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Viewpoint | Analysis of the effectiveness of the Company's Overall Transfer Contract

Published:

2024-07-10

Introduction

The "Company's Overall Transfer Contract" is an important legal document for the equity transfer of a one-person limited company. It not only requires the transferor and the transferee to negotiate the price and other content, but also requires the corresponding equity transfer procedures at the industrial and commercial registration authority. Whether it is the transferor or the transferee, once the two parties have a dispute, the biggest risk is that the "company's overall transfer contract" is found to be invalid, let us combine a case to analyze the effectiveness of the "company's overall transfer contract. Regarding the validity of the "Company's Overall Transfer Contract", the court of first instance in this case held that the civil legal acts carried out by the perpetrator and the counterpart with false intentions were invalid according to the provisions of Article 146 of the the People's Republic of China Civil Code. However, the court of second instance held that the form and content of the "Company's Overall Transfer Contract" did not violate the mandatory provisions of laws and regulations, and it was a paid registered name. As a person with full capacity for civil conduct, the risk should know, the Contract for the Transfer of the Company as a whole is only a means of completing the registration agreement, and there is no cause for the determination of invalidity. The court of second instance revoked the judgment of first instance and confirmed the validity of the Company's Overall Transfer Contract.

Brief of the case

A company was established on December 2, 2020, is a natural person-owned limited liability company, Zhang is the legal representative and sole shareholder. On November 16, 2011, the legal representative and shareholder of the company were changed from Zhang to Li, and Li was the sole shareholder.

On November 1, 2021, a company, Zhang mou (transferor, transferor shareholder, party a) and Li mou (transferee, party B) signed the "overall transfer contract of the company", agreeing that because party a wants to transfer all the shares of a company it invests and operates to party B as a whole, party a and party B shall sign this overall transfer agreement of shares and other shares after full negotiation and consensus, and both parties shall abide by it. After the signing of the contract, both parties have fulfilled the registration procedures for industrial and commercial changes in accordance with the law. Later, Li Moumou filed a lawsuit with the court to confirm that the "Company's Overall Transfer Contract" was invalid. The reason was that the two parties were only a registered agreement, and the company's overall transfer contract was only a form, not the true intention of both parties. The court of first instance held that the signing of the "Company's Overall Transfer Contract" was not Li Moumou's true intention, but a false intention, so it was invalid and supported Li Moumou's litigation request. During the appeal period, Zhang appointed the author to represent him in the second instance litigation.

The view of trial

The court of first instance held that:A civil juristic act performed with a false intention is null and void. In this case, Li and Zhang signed the overall transfer contract of the company, Zhang transferred all the shares of a company to Li, and on November 16, 2021, the industrial and commercial change registration, the legal representative of a company and shareholders changed to Li. According to the facts found out in this case, Li moumou and Zhang mou did not know each other. both parties signed a transfer agreement agreeing on the company's transfer price of 225000 yuan. Li mou claimed that he did not actually pay the money. Zhang mou argued that the money was offset by part of the deposit and rent received by the company before the overall transfer. Li mou still owes the payment. Zhang mou did not submit relevant evidence to prove this statement, it is also inconsistent with the agreement in the second item of the transfer contract that "Party A shall return the deposit and rent for the deposit of all the houses managed by Party B in the form of cash", and the property of the company does not belong to the shareholders of the company directly. It also does not conform to the relevant laws and regulations to use the deposit and rent for the transfer. Zhang changed the industrial and commercial change registration under the condition that Li did not pay the transfer price, it is obviously unreasonable that Li Moumou has not claimed the right to transfer the money from the company.

Based on the above facts, the "Company's Overall Transfer Contract" signed by both parties was not an expression of Li's true intention, but a civil legal act implemented with a false intention. Li's request to confirm that the transfer contract was invalid was supported by the court of first instance.

The court of second instance held that:According to the statements of the parties, there are actually two contracts in this case. The first contract was between Li Moumou and Zhao Moumou. Li Moumou received 5000 yuan from an outsider Tian Moumou. The two reached an oral agreement. Li Moumou voluntarily became the legal representative and shareholder of a company. The second contract was between Li Moumou and Zhang Moumou. In order to fulfill the agreement between Li Moumou and Zhao Moumou, Li Moumou and Zhang Moumou signed a written "Company Overall Transfer Contract". Judging from the sequence, the reason for signing the "Company's Overall Transfer Contract" is that Li Moumou accepted the entrustment of the registered legal representative of Tian Mou, an outsider. Therefore, the validity of the second contract cannot be determined separately from the first contract. There is a causal relationship between the two. The form and content of the "Company's Overall Transfer Contract" do not violate the mandatory provisions of laws and regulations, and Li Moumou is a paid nominal and received a reward of 5000 yuan. Li Moumou, as a person with full capacity for civil conduct, should know clearly that the "Company's Overall Transfer Contract" is only a means to complete the nominal agreement. Signing the agreement is Li Moumou's true intention and there is no cause for invalidity. Moreover, from the evidence submitted by Zhang Moumou in the second instance, Zhang Moumou is not the actual controller of a company. If it is determined that the "Company's Overall Transfer Contract" is invalid, it will be restored to Zhang Moumou, which violates the principle of fairness. To sum up, Li's direct application for the "company's overall transfer contract" is invalid, which is unfounded in law and should not be supported by the court of second instance.

the author's opinion

First, the "Company Overall Transfer Contract" signed by Li Moumou and Zhang Moumou is the true intention of both parties and should be protected by law. Li Moumou claims that the "Company Overall Transfer Contract" signed by him and Zhang Moumou is a false intention and bears the burden of proof.

