.Because it has many advantages such as simple and flexible program,low transaction cost,strong controllability and so on.In recent years,as an atypical form of guarantee,the status and effectiveness of the guarantee contract of a cession guarantee are gradually being clarified and recognized by law and judicial practice.But in view of the complex and volatile nature of commercial practice activities,there are still many controversial issues that remain to be further explore and deepen understanding.In the case of "Contract Dispute between Gangfeng Group Company and Guorong Invesment Company" and "Wang Yan and Shenzhen Market Supervision Administration’s Industrial and Commercial Change Registration" cases,Gangfeng Company raised 150 million yuan from Guorong Company.In order to guarantee the realization of the creditor’s rights,the former transferred all the equity of Gangfeng Real Estate Company held by it to the latter.In the meantime,the two parties have made detailed agreements on their respective rights and obligations,conditions for equity rotation,and ways to realize creditor’s rights and debts.Later,Gangfeng Company failed to pay off its debts as agreed.Guorong Company has made board resolutions as a shareholder,which has facilitated the change of many company registration items such as the legal representative of Gangfeng Real Estate Company.The two related cases involve the identification and treatment of many important issues in equity transfer guarantee,such as the nature and effectiveness of the agreement,the rights and obligations of the parties,the disposal of the creditor’s rights and debts,etc.The author believes that the determination of the nature of the agreement between the parties should not only refer to the facts of equity transfer,but also take into account the real purpose of the agreement signed by both parties and whether there is a basic debt-debt relationship and other factors to judge.With regard to the validity of the contract itself,according to the normative spirit of Civil Code and Judicial Interpretation of Guarantee System,if there is no violation of prohibitive provisions,its effect cannot be denied easily.As for the real right effect of the equity transfer guarantee,if the party completes the equity transfer according to law and makes public the change of ownership,the assignee has the priority right to be reimbursed for the target equity.Furthermore,considering the fluctuation risk of the value of the equity itself,in consideration of the interests of the transferee in realizing the claims,the assignee shall be endowed with the right to preserve the value of the underlying equity interest,such as the "right to know" and "right to supervise".Of course,this requires us to accurately identify "shareholder rights" and "preservation rights." Regarding the legal status and scope of rights of the transferee,although the assignee is the declared owner of the equity,within the internal relationship,the transferor is the true shareholder of the company,the transferee is only the creditor with a certain security rights,who enjoys the creditor’s rights and a certain range of guarantee rights according to a law,but does not enjoys the shareholder’s rights,and its behavior of exercising the shareholder’s rights is deemed invalid.As for the realization way of equity transfer guarantee,if there is no manifest injustice in the liquidation mode agreed by the parties,their autonomy of will should be taken precedence.