Legal Thinking Caused by a Case of Equity Pledge

The Property Law clearly stipulates that the equity pledge is established at the time of registration, but for the general shareholders of the joint-stock company that has not gone through the equity registration custody, the equity pledge is used for financing and lending. legal There are obstacles

Not long ago, the Chinese court network announced a case of equity pledge. The basic case was: Wang borrowed 4 million yuan from Li on October 26, 2013, and agreed that the repayment date was February 26, 2014, held by Wang. A 40% equity of A limited liability company is pledged (but not registered), and it is agreed that if it fails to repay on time, it will voluntarily transfer the 40% equity to Li. After the repayment date expired, Wang refused to repay the loan according to the agreed time limit, and voluntarily signed a power of attorney, promised to transfer 40% of the equity of the company he owned to Li, and entrusted Li with full authority. Equity transfer procedures. When Li asked Wang to go through the formalities for equity transfer, Wang did not delay with all kinds of excuses, and Li pleaded to the court.

How to characterize the case involves the two aspects of the effectiveness of the equity pledge and the equity transfer of the limited liability company. Starting from this case, it can lead to regulatory problems in judicial practice, especially for the supervision of stock companies that have not gone through equity registration and custody.

General provisions for equity pledge

Equity pledge is a kind of pledge of rights. China’s “Property Law” takes into account the difference of equity registration institutions when stipulating equity pledges, and adopts different provisions on equity pledge. Article 226, paragraph 1, of the Property Law stipulates: “If the fund shares or equity are pledged, the parties shall conclude a written contract. If the fund shares or the equity registered by the securities registration and settlement institution are pledged, the pledge shall be handled by the securities registration and settlement institution. When the pledge registration is established; if the other equity is pledged, the pledge shall be established when the commerce and commerce administrative department handles the pledge registration.”

At present, there is only one national securities registration and settlement institution, namely China Securities Depository and Clearing Co., Ltd. (“Zhongdeng Company”). The company is headquartered in Beijing, with two branches in Shanghai and Shenzhen. The competent department of Zhongdeng is China. Securities Regulatory Commission . Generally speaking, the equity of listed companies (expressed as stocks) is registered in Zhongdeng Company. Zhongdeng Company updates the stock status of listed companies daily according to the trading situation of stocks on the stock exchange; non-listed joint-stock companies can also choose to entrust Zhongdeng Company carries out equity registration.

In addition to Zhongdeng Company, there are also some regional equity registration and settlement companies, such as Anhui Provincial Equity Registration and Settlement Company, which can also provide equity registration and custody, equity pledge registration, equity transfer witness and related services for custody enterprises. Therefore, it can be said that all listed companies, as well as some non-listed joint-stock companies and even some limited liability companies, may have equity registration and custody. In the case of the pledge of the equity of the company that handles the equity registration, the registration of the pledge shall be submitted to the equity registration and settlement institution entrusted by the company.

In practice, most limited liability companies and some non-listed joint-stock companies have not gone through the equity registration custody. Therefore, for the pledge of the equity of this part of the company, according to the provisions of the Property Law, it should be handled by the administrative department for industry and commerce. Pledge registration. In this regard, on September 1, 2008, the State Administration for Industry and Commerce issued the “Measures for the Administration of Equity Pledge Registration of Industrial and Commercial Administration Organs” in accordance with the authorization of the Property Law, and further made the issue of the registration of equity pledges by the administrative authorities for industry and commerce. Clear regulations.

The pledge contract is a “practical contract”. If the pledge is not delivered, the contract will not take effect. In this regard, Article 212 of the Property Law clearly stipulates: “The pledge is established when the pledgee delivers the pledge property.” Article 226 of the Property Law also clearly stipulates that the equity pledge is the fund share and the equity registered by the securities registration and settlement institution. If the quality is pledge, the pledge shall be established when the securities registration and settlement institution handles the pledge registration; if the other equity is pledged, the pledge shall be established when the commerce and commerce administrative department handles the pledge registration.

A case in which the equity pledge is invalid

In this case, Wang pledges 40% of the equity of Company A as the borrowing behavior. Since the equity pledge registration has not been processed, the so-called equity pledge does not take effect. In addition, it should be noted that there is a liquidity clause in this case, that is, the agreement “If you fail to repay the loan on time, you will voluntarily transfer the 40% equity to Li.” The principle of fairness and prevention of malicious collusion caused damage to other creditors. As well as the prevention of the loss of assets in Duguo, Article 211 of China’s Property Law stipulates: “The pledgee shall not agree with the pledger before the expiration of the debt performance period that the pledge property is owned by the creditor when the debtor fails to perform the due debt.” Therefore, in this case The agreement between Wang and Li on the liquidity of the shares is also invalid.

