The Application Of Article 167 Of The Contract Law On Equity Transfer Contract

It is debated whether the Equity Transfer Contract by Installment can be applied to Article 167 of the Contract Law.This article retrieves relevant cases heard by courts at all levels after the publication of No.67 Guiding Case,and selects 9 typical cases that support the application and 6 objections.According to the collected cases,the applicable cases do not discuss the applicable reasons fully in the judgment reasons section.Instead,the equity transfer contract is equated with the sales contract.The unpaid is judged only in form.If the equity transfer amount of the company reaches one-fifth of the total equity transfer amount,Article 167 of the Contract Law is directly invoked as the basis for adjudication.Cases against application consider that the equity transfer contract is very special.So Article 167 of the Contract Law cannot be applied on equity transfer contracts.No.67 Guiding Case gives the judgment view that the equity transfer contract does not apply to Article 167 of the Contract Law,and discusses the reasons for the judgment.However,the Guiding Case only have its own case justice and cannot support the judicial guidance value that the guidance case wants to achieve.Maintaining transaction security due to commercial appearance does not constitute a condition that restricts the termination of the contract.Article 167 of the Contract Law is a special provision on installment purchaseand sale contracts,which are essentially credit contracts with two characteristics: "payment in installments" and "subject matter first delivery".The "one-fifth" rule is to protect the buyer's interests and avoid the seller proposing too harsh terms in the contract agreement;the provisions of "pay the entire price or terminate the contract" are a relief to the seller's risk of recovering the price.This right of the seller does not need to be premised on the contract,but can be directly based on the Contract Law Article 167.To terminate the contract must satisfy "the buyer has not fulfilled within a reasonable time after the reminder".It is undeniable that the equity transfer contract has both speciality and similarity compared with general sales contracts.The equity delivery is different from the change model of movable property delivery.In addition,the equity transfer contract are subject to special regulation by the company law.The restoration of the original status after dissolution involves the return of equity.The similarity is reflected in the similar nature of the contract and the credit granting behavior.The equity transfer contract has the characteristics of temporary,paid,duplex,and property of the sales contract.Similarity determines the possibility of reference application,but only needs to formulate appropriate application rules in combination with the particularities.Equity transfer contracts can apply Article 167 of the Contract Law by analogy for good reason.Firstly,according to Article 174 of the Contract Law,the equity transfer contract can be “ referenced to the relevant provisions of the sales contract ”.Installment purchases are not only for consumption purposes.There are many installment purchases for non-consumption purposes and many other types of contracts that use installment.From the current interpretation of the law,judicial practice and doctrine,it can not be concluded that the installment purchase and sale is only for the purpose of consumption.The "subject matter fee" in Article 167,paragraph 2 does not constitute a barrier to analogical application.This provision is a result of the application of the right of rescission,not a precondition.The meaning of the "use fee" is compensation for loss after the contract is terminated.The transferor can also claim damages after the contract of equity transfer is terminated,but it does not take the "use fee" as the standard.The application of Article 167 is after all analogical application.The particularity of the equity transfer contract should be considered,and the principles of collective rights and efficiency pursued by commercial transactions should be considered.It is important to refer to the applicable prerequisites to establish a relationship between the equity transfer contract and the essential characteristics of the installment sale.The first is that equity delivery meets the "first-in-time delivery" nature.The Judgment mark of the completion of the equity delivery behavior is the changes recorded in the register of shareholders.At this time,the assignee enjoys control over the equity,which is in line with the "first-in-time delivery".The payment of the equity transfer payment two or more times after the equity is delivered is an equity transfer contract that can refer to Article 167 of the Contract Law.Secondly,there is a realistic risk of recovery of equity transfer payments.Generally it is risk of equity resale,the transferee has limited ability to pay,and has a tendency to further default on the price.The right to terminate the contract should meet the following requirements.First,the assignor must make a reminder,and the assignee has not paid the due equity transfer payment within the grace period.Second,because the "direct application" is more accurate than the "reference application",if there is a statutory right of rescission in Article 94 of the Contract Law that can be "directly applicable",the statutory right of revocation shall apply.Full consideration should be given to the human nature of the limited liability company,and the retroactive effect of the termination of the contract should be limited.The contract signed with an external third party in the name of the company is protected by the "public announcement" effect of the equity registration,which will not be affected by the termination of the equity transfer contract.Besides,the termination of the contract does not necessarily have the effect of returning the equity to the original assignor.The restoration of the equity is highly similar to the transfer of equity,and the procedural requirements of equity transfer in Article 71 of the Company Law should still apply.Only when other shareholders agree to the transferee to return the equity and do not exercise the pre-emptive right is the original transferor allowed to recover the equity.For the return of equity,the return of equity shall be based on the equity transfer agreed in thecontract,and the value-added or depreciation shall be reasonably distributed or apportioned between the parties to achieve balance of interests and profit between the transferor and the transferee.