On The Credibility Of Registries Of Shareholders In LLCs

In China's judicial practice, disputes aroused in the recognition and transformation of shareholder's rights are common problems in limited liability companies. At the back of these disputes are the representation mode of shareholder's rights and its credibility. The key to solve the problems is to stipulate the representation mode of shareholder's rights, recognize the credibility of the registry of shareholders in the form of legislation, and build and perfect related institutions meanwhile.After demonstrating that a right should be shown by a unique and definite representation mode, the paper develops that the representation mode of shareholder's rights should be unique and definite, and the mode differs in different types of companies. In listed companies, the mode registers as the relevant record in securities registration and settlement institution. In non-listed companies and limited liability companies, for the shareholders of bearer shares, the shares are the representation mode; for shareholders of name shares, the relevant record in the registries of shareholders is the representation mode.Distinguishing the publicity of shareholding change and the representation mode of shareholder's rights, the paper clarifies the relation between the publicity principal in shareholding change and the credibility of the registry of shareholders:they are coordinate concepts mutually complemental in function, and the credibility principal is not a logical extension of the publicity principal. It is the publicity principal not the credibility principal that grants the effectiveness of the shareholding change, but the credibility principal gives validity to the representation mode. The legitimacy of the credibility of registries of shareholders comes from the protection of reasonable reliance.In the second part of the paper, by comparing concensualism and formalism, the author take the opinion that concensualism is the better choice for the legislation of shareholding change in limited liability companies. The paper discusses the original condition of the relation between the credibility of registry and the change of real right. By analogy, it argues that concensualism and formalism are both suitable for the credibility of registry in company law. The credibility of registry is not a inevitable inference of formalism. Concensualism does not naturally reject the credibility of registry. In the final analysis, whether we approve the credibility of registry or not mainly depends on what kind of value choice we'll make and what kind of policy we'll adopt.The third part of the paper discusses the tatbestand of the credibility of registries of shareholders in limited liability companies. It requires that a material error exists in the registry, the grantee obtain the rights through transaction, the registry of shareholders shows that the bargainer are entitled, the grantee acts in good faith and without culpa lata. On the basis of theoretical analysis, the paper evaluates the relevant regulations in The Provisions of the Supreme People's Court on Some Issues about the Application of the Company Law of the People's Republic of China (â…¢).The forth part of the paper makes some gross suggestions concerning the institutional supports of the credibility of registries of shareholders in limited liability companies, including establishing the trusteeship of the registry of shareholders, perfecting the items in the registry and creating a less unfair compensation system.