On The Improvement Of Employee Stock Repurchase System In Limited Liability Companies

Article 142 of the company law of the people’s Republic of China(2018 Amendment)(the same below)stipulates,in the form of exceptions,that the stock rights of employees can be repurchased by a joint stock limited company that implements the employee stock ownership plan.For a limited liability company,there is no provision for the company to repurchase stock rights.However,ESOP is widely used in limited liability companies.Enterprises must face the issue of the disposal of stock rights of employees who have left,and the number of litigation disputes caused by them have gradually increased.The court held different opinions on the legal basis of the share repurchase of limited liability companies during the trial.The effectiveness is also debated.Analytical scholars’ research on the state-owned enterprise mixed-reform employee stock ownership plan and the share repurchase of limited liability companies concludes that under the current company law,it is legal and feasible to repurchase employee equity,and limited liability companies restrict their employee equity through the company’s articles of association.The exit conditions should also be affirmed in judicial practice.First of all,China’s company law does not strictly prohibit the share repurchase of limited liability companies.Not only that,the share repurchase system has multiple functions in modern corporate enterprises.Limited liability companies urgently need to improve the share repurchase in participating in international competition.The system supports the needs of business development."The law is free without prohibition." The company’s articles of association stipulate that employees’ stock repurchases do not violate the compulsory provisions of laws and administrative regulations,but also the need to balance the company’s overall interests and protect the interests of small shareholders.Improving the legislation on employee stock ownership,clarifying specific provisions for limited liability companies’ share repurchases,and providing a unified legal basis for resolving employee equity repurchase disputes are key to the smooth progress of limited liability company employee stock ownership plans.At the same time,judicial practice in some disputes,a tolerant attitude should be adopted,taking into account the interests of employees and the enterprise.As an important shareholding carrier,the employee shareholding meeting has always played the role of managing the employee’s equity in the form of a nominal shareholder.However,the legal status of this type of shareholding in the repurchase of employee equity is not clear,and there is also controversy as the main body of the repurchase.With the development of the trust law,the trust shareholding model has been more recognized.In the future employee shareholding plan,professional trust institutions will gradually replace the employee shareholding meeting,and play a role as a beneficial and fair shareholding model.