Equity transfer dispute

Zhang is the legal representative of Company A, and Huizi is the legal representative of Company B and holds 100% equity of Company B. In July 2005, Company A signed a share transfer agreement with B, acquiring the shares of Company B held by the defendant, and the agreement stipulated that if Company A repaid Company B's external debts incurred before the signing of the agreement, Company B should reimburse the corresponding amount to Company A.

Prior to this (November 2004), B had signed a land transfer agreement with C, agreeing that B would transfer a piece of land located in an industrial park along with the equity to C before June 2005, for which C paid a deposit of 1 million RMB. The agreement stipulated that after the land certificate was processed, both parties would sign a share transfer contract. Subsequently, due to a drop in land prices, C did not sign the share transfer contract as agreed. Due to the failure to perform the agreement in a timely manner, C sued Company B, requesting the return of the land transfer deposit. Since B did not obtain the land use rights when signing the transfer agreement with C, the land transfer agreement was invalid. Because at the time of signing the agreement, B was both the legal representative of Company B and an investor in Company B, and the land transfer deposit paid by C was also collected by Company B, and in fact, Company B obtained the land use rights through the transfer, the court determined that B's signing of the land transfer agreement was an act performed in the course of duty, meaning the parties to the land transfer agreement were C and Company B, and ordered Company B to return the land transfer deposit.

In 2006, the People's Court of XX District made a judgment based on the facts of the appeal regarding the dispute over the land use rights transfer contract between C and Company B.

In September 2009, Company A filed a lawsuit in the People's Court for a share transfer dispute based on the judgment, requesting B to reimburse the land transfer deposit, case acceptance fee, and case execution fee that it paid on behalf of Company B.

[Lawyer's Representation Strategy]

First, both the plaintiff and the defendant submitted the "Share Transfer Agreement" to the court as evidence, but the "Share Transfer Agreement" provided by the plaintiff Company A was invalid both in form and content.

According to the "Share Transfer Agreement" provided by Company A, which was signed with Company B in July 2005, the transferor was Company B and the transferee was Company A. However, according to the provisions of the Company Law of our country, share transfers occur between shareholders and third parties outside of shareholders. If the company, as a legal person, is not a shareholder of the company, it can only accept the transfer as a share transferee and cannot act as the subject of the transfer itself. In the agreement provided by Company A, the transferor is the company itself whose shares are being transferred, which clearly violates legal provisions and is an invalid agreement.

At the same time, according to the materials from the industrial and commercial bureau regarding Company B, there is no share transfer agreement provided by Company A, but rather two other share transfer agreements signed by both parties in July 2005, whereby B transferred 10% of Company B's shares to A and 90% of the shares to Company A, and the content is completely different from the "Share Transfer Agreement" provided by Company A. According to the rules of evidence in civil litigation in our country, "the probative force of official documents produced by state organs and social organizations in accordance with their duties is generally greater than that of other written evidence." The purpose of the industrial and commercial bureau's registration and filing is to publicly disclose the ownership and changes of the company's shares to society, and the company discloses the information about share changes to the public through the industrial and commercial registration authority, and it is presumed that the public knows or should know this disclosed information. Given that the industrial and commercial registration has a declarative effect, the factual situation reflected therein has credibility, and the evidentiary effect also takes precedence over other criminal evidence. Therefore, regarding the share transfer agreements proposed by both parties that have obviously contradictory terms, the two share transfer agreements filed with the industrial and commercial bureau should be recognized as the final effective agreements.

Secondly, the two "Share Transfer Agreements" filed with the industrial and commercial bureau clearly stipulate that "both parties agree that after the transfer, all original debts and other legal consequences shall be borne by Company B," which means that B will no longer bear any debt repayment responsibility to Company B after transferring its shares, while the plaintiff Company A has confused the two completely different entities, Company B and defendant B. Therefore, Company A is not a qualified plaintiff. According to one of the pieces of evidence in this case, the effective judgment of the People's Court of XX District indicates that the plaintiff should be Company B.

Finally, it has been four years since the plaintiff Company A repaid Company B's debts, which has long exceeded the two-year statute of limitations. The law of our country stipulates that the ordinary statute of limitations is two years, calculated from the time when the parties know or should know that their rights have been infringed. If Company A believes that its legitimate rights and interests have been infringed, it should have filed a lawsuit within two years from 2006, the date it repaid the debt. However, by the time Company A filed the lawsuit, the statute of limitations for its debt claim had already expired, resulting in the legal consequence of extinguishing its right to win the case and losing the right to obtain legal protection. Therefore, even if the "Share Transfer Agreement" provided by Company A is a valid agreement with legal effect, due to its own failure to exercise its rights leading to the expiration of the statute of limitations, it has lost the right to win the case.

[Lawyer's Insights]

However, through this case, professionals realize that although the case initially appears to involve multiple parties and complex legal relationships, as long as the key points are grasped, such as the legal effect of the "Share Transfer Agreement," whether the plaintiff is qualified, and the statute of limitations, the thought process becomes clear. Especially by denying Company A's qualification as a plaintiff, bypassing the complicated terms of the "Share Transfer Agreement," simplifying the complex, and providing clients with efficient and reliable services.