Although our law does not recognize the validity of the liquidity clause, after the expiration of the repayment date, Wang’s voluntarily issued power of attorney, “will promise to transfer 40% of the equity of the company it owns to Wang’s power of attorney. Li, and entrusted Li to handle the equity transfer procedures, shall be deemed to be equity transfer in legal evaluation. This behavior is a legal act that is re-implemented after the expiration of the main contract (borrowing contract). It is not a liquidity clause and should be re-evaluated.

In this regard, according to Article 229 of the Property Law, the provisions of Section 2 of Article 219 are permitted. If the debtor fails to perform the debt due or the pledge is fulfilled by the parties, the pledgee may agree with the pledger to pledge the property. It is also possible to give priority to the price of the auction or sale of the pledge property. In this case, the legal nature of Wang’s act of issuing a power of attorney is to use the 4 million yuan loaned by Li as the consideration, and to grant Wang a company Enjoy a 40% stake.

In this case, when Wang transferred the equity of Li to belong to a third party other than the shareholder (Li is not a shareholder of Company A), he shall comply with the provisions of Article 71 of the Company Law and, with the consent of more than half of the shareholders of Company A, And to ensure the priority of other shareholders of Company A. In terms of procedures, Wang shall notify other shareholders in writing of his share transfer in writing for consent. If other shareholders fail to reply within 30 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 disagree with the transfer, the shareholders who do not agree shall purchase the equity of the transfer; if they do not purchase, they shall agree to the transfer.

Regulatory problems in judicial practice

Since the shareholders of a limited liability company all need to register industrial and commercial, the equity transfer or pledge of the limited liability company is convenient, as long as the pledgor and the pledgee agree. Even if the limited liability company fails to issue a capital certificate to the shareholders, according to the provisions of the “Regulations on the Equity Pledge Registration of Industrial and Commercial Administrations”, the shareholders may also rely on the register of shareholders of the limited liability company that records the name (name) of the pledger and its capital contribution. Copies are registered for pledge; and a copy of the shareholder’s register of the limited liability company can be obtained by consulting the industrial and commercial registration file.

In judicial practice, there are certain regulatory difficulties for equity transfer and pledge registration of joint-stock companies that have not gone through equity registration custody. The reason is that it is difficult for the industrial and commercial administration to register all the shareholders of the joint stock company in consideration of the public company property of the company limited by shares. In fact, for listed companies, equity can be traded freely on the stock exchange, and the shareholder status is constantly changing. It is neither necessary nor possible to require the industrial and commercial administration to register the shares.

In this regard, the “Company Law” on the shareholder management of the joint-stock company adopts a three-point method: distinguish between the promoter shareholder, the registered shareholder and the general shareholder, and adopt different management methods. That is, for the proponent shareholders to adopt registrationism, Article 81 of the Company Law stipulates that the articles of association of the company shall specify the name or name of the promoter, the number of shares subscribed, the method of capital contribution and the time of capital contribution. Therefore, changes to the sponsor’s shareholder or equity transfer, subject to changes in the company’s articles of association, should be subject to industrial and commercial change registration. For registered shareholders of a joint stock company, it shall be recorded in the register of shareholders set up by the company itself. In this regard, Article 139 of the Company Law stipulates that the share transfer of a registered shareholder shall be recorded in the shareholder register of the share company after the transfer. For the general shareholders of a joint stock company, as long as the stock is delivered to others, the legal consequences of the equity transfer will occur.

Considering the three different types of shareholders of a joint stock company, if the joint stock company does not handle the equity registration trusteeship, the equity transfer or pledge of the general shareholders can only rely on the transfer of the stock or the pledge of the stock itself. Since the general shareholders do not have to register for business, the industrial and commercial administrations handle the equity transfer and the equity pledge under certain circumstances. Even if the stock company issues shares to the shareholders, in accordance with the provisions of Article 226 of the aforementioned Property Law, the stocks are simply delivered to the pledgee. If the industrial and commercial registration is not carried out, the legal effect of establishing the pledge may not occur. In accordance with the requirements of the Measures for the Administration of Equity Pledge Registration by the Administration for Industry and Commerce, the pledge of the equity of a joint-stock company that has not gone through the equity registration custody shall be handled by a copy of the shares issued by the company (subject to the company seal).

In the company’s practice, the situation in which the company issues capital certificates or stocks to shareholders is not optimistic. Many limited liability companies do not issue capital certificates to shareholders. Many joint-stock companies do not issue shares to shareholders. In addition, the general shareholders of joint-stock companies do not need to register for industrial and commercial purposes. Therefore, there are certain difficulties in using equity pledge for financing and lending. The formation of this difficulty is not due to the existence of legislative omissions, but the lack of corporate responsibility for shareholders. Therefore, how to strengthen the company’s sense of responsibility for shareholders, the company to issue a certificate of capital or stocks to carry out special inspections and strengthen their legal responsibilities, should cause the law enforcement agencies to think.