1. Civil subjects engaged in civil activities shall follow the principle of voluntariness and establish, change and terminate civil legal relations in accordance with their own will. As a person with full civil capacity, Li Moumou should know the legal consequences of signing the contract involved in the case. The "Company's Overall Transfer Contract" does not violate the prohibitive provisions of laws and regulations, so the "Company's Overall Transfer Contract" is legal and valid.

2. The "Company's Overall Transfer Contract" was voluntarily signed by both parties on November 1, 2021. Both parties have signed and confirmed it. It is the true intention of both parties. Li Moumou did not provide evidence that the signing of the contract is a false intention of both parties. The legal act of signing shall bear the legal consequences, that is, it shall bear the obligations of the contract.

3. The contract involved was signed and confirmed by both parties, and the industrial and commercial registration was changed. According to the first paragraph of Article 465 of the the People's Republic of China Civil Code [The legally established contract is protected by law and the principle of contract relativity]: "The legally established contract is protected by law", the contract has legal effect and is protected by law.

Second, during the court investigation, it was found that Zhang Moumou was only a registered shareholder. The "Company Overall Transfer Contract" signed by both parties was an industrial and commercial change registration procedure signed and handled by the actual shareholder Zhao Mou with the consent of Li Moumou and Zhang Moumou in accordance with the law, and did not have the elements of invalidity.

1. Zhang Moumou is not a shareholder of a company, nor does he actually operate and manage the company. The company's income has not entered Zhang Moumou's account. Zhang Moumou is only a registered shareholder. Li Moumou recognized the fact that Zhang Moumou is a registered shareholder in court. The "Company's Overall Transfer Contract" signed by both parties was signed by the actual shareholder Zhao Mou after agreement and negotiation. There is no false intention.

2. After the signing and entry into force of the "Company's Overall Transfer Contract", the two parties have fulfilled the registration procedures for industrial and commercial changes in accordance with the law. Li Moumou said that after his transfer, he found that the company had debt problems one after another. The debt should belong to the business risk, and even if it really appeared, it should be borne by Li Moumou.

3. On November 16, 2021, after the change of the company's equity and legal representative, Li, as a shareholder of a one-person limited liability company, shall bear the corresponding rights and obligations in accordance with the contract.

4, industrial and commercial registration has a statutory publicity power.

After the two parties signed the "Company Overall Transfer Contract", they completed the procedures for changing the industrial and commercial registration according to the above-mentioned contract. Not only the legal representative was changed, but the equity was also changed. The change of industrial and commercial registration was handled by Li Moumou himself, and there was no false intention. Unpaid equity transfer payment for change registration is not a statutory condition for the invalidity of the contract.

The payment of the equity transfer fee is Li's contractual obligation. As the right holder, he has the right to require him to assume the obligation according to the "Company's Overall Transfer Contract". Zhang did not give up the right to require Li to pay the contract price.

Third, contracts established in accordance with the law shall be protected by law, and the parties shall perform in good faith.

Zhang did not know about Li's claim that he accepted the entrustment of others and received 5000 yuan as the legal representative of a company. Li accepted the paid name and should bear the corresponding legal consequences. The act of naming and the signed "overall transfer of the company" is an independent legal act, from the "overall transfer of the company contract" signed, performance process, there is no invalid situation. Therefore, the "overall transfer contract of the company" signed by Zhang and Li is the true intention of both parties. It does not violate the mandatory provisions of laws and administrative regulations, is legal and effective, and is legally binding on both parties. Both parties shall fully perform their respective obligations in accordance with the contract.

Attached to relevant laws and regulations

(1) the People's Republic of China Civil Code

Article 465 [Contracts established in accordance with the law are protected by law and the principle of contract relativity] Contracts established in accordance with the law are protected by law.

Article 143 A civil juristic act shall be valid when the following conditions are met:

The (I) actor has the corresponding capacity for civil conduct;

(II) meaning is true;

The (III) does not violate the mandatory provisions of laws and administrative regulations, and does not violate public order and good customs.

Article 146 [Effect of False Representation and Concealment] A civil juristic act performed by the perpetrator and the counterparty with a false expression of intent is invalid.

2. the People's Republic of China Civil Procedure Law

Article 177 A people's court of second instance shall, after hearing a case on appeal, deal with it in accordance with the following circumstances:

If the facts found in the original judgment or order of the (I) are clear and the law is correctly applied, the appeal shall be rejected by way of judgment or order and the original judgment or order shall be upheld;

If the original judgment or ruling of the (II) is wrong in determining the facts or in applying the law, the judgment or ruling shall be revised, revoked or modified in accordance with the law;

If the basic facts found in the original (III) judgment are not clear, the original judgment shall be rescinded and remanded to the people's court of origin for retrial, or the judgment shall be revised after the facts have been ascertained;

(IV) the omission of the party in the original judgment or the illegal default judgment is seriously in violation of legal procedures, the original judgment shall be revoked and returned to the original people's court for retrial.

(V), after the people's court of first instance has made a judgment on a case remanded for retrial, the people's court of second instance may not remand the case for retrial if the party concerned files an appeal.

(Statement: This article is based on the author's experience summary of the point of view, only for the exchange of learning)

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