The Theory Analysis And Improvement Of Law To The Shareholders’ Pre-emptive Rights

Equity, as a kind of capital, can be freely transferable inprinciple. However, for those limited liability companies which stronglyrely on human joining, if restriction was not put on equity transfer,companies would be in jeopardy. In order to maintain the stability of thelimited liability company under the premise of free transfer of ownership,restrictive provisions were made concerning transfer of ownership fromshareholders to non-shareholders among limited liability companies allover the world. China’s "Company Law" has a clear description concerningtransfer of ownership from shareholders to non-shareholders: while givingthe other shareholders’ consent rights and pre-emption rights in thecompany, it also describes the purchase obligation of the shareholders whoobject when a majority of shareholders are opposed to the transfer. Inreality, there are many cases in which shareholders of a limited liabilitycompany safeguard their legitimate rights and interests through the exerciseof preemption. However, taking into consideration of the complexity ofreal deal and limitations of legislation, as well as the inadequate provisionsof the exercise conditions, exercise period and relief channels in China’s"Company Law", disputes often arise between shareholders who transferownership and other shareholders who exercise pre-emptive rights, whichnot only undermines the harmony and stability of the company but also hasan adverse impact on the interests of non-shareholder. Therefore, it isnecessary to promote the improvement to the law through academic research. On the basis of an academic analysis of shareholders ’pre-emptiverights, proposals are put forward concerning the incomplete description insome articles in law in hope of giving some useful suggestions concerningthe modification of the law and resolution of some disputes.In the first chapter, an analysis of the conflicts between limitedliability company’sstrongly relying on human joining and free transfer ofequity is given, which reveals the purpose of the establishment of thesystem of pre-emptive rights of shareholders and it also defends limitedliability company’s strongly relying on human joining by settingrestrictions on the transfer of ownership. By introducing descriptions ofshareholders’ pre-emptive rights in law articles in other countries andquoting relative provisions in China’s"Company Law", it points out thatadditional provisions can be made in companies’ regulations under thestatutory model in which the law gives other shareholders consent rightsand preemption and formulates the buying rights of shareholders.The second chapter discusses the legal nature of the shareholders’pre-emptive rights. Shareholders’ pre-emptive right is not only a legal right,but also the right to form, the exclusive legal property rights. In addition,combined with cases, an analysis of the impact of shareholders’pre-emptiverights legal characteristic on practices is also made.The third chapter gives an analysis and explanation of the followingseven aspects: the necessity of Shareholders purchase obligations, theexercise of pre-emptive rights body, determination of the same conditions,the way how to exercise shareholders’ pre-emptive rights on special"transfer", the fulfillment of the obligation to notify shareholders and thenecessity of setting the exercise period of pre-emptive rights ofshareholders. This chapter gives an analysis of problems existing in presentlegal provisions as well as problems in specific application, and thischapter also gives corresponding improvement proposals.The fourth chapter gives an analysis of the legal effect of foreignequity transfer agreement, from the perspective of protecting theshareholders’ pre-emptive rights. In addition, through the analysis of thefact that some shareholders only ask to confirm that external transferagreement is invalid, it gives the proposal that the way how to exercise pre-emptive rights should be given while confirming the validity of thecontract. In addition, it also gives the proposal that the actual situations ofthe cases should be specially considered and the stability of the existingorder should be maintained as well as possible while guaranteeing theexercise of shareholders’ pre-emptive rights and protecting the interests ofother partners.