Comment On The Case Of Stock Transfer About Mr.Qin V. Mr.Chen

Human cooperation is an important attribute of a limited liability company.The preemptive right of shareholders is an important tool to maintain the human cooperation of a limited liability company.The case of Qin v.Chen is a dispute over the equity transfer around the preemptive right of shareholders.The focus of the dispute in the case is whether the equity transfer agreement that violates the provisions of shareholders’ preemptive right should be revoked and after the transfer shareholder does not agree to the transfer of shares,whether the proposition of priority purchase advocated by other shareholders should be supported.Article 71 of the Company Law gives shareholders the legal right to give priority to the purchase of shares,but the legislative purpose of this provision is not to restrict shareholders from freely transferring the shares they own.Therefore,the violation of the preemption right of shareholders does not lead to the revolution of the equity transfer agreement,but only affects the actual implementation of the equity transfer agreement.If the transferring shareholder does not agree to the transfer of shares after other shareholders advocate the exercise of the right of preemption,at this time,the claim of the preemptive right of other shareholders should be dealt with differently according to whether the transferring shareholder violates the preemptive right of shareholders.If the transferring shareholder violates the shareholder’s preemption right in the process of transferring shares to another shareholder,such as failing to seek the consent of other shareholders on the equity transfer.According to Article 21 of interpretation IV of the Company Law,the proposition of priority purchase by other shareholders should be supported.In this case,Chen,the transferring shareholder,did not notify the equity transfer and obtain the consent of other shareholders Qin when transferring his shares to Cheng,a non-shareholder transferee,which violates the provisions of shareholders’ preemptive right.But the "Equity transfer Agreement" signed by Chen and Cheng should not be revoked for violating the provisions on the preemption right of shareholders.The Equity transfer Agreement is the expression of the true intention of Chen and Cheng.There is no violation of the mandatory provisions of laws and administrative regulations,and it should be recognized as valid.Chen did not notify and solicit Qin’s consent on the equity transfer in the process of transferring shares to the others,Qin has the right to transfershares in accordance with Article 21 of interpretation IV of the Company Law in accordance with the same conditions of the Equity transfer Agreement.Chen said that he did not agree to the transfer of shares after Qin advocated that he would buy the transferred shares under the same conditions as the "Equity transfer Agreement Because Chen previously violated the preemption right of shareholders,he did not apply the provisions of Article 20 of interpretation IV of the Company Law,and had no right to defend Qin’s claim of preemption.Therefore,the court should support Qin’s claim of transferring shares in accordance with the same conditions of the Agreement on Equity transfer.