Introduction: As a shareholder of a company, do you believe that after you transfer the company's equity, the company is no longer related to you, and you no longer enjoy the company's interests or bear company responsibilities? This article will draw a conclusion that is different from the usual understanding through case analysis.

 

Under the company's registered capital subscription system, there are significant differences in judicial practice regarding whether the original shareholder should still be responsible for the company's debts after transferring the company's equity before the subscription period has expired, and the judicial scale cannot be unified. This article analyzes whether creditors can claim liability from the original shareholders of the company in accordance with Article 19 of the "Provisions on Several Issues Concerning the Change and Addition of Parties in Civil Execution" by searching for 91 relevant cases in Guangdong Province after the promulgation of the "Minutes of the Ninth People's Meeting" and typical cases in other provinces, combined with the author's practical experience.

 

1、 The legal basis for the original shareholder to still be responsible for the company's debts after the equity transfer

 

The most direct legal basis for adding the original shareholder to bear the company's liability as the executor is Article 19 of the "Provisions on Several Issues Concerning the Change and Addition of Parties in Civil Execution" As a company subject to execution, if its assets are insufficient to repay the debts determined by the effective legal documents, and its shareholders transfer their equity without fulfilling their investment obligations in accordance with the law, the applicant for execution shall apply for the change or addition of the original shareholder or the initiators who bear joint and several liability for the investment in accordance with the provisions of the Company Law as the subject of execution. If they bear liability within the scope of the non legal investment, the people's court shall support them in accordance with the provisions of this article, Shareholders who have not made capital contributions in accordance with the law can be added and bear responsibility.

 

Article 13 and Article 18 of the Judicial Interpretation of the Company Law (3) also stipulate that shareholders who transfer their equity without fulfilling or fully fulfilling their investment obligations shall bear supplementary responsibilities.

 

Article 6 of the "Minutes of the Ninth People's Meeting" states: "Under the registered capital subscription system, shareholders are entitled to term benefits in accordance with the law. If creditors request shareholders who have not yet made their capital contributions to bear supplementary compensation liability for the company's debts that cannot be paid off within the scope of their capital contributions, on the grounds that the company cannot pay off the due debts, the people's court shall not support it. However, except for the following circumstances: (1) In cases where the company is the subject of enforcement, the people's court exhausted the enforcement measures and had no property available for enforcement, and had already met the reasons for bankruptcy, but did not apply for bankruptcy; (2) After the company's debts are incurred, the shareholders' (general meeting) resolution or other means of extending the shareholder's contribution period, Although this article emphasizes that shareholders enjoy term benefits in accordance with the law, it is more often used as a reason for accelerating the expiration of their subscription period before it expires.

 

2、 Comparison of different judgments of courts in different regions

 

Through the "China Judgment Document Network", a search was conducted on the relevant judgment documents of intermediate people's courts in Guangdong Province after the promulgation of the minutes of the Ninth People's Congress. Since 2020, there have been a total of 91 relevant judgments/rulings, and representative precedents have been selected and compared with typical precedents from other provinces in terms of "supporting" and "negating" attitudes towards judgments.

 

In judicial practice, there are significant differences among courts in various regions regarding whether the original shareholders should bear responsibility for the company. They make completely different determinations when the basic facts are similar, and even if the judgments are the same, the reasons are not the same.

 

1. Case analysis of supporting original shareholders to take responsibility for the company

 

The courts in Guangdong Province generally adopt a positive attitude towards whether the original shareholders should bear responsibility for the company, especially the Guangzhou Intermediate People's Court. Although there are different reasons, none of them do not support it. The author has not been able to retrieve a judgment document that denies the responsibility of the original shareholders. The reasons for supporting the original shareholders to assume responsibility for the company's debts mainly focus on the following points:

(1) Has malicious intent, obvious intention to evade subscription obligations, evade debts, and violates the principle of good faith;

(2) Negating term benefits and emphasizing the system of capital enrichment and maintenance is the basic system of China's company law;

(3) The relativity of the contract, the subscribed amount and payment deadline are internal agreements between the company and its shareholders, as well as between shareholders and shareholders, and cannot compete against external creditors of the company;

(4) Article 19 of the "Provisions on Several Issues Concerning the Change and Addition of Parties in Civil Execution" applies to machinery, which states that "if no capital contribution is made, it shall be borne".

