Significant Changes in Equity Transfer of Limited Liability Companies under the New Company Law
Before the revision of the Company Law, if shareholders wanted to transfer their equity to someone other than shareholders, they needed to first seek the consent of other shareholders, and only with the consent of more than half of the other shareholders could they proceed with the equity transfer. The new company law has abolished the requirement to seek consent, and instead stipulates that the transferor only needs to notify other shareholders in writing of the quantity, price, payment method, and deadline of the equity transfer. After receiving the notice, other shareholders may have the right of first refusal under the same conditions. If there is no response within 30 days from the date of receiving the written notice, it shall be deemed as a waiver of the right of first refusal. This change simplifies the process of equity transfer.
2、 New regulations have been added that require written notice to the company for equity transfer and changes to the shareholder register.
This is a newly added provision in the Company Law, which stipulates that if a shareholder transfers equity, they shall notify the company in writing and request a change in the shareholder register; For those who need to apply for change registration, they can request the company to apply for change registration with the company registration authority. If the company refuses or fails to respond within a reasonable period of time, the transferor or transferee may file a lawsuit with the people's court in accordance with the law. This new regulation grants shareholders the right to sue, preventing the company or other shareholders from refusing to cooperate with equity transfer or unreasonably obstructing, making it difficult for new and old shareholders to realize their rights.
3、 The time point at which the transferee can exercise shareholder rights after equity transfer has been clarified.
Due to the fact that equity transfer often takes some time to complete, in practice, some new shareholders advocate that they should have the right to exercise their rights from the time they sign the equity transfer agreement, some advocate that they should have the right to exercise their rights from the time they pay the consideration for the equity transfer, and some are already fulfilling their shareholder responsibilities before signing the equity transfer agreement. Various situations are complex. Previously, there was no clear provision in the law regarding when new shareholders can exercise their shareholder rights. The revised new Company Law stipulates that in the case of equity transfer, the transferee may assert shareholder rights against the company from the time it is recorded in the shareholder register. This new regulation solves the difficulties in judicial practice.
4、 Clarify who bears the obligation to contribute capital if there are defects in the transfer of equity by shareholders.
Previously, Judicial Interpretation Three of the Company Law had made provisions on the issue of equity transfer by shareholders who failed to fulfill or fully fulfill their investment obligations. According to the regulations, in this case, the transferee knew or should have known about it, and the company requested the shareholder to fulfill their investment obligations, and the transferee shall bear joint and several liability for it. However, this judicial interpretation does not further specify how to handle the issue of capital contribution for shareholders who have not yet reached the deadline for capital contribution if they transfer their equity.
