| To optimize the business environment and protect SMEs from financing predicaments,China has been improving the guarantee systems for movable assets and rights.As a part of these systems,the equity transfer guarantee is highly favored by businessmen,because the guarantor transfers the formal ownership to provide a guarantee for financing and realized claims.As an atypical form,the controversial equity transfer guarantee is not incorporated into the Civil Code of the People’s Republic of China(hereinafter referred to as the Civil Code),but legally confirmed by the Interpretation of the Supreme People’s Court on the Guarantee System of the Civil Code of the People’s Republic of China(hereinafter referred to as the "Interpretation on Guarantee of the Civil Code ").As for the legal structure of the transfer guarantee system,there is theoretic divarication: the security structure theory and the ownership structure theory.In China,judicial interpretation and judicial adjudication are based on the demand for reasonably balancing the rights and obligations of the parties concerned rather than a specific theory.Due to the limitations of the Interpretation on Guarantee of the Civil Code,there are important disputes that cannot be fully resolved in practice,such as the opposing effect of opposition to execution and the in-order compensation rule of secured parties,and further improvement is required.The equity transfer guarantee effect is divided into contractual,internal and external effects.Based on the structural characteristics of the equity transfer guarantee,the transfer guarantee is realized through multiple contracts such as equity transfer agreement,supplemental agreement and equity repurchase agreement.The internal effect refers to the relation with respect to the rights and obligations of the parties concerned.In judicial practice,it is controversial to determine whether the parties involved in individual cases have established a legal equity transfer relation or an equity transfer guarantee relation;In addition,the boundary of the shareholders’ rights exercised by the secured party as a nominal shareholder is also in dispute.The external effect refers to the relation in rights and obligations between the parties and a third party,and the issues include the power and effect of the secured party to dispose of the underlying equity.As for the realization of the security interest,the equity transfer guarantee system is characterized by flexible forms and high efficiency of realization.In the realization forms,both vesting and dispositive liquidation take the imposition of a liquidation obligation on the secured party as a prerequisite.Business registration about equity transfer of the secured party is considered as a judgment basis for the priority right to be repaid.Besides,business registration can also provide the basis for the in-order compensation rule of the secured parties;finally,in case of insolvency of the guarantor,the secured party has the exemption right,which can better protect its rights and interests. |
