Research On The Pre-emption Right Case Of State-owned Equity Transfer

The pre-emptive right is the legal right given to shareholders in the company law.Other shareholders of the company also have the right of first refusal when the state-owned equity of the limited liability company is transferred.Due to the imperfection and in-coordination of related legal systems,it is a controversial issue to protect shareholders’ pre-emptive rights when the state-owned equity is transferred through public bidding in the equity exchange.In dealing with such cases,the court mainly focuses on the following three disputes: first of all,whether other shareholders are required to enter the property rights exchange to exercise pre-emptive right;secondly,how to determine the "expression of intention" of other shareholders while they exercise pre-emption right;lastly,how to determine the validity of contract while shareholders’ pre-emption right has been infringed.Firstly,state-owned property rights trading in the property exchange is a mandatory provision of the law,other shareholders should not break through this provision through the shareholders’ pre-emption right.Therefore,entering the property rights exchange to exercise pre-emptive right should be regarded as one of the ‘same conditions’.Secondly,in order to maintain the balance of rights and interests of the transferor,the third party and the property right exchange,it can be considered that the implied behavior of the shareholders can be regarded as a waiver of the preemptive right under certain circumstances.Finally,the effectiveness of the equity transfer contract between the transferring shareholder and the third party is not affected by the infringement of the shareholders’ pre-emption right.In addition,article 22 of the Supreme People’s Court on Issues Relating to Application of Company Law of the People’s Republic of China IV stipulates: the determination of ‘written notice’ and ‘equal conditions’ can be left to the discretion of the Equity Exchange.The application of ‘can refer to the trading rules of the property right trading place’ is uncertain because it will make the rules of the Equity Exchange are in violation of the law.In summary,we need make the shareholder preemptive right system more clear through the law: making it clear that it’s necessary for shareholders to enter the property rights exchange to exercise the right of first refusal,refining the articles of law of preemptive right through Articles of Association,and balancing the conflict between pre-emptive rights and the auction system to maintain the highest auction price while maintaining the humanness of alimited liability company.