 

2. Do not support the original shareholders to assume responsibility for the company

 

Although most courts in Guangdong Province generally adopt a positive attitude towards whether the original shareholders should bear responsibility for the company, some courts still hold different opinions and have made negative judgments on whether the original shareholders should bear responsibility for the company. The reasons for denying the original shareholder's responsibility for the company's debts mainly focus on the following two points:

(1) There is no malice or intention to evade or abandon debts;

(2) Affirming the benefits of the term, if the subscription period has not expired, it cannot be considered as a "failure to contribute in accordance with the law", and shareholders are not responsible for the company's debts after transferring their equity.

 

In the cases of (2020) Yue 01 Min Zhong No. 19190 and (2019) Yue 03 Min Zhong No. 30818, the differences in the judgments are particularly evident. The basic facts of the two cases are very similar, both of which were that the original shareholders transferred their company shares for "1 yuan" before the expiration of the subscription period, but the Guangzhou Intermediate People's Court and the Shenzhen Intermediate People's Court made completely opposite judgments. The Shenzhen Intermediate People's Court affirms the term interests of shareholders and believes that the obligation to contribute before the deadline cannot be recognized as an obligation during the period of serving as a shareholder; The Guangzhou Intermediate People's Court believes that the company's capital enrichment and maintenance system takes priority over the shareholders' term interests, and the original shareholders who did not contribute should bear the responsibility.

 

Based on the relevant judicial precedents of Guangdong Province, it can be seen that the mainstream judgment approach is for the original shareholders to assume supplementary responsibility for the company's debts within the scope of subscribed capital contributions, and attempting to break the judgment inertia is of great difficulty.

 

3、 Analysis of Judgment Reasons

 

Among the various reasons on both sides mentioned above, the author believes that it is inappropriate to examine whether the original shareholder has the subjective fault of "malice" in evading or abolishing debts, and to use "malice" as the standard for determining whether the company should be held responsible. The mechanical application of Article 19 of the "Provisions on Several Issues Concerning the Change and Addition of Parties in Civil Execution" - "should be borne without capital contribution" is not appropriate.

 

1. The term interests of the original shareholders should be protected

 

The new Company Law promulgated in 2014 and the minutes of the Ninth People's Meeting both affirmed the term benefits of shareholders under the subscribed capital contribution system. The transfer of equity before the expiration of the capital contribution period cannot be naturally recognized as "failure to fulfill the capital contribution obligation in accordance with the law" in Article 19 of the "Provisions on Several Issues Concerning Changes and Additional Parties in Civil Execution", which is aimed at the situation of unpaid contributions that should be made.

 

Article 26 and Article 80 of the Company Law, as well as Article 22 of Judicial Interpretation 2 of the Company Law, clearly define the term of contribution. "Transfer of equity without fulfilling or fully fulfilling the obligation of contribution" refers to the transfer of equity by shareholders without paying the agreed amount of capital upon the expiration of the contribution term, which is the transfer of defective equity. The transfer of equity by shareholders before the expiration of their capital contribution does not belong to the situation of "transferring equity without fulfilling or fully fulfilling their capital contribution obligations".

 

Negating the term interest of the original shareholder undoubtedly increases the responsibility of the original shareholder, making it possible for them to bear legal responsibility without knowledge, and making it impossible for the parties to establish reasonable legal expectations.

 

2. The subscribed capital has publicity

 

The court holding a "supportive" attitude believes that "the subscribed amount and payment deadline are internal agreements between the company and its shareholders, as well as between shareholders and shareholders, and cannot compete with external creditors of the company." The author believes that this is a confusion between the shareholder agreement and the company's articles of association, and that the investment deadline and amount are recorded on the company's articles of association, which are both external and public, and can obtain corresponding information through public channels.

