Shareholders of a limited liability company can transfer all or part of their equity to each other. The transfer of equity by a shareholder to a person other than the shareholder must be approved by a majority of the other shareholders. Shareholders shall notify other shareholders in writing to seek consent regarding the transfer of their equity. If other shareholders do not respond within thirty days from the date of receipt of the written notice, they shall be deemed to have agreed to the transfer. If more than half of the other shareholders do not agree to the transfer, the shareholders who do not agree should purchase the transferred equity; if they do not purchase, it will be deemed to have agreed to the transfer.

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For equity transferred with the consent of shareholders, other shareholders have the right of first refusal under the same conditions. If two or more shareholders claim to exercise the right of first refusal, they shall negotiate to determine their respective purchase proportions; if the negotiation fails, the right of first refusal shall be exercised according to the proportion of their respective capital contributions at the time of transfer. If the company's articles of association have other provisions on equity transfer, those provisions shall prevail. So how to determine the original value of an individual's transferred equity?

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How to determine the original value of an individual’s transferred equity?

1. Cash investment

For equity acquired through cash investment, the original value of the equity shall be recognized based on the sum of the actual price paid and reasonable taxes and fees directly related to the acquisition of equity;

2. Non-monetary asset investment

For equity acquired through non-monetary asset investment, the price of the non-monetary asset at the time of investment is directly related to the equity acquisition recognized or approved by the tax authority. The sum of reasonable taxes and fees shall be used to confirm the original value of the equity;

3. Free transfer

The equity is obtained through free transfer and the circumstances listed in the second paragraph of Article 13 of these Measures are met If the equity is acquired, the original value of the equity shall be confirmed based on the sum of the reasonable taxes and fees incurred on acquiring the equity and the original value of the original holder's equity;

4. Convert to share capital

The invested enterprise shall use capital as the capital If public reserves, surplus reserves, and undistributed profits are converted into share capital, and individual shareholders have paid personal income tax in accordance with the law, the original value of their newly converted shares shall be determined as the sum of the amount of the increase and related taxes and fees;

5. Others

Except for the above circumstances, the competent tax authorities shall reasonably confirm the original value of the equity in accordance with the principle of avoiding repeated collection of personal income tax.

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