Legal Analysis Of Forcing Departed Shareholders To Transfer Their Shares In The Articles Of Association Of LLC

The current "Corporation Law" stipulates that the articles of Limited Liability Company(LLC)can make separate stipulations in terms of the transfer of shares,which reflects the autonomy of company charter.In practices,some company charters even stipulate some clauses of compulsory equity transfer in some cases.The terms of compulsory equity transfer based on respecting the company autonomy,or based on the demand of maintaining human joining of LLC and management,or based on consideration of the optimal allocation of resources,which have their certain theoretical basis.Because of the irreparable defects of "Contractual Theory "of articles of association,this paper based on "Common Behavior Theory" of articles of Association,consider that the clauses of forcing departed shareholders transfer their shares in the articles of association have the same force to each shareholder as long as they don’t violate the mandatory law.However,the clauses of compulsory equity transfer should be given some necessary limitation to protect the interests of shareholders.Firstly,the choosing of equity transfer is not completely free,but it also can’t completely lost the freedom of choosing.Compulsory share transfer may treat as a last choice to shareholders.If they can reach an agreement with the internal shareholder before the deadline,the compulsory purchase clause should not be started;Secondly,the stipulation of the price of compulsory equity transfer have effect to the shareholders who vote for the articles of Association according to the principle of honesty and credibility and the principle of estoppel.But for the shareholders who vote against the modified articles of association,LLC should pay a fair and reasonable price or give their the appraisal right of dissenters;Thirdly,the aggravating restrictions on the share transfer(including compulsory equity transfer)of modified articles of Association do not require the consent of all shareholders,it just need the relevant shareholders’(who affected by the modification)agreement.The company don’t need the consent of the relevant shareholders only when faced the major reasons,for the good of the whole and have to make the change.The relevant dissenters can request the company to purchase its equity with a reasonable price.Lastly,the departed shareholders must be given some necessary period of exhortation.The period generally is 30 days,30 days is enough for the shareholder to transfer shares to the company or other shareholders.At this point the shareholders’ qualification eliminating time should be at the time when the shareholders share certificate be transferred or withdraw.If the shareholders delay to transfer shares deliberately,the shareholder qualification shall be eliminated after the expiration of the period of exhortation.And a debtor creditor relationship will be formed between the relevant shareholder and company.If the departed shareholder transfers his shares despite the articles of Association,the court can revoke the contract of equity transferring according to the shareholder’s violation of legal liability——the obligation to abide by the articles of Association when the conduct of transferring of equity appears in the period of exhortation or the company charter hasn’t stipulate the date of termination of the shareholder qualification;The court can affirm the transferor does not have the shareholder qualification,his transferring conduct is Unauthorized Conduct and ineffective without the company’s ratification when the conduct of transferring of equity appears after the period of exhortation.The transferee can obtain the ownership if the equity transfer contract is in accordance with the conditions of Bona Fide Acquisition.The conditions of Bona Fide Acquisition include that the transferor is not entitled to dispose,the transferee is in good faith,the transferee shall pay a reasonable consideration,the shares already have the registration of alteration.