Study On Defective Share Transfer Of A Limited Liability Corporation

In recent years, the companies are continuing to grow stronger and larger as themarket-oriented economy keeps prospering. The more frequently shares are transferred, themore of the share transfer disputes happen. Among those, defective share transfer disputeshave become a focus in both theory and practice and caught worldwide attention. The mainreason lies in that there are no systematic provisions made in our laws, regulations andrelevant judicial interpretations, which shall give a definition to defective share transfer, judgeits effectiveness and responsibilities and implement right relief for the assignee. Regulationsof Certain Issues of The Supreme People’s Court on The Company Law of The People’sRepublic of China(Ⅲ)(hereinafter Judicial Interpretations of The Company Law(Ⅲ)) cameinto effect on February16,2011, which involves some regulations about the responsibility ofthe defective equity transfer. However, these regulations are not enough for us to solve somany defective share transfer disputes in practice.Because there are no consistentunderstandings about the defective share in theory and practice and legislation about it is notperfect, the court across the China gives many inconsistent judgments to the similar trials,thus making a bad influence on the authority and impartiality of the judicial system.Based on the limited liability company, the thesis aims at solve the defective sharetransfer disputes by discussing relevant issues about the transferring of defective share.Following are the four parts of the thesis:First, the thesis gives the definition of defective stock right in the limited liabilitycompany. The author explains the definition of defective stock right by analyzing threeaspects, which are violating the shareholders’ obligations of capital contribution, breachingthe procedures of equity transfer, and the ones caused by other reasons.Second, the study draws a conclusion about identifying the transfer of the detective stockright is valid or not.First of all, the study confirms the qualification of the stockholders whocontributes the defective capital. By analyzing some relevant theories, the author holds theopinion that the shareholders with formal requirements are still qualified as long as the limitedliability company is legally set up. However, their obligations of capital contribution are stillnot released.Moreover, the author analyzes the possibility of transferring the detective stockright.The essence of the equity transfer is an overall exchange of all the rights and obligations of the shareholders have based on their identity. Since the object of stock right transfer is therights of shareholders, we can not deny that they still possess their rights as shareholders evenif their share right are defective.So long as the assignor and assignee should make thecorrections for the defect, the detective stock right is able to be transferred.Then, the authoranalyzes four theories about the validity of transferring detective stock right.By evaluatingtheir advantages and disadvantages, the author approve of Revocation.Finally, the authorstates his legislative suggestions to fill in the gap of the validity of transferring the detectivestock right in legislation.Third, the thesis discusses how to assume responsibility when transferring of thedetective stock right of the limited liability company. First of all, the author introduces thedifferent theories about that and evaluates their advantages and disadvantages as well. Hisfinal viewpoint is that whether the transferee shall assume corresponding responsibilities ornot is determined by if the transferee is in good faith.Then, the author gives a reference onhow to burden the specific responsibilities when transferring of the detective stock right. Heconcludes that we shall judge the assignor and the assignee specific responsibility on thecharacter and characteristics of each specific responsibility.Lastly, the author introduces somelegislative provisions about the specific responsibilities when transferring of the detectivestock right and puts forward some relevant legislative proposals.Fourth, the study discusses remedy systems to the assignee with detective stock right.Form the perspective of those assignees who are in good faith, the author believes that theycan safeguard their legal interests by exercising their defense right and recourse right. Inaddition, to keep the assignee’s benefits being impaired from now on, the author also givessome suggestions about precaution against relevant risks and legislative proposals.