 

The disputes between creditors and the company belong to the external legal relationship of the company, and priority should be given to the application of group law rules, emphasizing externalism and publicity, and making judgments based on formal characteristics. The counterparty, i.e. the creditor, voluntarily chooses to trade with the company and should bear the risk.

 

3. The recognition of 'should be borne without capital contribution' will lead to the company's shareholders' endorsement style liability assumption

 

In the Guangzhou Intermediate People's Court's (2020) Yue 01 Zhi Yi 591 execution ruling, it is believed that "the original shareholders did not fulfill their capital contribution obligations before the two equity transfers", and the ruling states that all three shareholders, including the former, middle, and later shareholders, are responsible for the company's debts within the scope of subscribed capital contributions. The ruling requires all shareholders to bear responsibility within the scope of their capital contributions, and according to its meaning, the cumulative amount of responsibility assumed by all shareholders even exceeds the total amount of subscribed capital contributions. It seems more reasonable to rule in the (2020) Yue 01 Zhi Yi 189 case of the Guangzhou Intermediate People's Court that all shareholders' total liability for the debts in this case does not exceed the scope of the company's registered capital.

 

On the premise of denying the term benefits of the original shareholders, it is inevitable that all previous shareholders of the company will be added as executors, and the company's shareholders will be alienated as "endorsers" in the bill law, which undermines the independence of the company's legal personality.

 

In summary, it is not legitimate and reasonable to directly judge the original shareholders' liability for company debts regardless of subjective "malice", which goes against the legislative intention of the registered capital subscription system. Guo Fa [2014] No. 7 "Notice of the State Council on Issuing the Reform Plan for the Registered Capital Registration System" clarifies that the purpose of the registered capital subscription system is to "further release the reform dividend, stimulate entrepreneurial vitality, and stimulate new development momentum". Simply stating that the original shareholders are responsible for corporate bonds actually negates the subscription registration system through litigation, suppresses the enthusiasm of market activities, and goes against the original intention of legislation.

 

4、 The protection of creditors should not be at the expense of harming the interests of bona fide parties

 

Social activities are in a rapid process of change, and the adjustment of social activities by law is also in a dynamic balance. However, the attempt of law to completely catch up with social activities and maintain consistency is not rational or realistic.

 

Due to the protection of creditors, in the early days of our country, the principle of jointly assuming the debts of one spouse was based on the principle of husband and wife, with some exceptions, which led to one spouse possibly bearing the debts without knowledge and violated the principle of fairness. The Interpretation of the Supreme People's Court on the Application of Laws in the Trial of Cases Involving Couple Debt Disputes in 2018 and the Civil Code implemented in 2021 rejected the previous "husband and wife binding doctrine" and re established the principle of "joint signing of joint debts between husband and wife", which requires a common agreement on joint debts between husband and wife.

 

As the original shareholder who has already transferred the company's shares, being required to bear legal consequences without being able to participate in the company's management, knowing nothing about the underlying transactions of related disputes, and enjoying the corresponding shareholder rights such as the right to know and vote clearly increases the responsibility of the original shareholder, which is not only unfair but also unable to reflect the predictability of the law. This will leave shareholders in a long-term state of uncertainty and insecurity once they hold a stake in the company.

 

The direct mechanical requirement for the original shareholders to bear responsibility for the company's debts is undoubtedly the most direct way to achieve the interests of creditors and is most conducive to protecting creditors; By implementing objections, additional responsibility bearers are added, which also saves judicial resources and economic costs. However, this approach lacks legal basis and a foundation for claims, which not only undermines the subscription system, but also leads to conflicts in legal provisions, inconsistent legal logic, and inconsistent judicial decisions.

 

Regarding whether the original shareholder should bear responsibility for the company's debts, the judgment reason of (2019) Chuan Min Zhong No. 277 is worth advocating. "When transferring equity, there is no malicious intention of evading or infringing on the creditor's rights, so transferring equity before the expiration of the subscribed capital period is not a defective equity transfer." On the premise of affirming the interests of the original shareholder's term, the subjective fault of "malicious" should be examined, Avoid applying a one-size-fits-all legal mechanism.

 

The cases listed in this article are all excerpts from the China Judgment Document Network.