On The Flaws Equity Transfer Of Responsibility

Although legislations of many countries have strict regulations on the responsibility of capital contribution of the stockholders, defective capital contribution is still commonly seen. Defective capital contribution leads to defective share which is the material basis of defective share transfer. In recent years, disputes on defective share transfer arising from defective capital contribution are rather common in practice while there is no specific regulation on it in current legislation. Meanwhile, legal theory of corporations lays more emphasis on the defective capital contribution of shareholders and lacks the systematic discussions in this respect. This dissertation will provide suggestion and solution by discussing the defective share, the effect of defective share transfer and the legal liability. The discussion will focus on the limited liability corporation, limit the defective share to the share resulting from defective capital contribution and aim at the protection and balance of the benefits of shareholder, company, creditors and other related parties.This dissertation has 4 parts besides the preface and closing part. The structure is as follows:Part 1:Firstly, this part introduces the concept of defective share and defines the defect, share and capital contribution defect to get the definition of defective share in broad and narrow sense. Secondly, this part deals with the reason of defective share i.e. the forms of defective including the theoretical classification and the classification in current legislation.Part 2:Firstly, this part is relevant to the discussion the qualification of shareholder of the defective share. The author makes the conclusion that defective capital contributor still has the qualification of shareholder and shareholder right in spite that such right is legally defective by analysis of the definition of capital contribution, shareholder qualification and shareholder right. Secondly, such shares are still transferable.Part 3, Firstly, this part will provide a brief introduction to theories of the effect on defective share transfer---the theory of absolute voidances, the theory of absolute valid, the integrated theory and the theory of discrimination. Secondly, this part discuss the principle of the effectiveness of the defective share transfer contract and remark the pros and cons of each theory to provide the opinion of this dissertation. Then, the author analyzes whether the defective capital contribution and the fraud in the party's express of intention have impact on the effectiveness of defective share transfer. Lastly, this part deals with the burden of proof in the event that the fraud constitutes a rescindable contract and exercise of recession right and the legal effect on the recession of the defective share transfer contract.Part 4:Firstly, the discussion of the principles of liability of the defective capital contribution in case of defective share transfer is carried out. Then, the analysis focuses on the various types of liabilities in disputes on defective share transfer and discusses the liability of the transferor and the transferee in the defective share transfer contract to the non-breaching shareholder, company and the creditor of the company and it will discuss the share of the liabilities of both parties and issues on recovery. The author will provide opinion on the liability to the creditor of the company i.e. the afterward creditor and the previous creditor should be treated differently in the event that the good will transferee exercise the recession right to the defective share transfer contract. Lastly, this dissertation will provide the introduction to the litigation prescription.