A Study On The Legal Issues Of Equity Contribution

This paper study the legal issues of equity contribution,including equity concontribution restrictions, the assessment and verification of equity contribution,the performance of equity contribution,the form and effectiveness of defective equity,which are based on a specific case.The first part firstly cites a case,then points out the issues of the case, and the legal implications involved.The second part investigates the equity contribution restrictions.Equity contribution restrictions of Ltd. mainly involve the consent and pre-emption right of other shareholders . The same conditions include price, quantity, the way of payment, transaction time and the attachments and so on, of which price and quantity are most important. Whether the qualifications offered by shareholders with pre-emption right are equal to the investment companies relies on the specific case. Pre-emptive right of shareholders should not be exercised by part, unless the investor and the investment company have accepted it. The special restrictions must be given to the sponsors and senior managers of Co.,Ltd. Investment with special funding such as the financial stake and the state-owned equity must follow the relevant legal provisions for the special share transfer. Imperfect empowerment stake should not be used for investment.The third part explores the procedures of equity contribution. Equity contribution should follow the assessment and verification requirements, Equity assessment should be performed by statutory agencies in accordance with the law.Assessment should consider the company's assets, operating performance, the quantities of the equity contribution and a reasonable date to determine the benchmark price.Equity contribution should follow a special verification system because of fluctuation, including the legitimacy of the equity transference, the integrity of the equity and the assessment of the shares.The fourth part probes the performance of equity contribution.Shareholders must complete the equity transferring in order to fulfill funding obligations.For the transferring criterias of equity ownership are different ,the corresponding procedures and effects are also different.It is proposed that the performance of equity contribution is mainly embodied on the written information to the corporate by the endorser; for the listed shares , the transfer records by the clearing system are the standard procedures; for the third person is concerned, the changes in ownership take Trade and Industry Bureau registration as the standard.Part V studies the form, effectiveness and relief measures of defective equity. The equity contribution which is non-performed or partly-performed is not of course invalid, and the shareholders can take measures to relief. If equity contribution harm the pre-emptive rights of other shareholders, and other shareholders advocate pre-emptive rights, the share transfer is invalid;but if the investor pay a substitute for equity contribution (such as currency or other non-monetary property, etc.) to remedy, investment can be valid.If equity investors are the sponsors, control shareholders, major managers of Co., Ltd, the court should consider the interests of the investment companies, shareholding companies and the main stakeholders to make judgments. The transfer of equity limited by the company's charter principle can not be used for captital contribution,but if the other shareholders accept it by behavior, it should be recognized the effect of capital contribution.If we have the pledged equity contribution, for public offering holding corporate limited ,it should be invalid, so as to safeguard the interests of the third person of the trust;for non-public offering holding corporate limited it should be valid, but the liquidity-restricted and power-burdened equity contribution should be confirmed under stern provisions so as to ensure the company's property and the interests of creditors.