An Empirical Analysis On The Effectiveness Of Equity Transfer Contracts ——Focus On The Equity Transfer Contract Where Infringes The Pre-Emptive Right

The provisions on the validity of other shareholders involved in the equity transfer contract when they have not waived their pre-emptive rights in China’s laws and other provisions have gradually been completed,but the provisions on their validity are still vague and have not been able to give a clear answer.The pre-emptive right of Shareholders in China was first proposed by the Company Law of 1993,when the shareholders of a limited liability company transfer equity to an external transferee,other shareholders enjoy the right to give priority to the equity under the same conditions over the transfer of others,the purpose of which is to maintain the unique personality of the limited company,but at the same time should also take into account the rights and interests of the transferred shareholders,external third parties and other shareholders,so how to balance the multiple rights and interests involved in the equity transfer is the challenge faced by China’s pre-emptive right system.This article mainly analyzes and explores the adjudication approach in China’s adjudication practice regarding the validity of equity transfer contracts that other shareholders have not waived their pre-emptive rights.This article begins with an overview of the shareholder pre-emptive rights system and serves as a basis for the entire article.There are disputes in academia and judicial practice over the validity of equity transfer contracts,so it can be seen that the definition of the validity of equity transfer contracts is an issue that remains to be resolved.Through the empirical analysis of the public judgment documents from multiple angles through the "Wolters Kluwer First" case database,it was found that although there was a gradual consensus on its validity in practice,that is,it was believed that the validity of the equity transfer contract could not be denied solely on the grounds of infringing the pre-emptive rights of other shareholders,it still failed to achieve the "same judgment in the same case",and there were as many as five approaches on which the people’s courts relied on to determine the validity of the equity transfer contract,mainly including: 1.taking the legal nature and effect of the pre-emptive right as the approach;2.taking the Company Law as the approach;The normative categories of Article 71 are approaches;3.The approach is to not notify other shareholders whether it constitutes malicious collusion;4.to take the principle of distinguishing between the validity of contracts and changes in rights as the approach;5.to refer to the application of the Provisions on Foreign Investment as the approach.This paper collates the typical examples of each approach and analyzes the practical dilemma of the court’s adjudication approach in combination with theoretical doctrine.Each adjudication approach has its unreasonableness or limitations,and the unclear identification of the nature of the right of pre-emptive purchase,the normative type of article 72 of the current Company Law,the definition of malicious collusion and other issues is the root of the difference in the determination of the validity of the contract.The improvement and unification of the approach to determining the validity of equity transfer contracts is more favorable to trial practice.Therefore,it is proposed that China’s judicial practice should follow a unified approach to adjudication: first of all,the principle of distinguishing between the validity of contracts and changes in rights should be clarified;second,the jurisprudence of lex specialis should be applied to general law first;and finally,the general provisions of the Civil Code of the People’s Republic of China on the validity of contracts should be returned to apply.Finally,the article proposes that in order to balance the maximum economic interests of the transfer shareholders with the "prior interests" of other shareholders,a compensation mechanism for the pre-emptive right holder to the external third party should be established,that is,if there is no transferor shareholder and the external third party maliciously colludes to infringe on the pre-emptive right of other shareholders,the shareholder exercising the pre-emptive right should compensate the external third party,that is,the shareholder exercising the pre-emptive right should bear the cost of the early negotiation of the equity transfer contract.