Research On The Judicial Recognition Of Equity Holding By Proxy In Listed Companie

Equity held in trust accounts for a large proportion of cases involving disputes over corporate equity.Currently,the provisions on equity held in trust in China mainly focus on limited liability companies,leaving a legal gap in respect of listed companies’ equity held in trust.In the face of strong financial supervision,entrusted holding of listed companies’ shares is generally in violation of regulations.The Supreme Court put forward a new method to identify the validity of the agreement,affirming that the entrusted holding agreement violates the regulatory rules governing listed companies.To be specific,the entrusted holding agreement requires clear and truthful shareholding,impairing the social and public interests,and therefore holds the agreement invalid.Subsequent relevant judgments adopted similar arguments in succession and similarly reached the judgment that a listed company’s escrow agreement was invalid.However,the argument for damage to social and public interest is not sufficient in making a blanket judgment and is suspected of damaging freedom of contract.Moreover,judicial judgment has credibility,and improper judgments will mislead the market and result in deviation of market prediction and decision making.This article studies and discusses the entrusted equity holding of listed companies,focuses on the recognition of the validity of the agreement,clarifies the measuring methods for social public interests,and meanwhile,attaches importance to the treatment after the recognition of the validity of the contract,clarifies the ownership of equity and the distribution of equity interests so as to better respond to practical problems.This text launches from the following four chapters concretely.The first chapter introduces the status quo of the issue of nominee holding of listed companies.First,the status quo of legislation,pointing out that the legal provisions of nominee holding of listed companies are relatively blank.The second relates to the status quo of justice,which clarifies two core legal issues concerning entrusted holding of listed companies’ shares: one is determination of the validity of entrusted holding of shares by listed companies,and the other is legal treatment when such shares are invalid.It is imperative to summarize the different judgment results of the validity of an agreement held by a listed company on behalf of others,i.e.the trial in which the agreement is held valid and the trial in which the agreement is held invalid.The former is mainly based on that the regulatory provisions are departmental rules rather than laws or administrative regulations,that the regulatory provisions apply to the equity holding of limited liability companies on a commission basis and that full respect of autonomy of will,the latter will mainly rely on Item 3 and Item 4 of Article 52 of the former Contract Law to determine the ineffectiveness of an agreement.Finally,sorting out the property arrangement after the invalidation of the agreement,that is,the nominal shareholder may continue holding the shares,but need to return the contributed capital,while the appreciation interests may be judged by some courts to return the full amount to the actual investor or by some courts to share the liabilities.In Chapter II,the current judicial situation regarding the recognition of the validity of an agreement held on behalf of another party is questioned.First of all,it points out that it is not advisable to determine the validity of the agreement for holding equity interest in others’ name by reference to relevant provisions on holding equity interest in others’ name of limited liability companies,and analyzes the special nature of listed companies and the financial regulation background faced by listed companies.Secondly,the author questions on the application of the relevant provisions of the Contract Law to the nominee agreement of a listed company.After analysis,the basis for determining the effectiveness of a listed company’s nominee agreement should be the "social and public interests" provision,in particular,the listed company’s equity held by others on behalf of others to evade the regulation is value-neutral in terms of law,so it is not advisable to determine such act of evading the law on the basis of the Item 3 of Article52 of the original Contract Law.The correct approach is to analyse the substantive relationship of rights and obligations through the appearance of "evasion of the law",the court shall have a scientific methodology framework for substantive consideration,which means that the trial path of the "public interest" clause shall be applied.In respect of Item 5,Article 52 of the original Contract Law,for the determination of whether regulatory provisions affect the validity of an agreement,it should not be limited to the restrictions on the source of judgment law,and the substance of regulatory provisions shall be inspected instead.This also means that the trial approach of the "public interest" clause shall be applied.After clarifying that the validity of the agreement for holding shares on behalf of a listed company shall be based on the clause on "social public interests",it is pointed out that the clause on "social public interests" should be treated dialectically to define the connotation of social public interests.However,the concept cannot be unified,so the application of such clause should focus on the measurement of interests.In Chapter III,the analysis focuses on how to specifically determine the effectiveness of a holding agreement on behalf of others in accordance with the articles on social and public interests,i.e.based on the measurement of interests as the methodology.Introduce the value of interest measuring;however,interest measuring is abstract and principled,so to reduce the arbitrariness of the judgment,specifically in the determination of the effectiveness of shareholding of listed companies,interest measuring shall be applied in accordance with the principle of proportion to ensure that the judgment on the effectiveness of the agreements is moderate.Finally,to determine the validity of an entrusted holding agreement,it is necessary to first confirm the purpose of the regulatory provisions.Under the principle of proportionality,it is necessary to measure the private law interests in the commercial trial and the regulatory interests in protecting the market order or the rights and interests of investors.Major considerations in determining the effectiveness of the agreement include the flagrant degree of the execution of the agreement,relevance between the agreement and social public interests as well as the necessity of the invalidity of the agreement.The final determination of the effectiveness of a nominee agreement of a listed company shall be based on the principle of its effectiveness.If the agreement is determined to be ineffective,full reasoning shall be required.Chapter 4 focuses on analysing the second core legal issue of listed companies’ equity held in trust,i.e.the handling after the confirmation of the validity of the agreement.A valid agreement can be used as the basis for the right of claim of the actual investor;the key lies in the handling after the agreement is confirmed as invalid.Firstly,on the ownership of equity interest.In the theoretical circle,there are many opinions on the identification of the ownership of equity interest,specifically divided into the theory of form,the theory of substance and the theory of compromise.We hold that the nominal shareholder shall obtain the equity interest after the agreement is invalid,mainly based on the Rechtsschein Doctrine and for the consideration of the stability of the company.Second,return of the contributed capital and distribution of appreciation interests,the provisions on the invalidity of such contract may be applied to the return of the contributed capital,i.e.the nominal shareholder shall return the contributed capital.However,the provisions on invalid contracts shall not apply to the disposal of interests arising from appreciation of equity,so the distribution of appreciation interests should be conducted in the way of "sharing proportionally" to demonstrate the legitimacy of sharing rules of value-added interests proportionally from the perspective of "should be done".Finally,they put forward the specific factors for sharing the increased interest proportionally,comprehensively consider the contributions and risks assumed by the two persons,and pursue fairness and reasonableness.