Generally speaking, the defect of capital contribution refers to the amount of shares subscribed by shareholders in the process of company establishment or capital increase, which should have been paid in full and on time to the company account, but failed to be paid in full and on time as required, or paid in the company account to transfer the share capital out of the company by taking advantage of its controlling position.
In addition to the lack of funds, there are also cases where the value of pledged property is insufficient, pledged property has been delivered to the company but not transferred, and pledged property has been transferred but not delivered to the company for use. Of course, it also includes special forms such as property that investment has no right to dispose of, and investment money/stolen goods.
2. Can shareholders' capital contribution defects deny their shareholder qualification?
Shareholders have the obligation to contribute to the company, but the failure to contribute does not affect their existing shareholder qualifications. The qualification of shareholders shall be confirmed according to the internal and external legal relations, the articles of association, the register of shareholders and the registration of the administrative department for industry and commerce. These documents can prove the qualifications of shareholders, but they cannot prove that shareholders have fulfilled their capital contribution obligations.
3. Legal consequences of defective capital contribution
According to the provisions of Articles 200 and 20 1 of the new Company Law of China, if the promoters or shareholders of a company make false capital contributions or withdraw their capital contributions, the company registration authority shall order them to make corrections first, and then impose a fine. At the same time, China's company law does not stipulate the right of other shareholders to start the disqualification procedure for defective investors. That is to say, in China, there is no legal basis for companies or other shareholders to start the disqualification procedure for shareholders with false or insufficient capital contribution, let alone directly deny their shareholder qualifications, that is, shareholders' defective capital contribution cannot lead to their disqualification or disqualification. Therefore, generally speaking, to determine whether a person enjoys the company's equity depends on whether he has an agreement to hold the company's shares, whether he is a shareholder recorded in the company's articles of association, the register of shareholders or the registration documents of the registration authority, rather than whether he contributes capital according to law, which is also a universal benefit of legislation in various countries.
To sum up, the exercise of shareholders' rights is based on whether they are qualified as shareholders, not on whether shareholders actually contribute capital. Defects in capital contribution do not necessarily affect the exercise of shareholders' rights.
4. Does shareholders' defective capital contribution have no effect on their shareholders' rights?
Defects in capital contribution may lead to restrictions on shareholders' rights.
Judicial Interpretation (III) Article 17 stipulates that if a shareholder fails to perform or fails to fully perform his capital contribution obligations, or withdraws his capital contribution, the company shall, in accordance with the articles of association or the resolutions of the shareholders' general meeting, make corresponding reasonable restrictions on his shareholder's rights such as the right to claim for profit distribution, the right to preemption of new shares, and the right to claim for the distribution of surplus property, and the people's court shall not support the shareholders' request for finding the restrictions invalid. It can be seen that there is a legal basis for shareholders with defective capital contribution to restrict their rights.
(1) Limitation scope of shareholders' rights
According to the provisions of Article 17 of the Judicial Interpretation (III), shareholders who fail to perform or fully perform their capital contribution obligations or withdraw their capital contribution are limited to the rights of beneficial shareholders based on property, such as the right to request profit distribution, the right to subscribe for new shares, the right to request the distribution of surplus property, etc., but do not include the rights of beneficial shareholders such as voting rights and the right to know. This provision of judicial interpretation (III) eliminates the long-standing controversy in academic and judicial circles about the limited scope of defective shareholders' rights.
In fact, shareholders with defective capital contribution should first limit their voting rights. Because "capital majority decision" is the basic value set by the company's voting mechanism, fulfilling the obligation of capital contribution is the basis and consideration for shareholders to obtain shareholder rights, and voting right is the primary right of shareholders' rights. Only when shareholders fulfill their capital contribution obligations can they bear risks and responsibilities to the company within the limit of their capital contribution. Imagine, compared with the shareholders who actually contributed 1 billion, how big are their interests and risks? In this case, how can their voting rights be exercised from the perspective of the company rather than from their own perspective? As for the right to know, there is no legal basis to restrict it because the current company law does not stipulate the shareholding time and shareholding ratio.
(2) Conditions for shareholders' limited rights
Judicial interpretation (3) Provisions on the conditions for restricting the rights of shareholders who fail to perform or fully perform their capital contribution obligations or withdraw their capital contribution, that is, through the provisions of the articles of association or the resolutions of the shareholders' general meeting. In other words, the company or other shareholders shall not restrict the rights of shareholders with defective capital contribution until there are no relevant provisions in the articles of association or the shareholders' general meeting makes relevant decisions in the form of effective resolutions, which is a procedural requirement for the restriction of shareholders' rights.
When the shareholders' meeting makes a resolution to restrict the rights of shareholders with defective capital contribution, if the shareholders with defective capital contribution are minority shareholders, the resolution will generally be made smoothly; However, if the defective shareholder is the major shareholder, it is difficult to make an effective resolution according to the capital majority voting mechanism stipulated in the Company Law, so that this effective restraint mechanism becomes a dead letter. From this point of view, when the company is established, it needs to make more detailed provisions in the articles of association with a high degree of foresight, clarify the avoidance mechanism of related party transactions, and clarify the detailed provisions on the restriction of defective shareholders' rights.
(3) Time limit for restricting shareholders' rights
Generally speaking, the rights of shareholders should be restricted until the shareholders with defective capital contribution take measures to correct their capital contribution, and the restricted rights can be traced back to the establishment or capital increase of the company. However, for shareholders who make contributions in kind, they need to go through the transfer registration procedures before they can transfer their ownership, because the contribution involves two aspects: physical delivery and property transfer registration, and one of them is incomplete, which constitutes a defective contribution. Judicial Interpretation (3) Different time limits shall be stipulated for the defective capital contribution that has not been delivered in kind or transferred.
Judicial interpretation (3) Article 10 stipulates that if an investor contributes capital with property such as houses, land use rights or intellectual property rights that need to be registered for ownership, and the company, other shareholders of the company or creditors claim that the investor has not fulfilled the obligation of capital contribution, the people's court shall order the parties concerned to go through the formalities of ownership change within a specified reasonable period; The people's court shall determine that a person who has gone through the formalities for the change of ownership within the above-mentioned time limit has fulfilled the obligation of capital contribution; The people's court shall support the investor's claim to enjoy the corresponding shareholder rights when actually delivering the property to the company for use. The people's court shall support the investor who contributed the property specified in the preceding paragraph, but has gone through the formalities of ownership change but has not delivered it to the company for use, and the company or other shareholders claim that it has been delivered to the company for use and do not enjoy the corresponding shareholder rights before the actual delivery.