A Study On The Effectiveness Of The Mandatory Equity Transfer Clause Of The Charter Amendment To The Articles Of Association In The Limited Liability Companies

When the "Company Law" was amended in 2005,a number of company articles of association were added,"other regulations,from which it is prescribed",of which Article 71,paragraph 4,gives the limited liability company’s articles of association self-government right "on the equity transfer matters".Based on the provisions of this article,the company generally arranges separately for the equity transfer in the articles of association,but it is easy to cause many disputes.In practice,there is a kind of charter autonomy clauses that cause huge controversy in the theoretical and judicial practice circles,that is,the company requires shareholders to transfer the equity clause.The Guiding Case No.96 affirmed the validity of such clauses in the initial article of association.The initial articles of association was able to bind all shareholders because it had the consent of all shareholders.However,compared with the initial articles of association,the amendments to the company’s articles of association have differences in the degree of agreement.If the company increases the terms of the compulsory equity transfer when the company changes its articles of association the dissident shareholders will appeal to the court on the grounds that the company has not agreed to dispose of the shares.Therefore,the effectiveness of the mandatory equity transfer clause added in the amendments to the articles of association has become a problem in this paper.This paper is divided into three parts:the proposal,the main body and the conclusion.The main body consists of five parts:Part I:The author sorts out the views of the judicial practice circles and the theoretical circles on the efectiveness of the mandatory equity transfer clause in the amendments to the articles of association,and finds that there are three viewpoints of validity,inefectiveness and effectiveness distinction between the judicial practice and the theoretical circles.Among them,the view of effectiveness distinguishes that the revised articles of association cannot bind the dissident shareholders.This view challenges the scope of the amendments to the charter,so it is necessary to discuss the scope of the amendments to the articles of association.Part II:Before analyzing the scope of the amendments to the articles of association,it is first necessary to clarify the nature of the articles of association.The contract theory can explain the nature of the articles of association more comprehensively,but the company articles of association is different from the traditional civil contract.The identification of a charter as an "incomplete contract" is a complete evaluation of the nature of the charter,and thus the validity of the amendment to the articles of association and the initial articles of association can be considered to be continuous.At the same time,under the resolution rule of the capital majority decision,the amendments to the company’s articles of association reflect a presumption of agreement,so the amendments to the articles of association should be binding on all shareholders.Part III:On the basis of the amendment to the articles of association can be binding on all shareholders,trying to establish a reasonable boundary for the autonomy of the company’s articles of association for equity transfer:First,the autonomy clause of the company’s articles of association should comply with Article 71.Secondly,it should also pay attention to the balance between the company’s humanity and capital;again,it should meet the reasonable expectations of shareholders to join the company;finally,the autonomy of the company’s charter is subject to the principle of equality.Part IV:Based on the reasonable boundary delineated in the preceding paragraph,verify whether the content of the mandatory equity transfer clause overflows the boundary.After verification,it is found that the mandatory equity transfer clause does not meet the true meaning of "other regulations",which may result in the imbalance of the company’s humanity and capital,and will lead to the reasonable expectation of shareholders,although it is in line with the shareholders’ equality in the company law.Principles but violate the principle of civil equality.Therefore,the essence of the problem in this paper is transformed into the conflict between corporate autonomy and shareholder equity protection.Part V:The company’s amendment to articles of association is the embodiment of the company’s autonomy,but the compulsory equity transfer clause has caused the infringement of the dissident shareholders.Therefore,it is necessary to determine the effectiveness of the compulsory equity transfer clause on the basis of the interest balance.In most cases,the purpose of the company’s amendment to the articles of association is for the company’s overall interests,and in line with the interests of the majority of shareholders,in practice it is difficult to identify the purpose of the company’s amendments to the articles of association as malicious.Shareholders,although their equity is infringed,can receive adequate relief,so they should tend to protect the interests of the company as a whole and the majority of shareholders.Finally,the paper summarizes the full text and concludes that the mandatory equity transfer clause in the amendment to the company’s articles of association should be considered valid.