Legal Analysis On Inheritance Of Stock Rights In A Limited Liability Company

A Limited Liability Company has characters based on shareholders,and to a certain extent,the circulation of stock rights is limited.Therefore,as independent civil rights,stock rights inheritance in a Limited Liability Company shall balance civil and commercial law fields,which makes it a little special.But this will not affect its inheritability.Based on the theory of the separation of stock interests,stock rights can be divided into property interests and personal interests.The problems arising from the inheritance of property interests could be tackled by the Civil Code and the problems arising from the personal interests could be solved by the Company Law.However,at present there are no specific provisions on inheritance of stock rights in the existing Civil Code and Company Law.Through 283 judicial documents related to stock rights inheritance,it can be found that the courts do not form unified criteria and three typical controversial issues are selected for research.Firstly,how to partition the stock rights involved community property of husband and wife when dealing with the estates.Secondly,the time of stock rights inheritance is not clear while some courts choose the time when the decedent dies and some choose the time after the modification registration in the company registration authority.Thirdly,from the decedent’s death to the completion of the modification registration,how to exercise stock rights is not clear too.In addition,based on the specific situations involved in the documents,it can be found that wills and articles of association do not play their full roles while shareholders and heirs also lack remedies for their own rights and interests.The stock rights inheritance in a Limited Liability Company is much complicated for its property and personal interests and the problems therein shall be clarified on the basis of balancing the interests of all parties.Referring to the legislation of Germany,Japan,the United Kingdom and the United States,the following design could be made.Firstly,when the decedent dies,stock rights inheritance begins.When partitioning the estates,the relative community property shall be allocated firstly to the surviving spouse as his or her separate property.When the stock is registered only in the decedent’s name,the spouse could only ask for the property interests of this part and could become a shareholder only with the consent from over half shareholders.When the stock is registered only in the spouse’s name,the heirs could just ask for the relative property interests and could not be a new shareholder through inheritance because the decedent is not a shareholder before his or her death.After confirming the estates,the heirs inherit the property interests of the remaining stocks.If there is no other stipulation in the articles of association,the heirs,except those who are prohibited from becoming shareholders by laws because of their special vocations like civil servants,may inherit the shareholder’s qualification and gain the total stock rights.As it may take some time to confirm the rights of inheritance and the shares,the estate administrator system in the Civil Code could be introduced.Before the confirmation,the estate administrator shall negotiate with the company and shareholders on behalf of the heirs,and if necessary,exercise stock rights according to the authorization of the heirs and articles of association.In addition,in order to avoid disputes,wills and articles of association shall play their full roles and post-event remedies shall be introduced to protect all parties’ interests as much as possible.Through shareholder objection system,shareholders have rights to refuse the heirs who would damage the interests of company to be a new shareholder through inheritance.Through heirs’ rights protection system,the rights and obligations of heirs,shareholders and company shall be clarified to promote the completion of inheritance.