On The Pre-emptive Rights Of Shareholders Of A Limited Liability Company

An investor will become a shareholder as soon as the company is set up and he cannot draw back from the company unless he transfers his shares to others. As a result of the characteristics of Ltd Company, the shareholders should be subjected to a lot of limitations. One of the limitations is the shareholders' preemption. Although China's new made some improvement about the shareholder's preemption, it is not perfect. There are many conflicts between the corporation law and other related regulations. Thus sometimes different decisions will be given for similar cases. At the same time, this topic is seldom elaborated. It's the background of the author to make this thesis.The thesis is made up of three parts: the introduction, the body and the conclusion. In the introduction, the problems to solve are raised by 2 cases. The body itself comprises 4 parts. In the first part, the basic theory of privileged allocations to shareholders is interpreted. The author regarded the privileged allocations to shareholders as a right of formation and a limitation to the right to transfer stocks. The second part explained why most legislatures in the world provide shareholders' with privileged allocations in their Corporations Laws. In the author's opinion, the design of the stockholder's privileged allocations system is an effort trying to realize the balance among the fluentness of stock rights, the harmoniousness of co-workers and the safety of business.On the basis of explanations above, the author made further discussions about privileged allocations to shareholders in the third part, including how to identify "same condition", whether the shareholders can partly exercise preemptions and how to perform privileged allocations to shareholders in auctions, etc. In the forth part, the author elaborated the legal validity of a contract to transfer shares between the seller and the purposed buyer which is signed through an illegal way. The authors approved of the argument that the contract should be regarded as valid only if there is malicious collaborations between the seller and the purposed buyer. Also, the author gave some advice on how to remedy over the shareholders when their privileged allocations are infringed. One suggestion is that if the purposed buyer's name has not been registered in the company's stock ledger, the shareholders with privileged allocations shall have the right to deregister the name of the purposed buyers from the company's stock ledger.