Paragraph 4 of Article 71 of China's Company Law stipulates the following about the transfer of shares by shareholders of a limited liability company: "If there are other provisions on the transfer of shares in the articles of association, those provisions shall prevail." This clause makes it clear that the articles of association can impose corresponding restrictions and requirements on the equity transfer of a limited company. In judicial practice, are the restrictions or special agreements set by the articles of association on equity transfer effective? This article will briefly analyze the following cases.
I. Case Index:
Title: Qihoo 360 Software (Beijing) Co., Ltd. v. Shanghai Laojiaoji Network Technology Co., Ltd. and Jiang Xuewen, etc.
Trial court and case number:
First instance: Shanghai Yangpu District People's Court (20 13) Yang Min Er (Shang) Chu Zi No.996.
Second instance: Shanghai No.2 Intermediate People's Court (20 14) No.330, No.4 (Shang) final word of Shanghai No.2 Middle School.
Second, the case introduction:
Laoyouji Company was incorporated on March 2, 20 1 1, in which Hu _ holds 60% of the company's shares and Li holds 40% of the company's shares. In June of the same year, Qihoo 360 Company, Laoyouji Company as Party A, Hu _ and Li as Party C signed the Investment Agreement. At the same time, Laojiaji Company has gone through the formalities of industrial and commercial change registration, with Hu _ holding 37.2%, Qihoo 360 holding 38% and Li holding 24.8%.
Article 16 of the Articles of Association of Laojiaji Company, dated June 20 1 1 year, stipulates: "The decision made by the board of directors on the matters discussed shall be valid only if it is approved by more than half of the directors, and shall be taken as the minutes of the meeting, and the directors attending the meeting shall sign the minutes of the meeting; However, the voting on the following matters still needs the written consent of the directors appointed by the shareholder Qihoo 360 Company: (added here according to the agreement). "
On August 20 13 12, Hu _ issued the Notice of Equity Transfer to Qihoo 360 Company and Li respectively, but neither Qihoo 360 Company nor Li made a written reply to Hu _.
On September 27th of the same year, Jiang Xuewen and Hu _ signed the Equity Transfer Agreement, stipulating that Hu _ would transfer 37.2% equity of Laojiuji Company to Jiang Xuewen. After the signing of the agreement, Jiang Xuewen paid the equity transfer fee according to the contract, but Laojiaji Company failed to handle the equity change registration formalities in time.
Accordingly, Jiang Xuewen appealed to the court, asking for an order to order Laoyouji Company to handle the industrial and commercial change registration formalities in time. Qihoo 360 Company believes that Article 16 of the Articles of Association clearly states that certain matters of the Company can only be passed with the written consent of its appointed directors, which embodies the meaning of "one-vote veto" in the Investment Agreement, so its Equity Transfer Agreement can only take effect after it is confirmed by Qihoo 360 Company.
The court of first instance supported Jiang Xuewen's petition, Qihoo 360 refused to accept it and filed an appeal. The court of second instance rejected the appeal and upheld the original judgment.
Third, the referee reasons:
Regarding whether the articles of association can set restrictions on the transfer of shares, China's "Company Law" has made different provisions on limited liability companies and joint stock limited companies, and the articles of association of limited liability companies can stipulate restrictions on the transfer of shares. In order to maintain the relationship between shareholders and the stability of the company itself, the company's articles of association can make corresponding restrictions and requirements on the equity transfer of a limited company, which is an important embodiment of the company's autonomy and humanity, as well as the principle of good faith and the principle of party autonomy. Therefore, all parties shall abide by the special provisions on equity transfer in the articles of association. In this case, giving Qihoo 360 a veto on some matters, including the transfer of equity, is an important condition for Qihoo 360 to subscribe for new capital. This restriction is the result of consultations between all parties for their own interests and needs, which conforms to the true intention of shareholders at that time and does not violate the mandatory provisions of the Company Law. It should be considered to be in line with the spirit of autonomy of shareholders' will and its effectiveness should be recognized.
However, Jiang Xuewen fulfilled his reasonable and prudent duty of care in the transaction. He and Hu Xi signed a competing equity transfer agreement one and a half months after the notice of exercising the preemptive right was issued, and fulfilled their payment obligations. Because the content of one-vote veto in the articles of association of Laoyouji Company is not clear, and it has not been reflected in the information registered by the administrative department for industry and commerce, Hu _ has no evidence to prove that he has informed Jiang Xuewen that Qihoo 360 Company has veto power in the above process, and there is no evidence to prove that Jiang Xuewen and Hu _ have malicious collusion. In order to maintain the safety of commercial transactions, we should follow the principle of commercial externalism and protect the trust interests of bona fide third parties, and the shareholders of Laoyouji Company. Therefore, the validity of the disputed equity transfer agreement should be recognized, and Jiang Xuewen's application for continuing to perform the agreement for industrial and commercial change registration should be supported.
IV. Legal analysis
(1) Features of the Articles of Association:
First, legality. Legality mainly emphasizes that the legal status, main contents, modification procedures and effectiveness of the articles of association are mandatory by law, and no company may violate them. The articles of association are one of the necessary conditions for the establishment of a company. No matter whether a limited liability company or a joint stock limited company is established, all shareholders or promoters must conclude the articles of association and submit them to the company registration authority for registration when the company is established.
Second, autonomy. As a code of conduct, the company's articles of association are not formulated by the state but by the company itself according to law. It is the result of the unanimous expression of the company's shareholders' will, and it is a code of conduct outside the law, which is implemented by the company itself without the state's coercive force.
(2) The effectiveness of the restrictive clauses set by the articles of association on equity transfer
Article 11 of China's "Company Law" stipulates that "the articles of association must be formulated in accordance with the law when establishing a company. The articles of association are binding on the company, shareholders, directors, supervisors and senior management personnel. "
The Articles of Association is the expression of the agreement of shareholders, which sets out the basic principles of the company's organization and activities, and is the company's charter. However, the articles of association, as the internal regulations of the company, have only the effect of the company and relevant parties, but are not universally binding.
In this case, the Investment Agreement embodies the spirit of the rule of law of corporate autonomy, which should be maintained and respected, but the agreement cannot violate the mandatory provisions of the Company Law. The Articles of Association, which was filed with the administrative department for industry and commerce and formed later, does not make special provisions on the transfer of shares by shareholders to people other than shareholders, nor does it explicitly mention that Qihoo 360 enjoys the "one-vote veto". The court found that the Articles of Association did not confirm that there was nothing wrong with the agreement in the Investment Agreement that Qihoo 360 had "one-vote veto" over the transfer of shareholders' equity.
Accordingly, when the articles of association set restrictions on equity transfer, we should pay attention to the following three points: first, the restrictions in the articles of association must be legal and effective, and must not violate the mandatory provisions of the Company Law and other laws; Second, after the articles of association are filed in the administrative department for industry and commerce, they have certain publicity and credibility, and have the effect of fighting against the third party, but they still need to be analyzed according to specific cases; Third, the restrictive clauses must be clearly agreed and expressed to ensure the content is clear.
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