Effectiveness About Procedural Flaw In The Share Transfer

Free transfer of equity are inherent right of shareholders, but absolutely free transfer would damage the interests of other shareholders and the company. Therefore,the national legislation set some certain restrictions on the transfer of shares, in particular on the external transfer of equity. In 2005, company law of our country was revised, and a dedicated chapter on regulations of equity transfer was added, which determines the institutional framework of equity transfer and provides the detailed provisions on the procedure of equity transfer. However, this revision of company law did not concern the effectiveness of equity transfer. For a long time, in the jurisdiction of equity transfer dispute, interpretation and application of the law is not accurate and lacks conferential thinking, which has led many misjudgments. In terms of the nature of legal norms, rules of equity transfer procedures belong to peremptory norms, which shareholders must comply with, and violation will bring seriously legal consequences.Furthermore, rules of equity transfer procedures also belong to management of mandatory provisions, aviolation of which does not render a contract void.When shareholders transfer equity, company law and the articles of corporation confer empower other shareholders and other interested persons by setting all kinds of procedures. These procedural rights are set for the transfer of shareholders’ equity,which is based on the purpose to maintain company share and protect the rights and expectations of interest-related bodies.The action of shareholders transferring their shares by violating such procedural rights does not necessarily damage the substantial interest of interest-related bodies. If the interested parties fail to fulfill the relieving rights, the procedural flaws of the contract are amended and effectiveness and performance are not affected. If the interested parties raise an objection to this, and start the relief program within a reasonable time, the court or the arbitral institutions can conduct a voidable review of the contract. If the dissent shareholder expressly agree to buy the equity, the transfer contract should be repealed and the contract performance should be returned. At the same time, to safeguard the legitimate rights and interests of relevant shareholders, and put an end to violations of procedural actsof equity transfers, the legal liability shall be investigated for the offering shareholder,assignee and the company.