Supplementary Liability of the Transferor in Equity Transfer in the Period of Unpaid Capital Contribution:An Interpretation of Article 88(1)of China's New Company Law
There are clear differences in the judicial adjudication regarding whether or not the trans-feror should assume liability after the equity transfer when the capital contribution is unpaid.There are two different viewpoints with regarding to whether or not the transferor should assume liability.According to Article 88(1)of the Company Law of the People's Republic of China,the transferor shall assume supple-mentary liability after the equity transfer if the transferee fails to pay the capital contribution in full and on time.There are four legal bases for the transferor to assume supplementary liability:the constraint of shareholder's limited liability,the requirement on full contribution of capital,the legal requirement on full payment of capital contribution,and the fiduciary obligation of the initiator as the controlling shareholder during equity transfer under special circumstances.This is a statutory,supplementary,limited,non-fault and one-time obligation,and there should be strict requirements on its application.In terms of the legal subject,the plaintiffs that appeal for the transferor to take on supplementary liabilities consist of two types:the company and its executing agency,as well as the company creditor(s).If the defendant is the transferor of the equity,it needs to consider if the equity is transferred once or for multiple times.There are also three different scenarios:the equity transfer has been completed,the period for making capital contribution has been expired,and the capital contribution has not been paid by the transferee in full and on time.The scope of supplementary liability for the transferor is limited by two factors:one is the obliga-tion to make the unpaid capital contribution as agreed in the equity transfer contract,and the other is the amount of the capital contribution that the transferee fails to pay in full and on time.In addition,the transferor's supplementary liability is not limited by the time limit.
the period of unpaid capital contributionequity transfertransferortransfereesupple-mentary liability
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