Welcome to Francis Academic Press

International Journal of Frontiers in Sociology, 2023, 5(10); doi: 10.25236/IJFS.2023.051002.

Interpretation of “Equal Conditions” in the Preemptive Shareholders' Right in a Limited Company

Author(s)

Xinyi Dong

Corresponding Author:
Xinyi Dong
Affiliation(s)

Yunnan University, Kunming, 650500, China

Abstract

As stipulated in the Company Law in China, shareholders’ preemptive right means that the shareholders of a limited company shall have priority in the purchase of equity under the same conditions, which protects the interests of other shareholders and third parties and the attribute of the cooperation among shareholders in a limited company. The importance of this right has also been fully reflected in judicial practice of which the interpretative approach suitable for “equal conditions” judgment is worth exploring. Based on the above background, this paper first raises problems when determining “equal conditions” in the shareholders’ preemptive right of a limited company in China. Second, it discusses “equal conditions”, “number”, “share price”, “method of transaction”, and “time limit” from perspectives of textual and teleological interpretations. Third, it explores the most reasonable interpretative approach of “equal conditions” and its elements suitable for judgment. It is hoped that better applying confirmation rules of “equal conditions” in shareholders’ preemptive right of a limited company in practice to solve practical problems in the process of equity transfer in a limited liability company and protect the vested interests of remaining shareholders except for transferring shareholders, thereby maximizing the value gained through equity transfer by transferring shareholders.

Keywords

Limited Company; Shareholders' Preemptive Right; Equal Conditions; Textual Interpretation; Teleological Interpretation; Interpretative Approach

Cite This Paper

Xinyi Dong. Interpretation of “Equal Conditions” in the Preemptive Shareholders' Right in a Limited Company. International Journal of Frontiers in Sociology (2023), Vol. 5, Issue 10: 6-10. https://doi.org/10.25236/IJFS.2023.051002.

References

[1] The provision of Article 71(3) of the Company Law of the People's Republic of China: other shareholders shall have the preemptive right to purchase the transferred equity with the consent of transferring shareholders under the same conditions.

[2] Compiled by Supreme People's Court Expert Judges Writing Group for Explaining Difficult Issues and Case Guidance, the Judicial Interpretation of the Company Law (IV) of Supreme People's Court Expert Judges Writing Group for Explaining Difficult Issues and Case Guidance. Beijing, China Legal Publishing House, 2017(10).

[3] Dictionary Editorial Office, Institute of Linguistics, Chinese Academy of Social Sciences. Modern Chinese Dictionary [K]. Beijing: Commercial Press, 2005.

[4] Mao Yizong. A Study of the Value Orientation Which Is Behind of the System of Preemption from the “Equal Condition” [J]. Journal of Anhi Agricultural University (Social Science Edition), 2004, (05).

[5] Guan Qian, Wang Yan. On the confrontation between the right of preemption of equity and the right of free disposal of equity [J]. People's Justice, 2012(11):80.

[6] Zhao Yuansong. Rules for determining "equal conditions" in disputes over the shareholders' preemptive right in limited liability companies[J]. Law and economics, 2018,(07):27-34.

[7] Wang Xinxin, Zhao Fenping. Re-talking about the legal issues of equity transfer of limited liability companies [N]. People's Court Newspaper, 2002-7-19.

[8] Tang Yuanyuan. Analysis of the partial exercise of the shareholders' preemptive right [J]. Journal of Changchun University of Science and Technology (Social Science Edition), 2010, 23(03).

[9] Zhu Lin. Research on the determination of the conditions for the exercise of the shareholders' preemptive right in limited liability companies - centering on the relevant provisions of the <Company Law> [M]. Beijing: China University of Political Science and Law Press, 2010:25.

[10] [Germany] by Bauer·by Sturner, German law of property (first volume) [M]. translated by Zhang Shuanggen. Beijing: Law Press, 2004:468.