Study On The Problems Of Defective Equity Transfer Of Limited Liability Company

Investment is the basic obligation of the company’s shareholders. Despite the clearregulations of Chinese “Company Law” on shareholder’s contribution obligation,shareholders’ defective capital contribution is still common in practice with its diverseforms. After the defective capital contribution of shareholders, the defective share arises,which results in a series of legal problems. This paper begins with a case, drawing outthe main problems associated with defective share, including the connotation and extensionof the defective share, the qualification of defective shareholders, validity evaluation ofcontract of share transfer, and the allocation of responsibilities after defective sharetransfer. This paper which lays stress on the evaluation of contract’s effectiveness andresponsibility assignment studies a variety of theories, introduces overseas company lawand pays special attention to the analysis of problems and disputes in the framework ofcivil law and commercial law. It is thought that the principle of Contract Law should beapplied to the problems of validity of the defective share transfer contract, and the right ofrevocation of a bona fide assignee should be properly modified combined with the conceptof Commercial Law. In terms of the allocation of responsibilities after defective sharetransfer, the protection of the security of trade and creditors’ interests should be stressed,and the transferor and the transferee shall bear joint responsibility in principle.