Viewpoint... Analysis of the identification of equity holding relationship and risk prevention and control.

The so-called equity holding, in essence, refers to the actual investor of the company through the nominal investor to reach a certain agreement, by the nominal investor to the company to pay or pay-in capital, and on the surface by the nominal investor to enjoy the rights of shareholders, to fulfill the obligations of shareholders. However, in most cases, the nominal contributor still has to follow the "command" of the actual contributor to exercise shareholder rights, and ultimately the actual contributor to obtain the company's dividends and bear the corresponding responsibility.

The actual investor can also be called an anonymous shareholder, which refers to the person who enjoys the rights of the company's shareholders through the real subscription and payment of the company's equity. Because his identity (name) is not recorded in the company's articles of association or the register of shareholders, he cannot find any capital contribution information in the relevant information system of market supervision. The actual contributor has three obvious characteristics: first, the actual contributor through the real contribution or the subscription of the company's equity.

The so-called nominal shareholder can also be called a prominent shareholder, this kind of title is essentially derived from the concept of the actual investor, refers to the person who does not really contribute or contribute capital, but is recorded in the articles of association or the register of shareholders, and through the market supervision related information system as a shareholder of the company. The reason why it is recorded in the articles of association, the register of shareholders and the relevant information system is that it has reached an agreement with the actual funder to hold equity, assume shareholder obligations and exercise shareholder rights on behalf of the actual funder.

According to the Supreme People's Court on the application<中华人民共和国公司法>The provisions of the (III) on certain issues (hereinafter referred to as "interpretation III of the Company Law") stipulates in the first and second paragraphs of Article 24: "the actual investor of a limited liability company shall conclude a contract with the nominal investor, stipulating that the actual investor shall contribute capital and enjoy investment rights and interests, and the nominal investor shall be the nominal shareholder. If there is a dispute between the actual investor and the nominal shareholder over the validity of the contract, if there is no invalid circumstances stipulated by law, the people's court shall determine that the contract is valid.

If a dispute arises between the actual contributor and the nominal shareholder as stipulated in the preceding paragraph over the ownership of the investment rights and interests, and the actual contributor claims the rights against the nominal shareholder on the ground that it has actually fulfilled its obligation to contribute, the people's court shall support it. If a nominal shareholder denies the rights of an actual contributor on the grounds that the company's register of shareholders is recorded or registered by the company's registration authority, the people's court shall not support it. From the provisions of the above judicial interpretation, there are two main elements of the establishment of the equity holding relationship, namely, the equity holding agreement and the actual funder to fulfill the obligation of capital contribution.

1. The shareholding relationship is formed on the basis of the entrustment relationship between the parties, the entrustment relationship is the legal act of both parties, the parties need to have the common intention to establish the entrustment relationship, sign the entrustment contract or the shareholding agreement, clarify the rights and obligations between the two and the liability for breach of contract. In judicial practice, the people's court mostly judges the true meaning of the parties according to the name, substantive content and performance of the contract.

The people's court held that the retrial applicant company a (defendant of first instance, appellee of second instance), company B (third party of first instance, appellee of second instance) and Yu mou (plaintiff of first instance, appellee of second instance) claimed to be a dormant shareholder due to a dispute over confirmation of shareholder qualification with company c (third party of first instance) and Li mou, third party of first instance, relevant evidence is required to prove that there is a legal and valid shareholding agreement between it and the nominee. Company C, Company B and Li, in the capacity of Party A, jointly sign a Letter of Certificate with Yu (Party B), which reads: "Party A and Party B jointly establish Company A, each with 50% equity. Party B's equity is temporarily held by Party A for the convenience of project operation". The letter is stamped with the official seals of Company C and Company B, and is signed by Li and Yu. The Letter of Proof does not exist as invalid under Article 52 of the the People's Republic of China Contract Law. The 2017 "Catalogue for the Guidance of Foreign Investment Industries" applicable at the time of the second-instance judgment and the 2019 "Catalogue for the Guidance of Foreign Investment Industries" applicable at the time of the second-instance judgment did not include the iron ore and other mine rights and interests of Company A involved in the case as prohibited items for foreign investment. Therefore, there is no situation that the Certificate Letter cannot be lifted due to the subsequent prohibitive provisions on foreign access. In summary, the second-instance judgment found that the Letter of Proof was true, valid and correct, and there was nothing improper about the existence of a true and valid shareholding agreement between the parties.

In the dispute over the confirmation of shareholder qualification between Wang (plaintiff) and Liu (defendant) and A Co., Ltd. (third party), the people's court held that the three "holding agreements" signed by the plaintiff and the defendant were the true intention of both parties, and were valid because they did not violate the relevant provisions of the company law. The three "holding agreements" also stipulated that the plaintiff and the defendant could unilaterally terminate the holding agreement. The plaintiff exercised the unilateral termination right by filing a lawsuit, which was in line with the law and the agreement of the "holding agreement". The defendant had no objection to this, and the people's court supported it. According to the agreement of the "holding agreement" and the evidence provided by the plaintiff, including bank cash payment documents, equity transfer agreements, bank customer receipts, receipt receipts, shareholders' meeting resolutions, etc., combined with the change of equity in the industrial and commercial registration information of A Co., Ltd., a complete chain of evidence can be formed, proving that 20.56 of the equity registered by A Co., Ltd. under the defendant (corresponding to the capital contribution of 24.0552 million yuan) is invested and enjoyed by the plaintiff. The plaintiff now requires the defendant to return the equity held on behalf of the plaintiff and change the registration to the plaintiff's name, in accordance with the law. In addition, A Limited and other shareholders recognized the plaintiff's actual investment and shareholding ratio, and agreed to change the registration, so they supported the plaintiff's claim.

2. In the absence of a written shareholding agreement, the shareholding relationship can also be established through evidence such as investment receipts and details of shareholders' investments.

The applicants for retrial are Company A (defendant of first instance and appellant of second instance) and Respondent Yang (plaintiff of first instance and appellant of second instance) and Company B (defendant of first instance), Song (defendant of first instance), Zhang (defendant of first instance), Company C (defendant of first instance), Zhao 1 (defendant of first instance), Zhao 2 (defendant of first instance) and Wei (defendant of first instance), in the dispute over the confirmation of shareholder qualification of Company D (the third party) in the first instance, the people's court held that although Yang was not registered as a shareholder in the business registration information of Company B, Company B issued a receipt to Yang with the content of "receipt of investment funds", as well as two financial reports of Company B and "Details of Investments of Shareholders", etc, all prove that Yang is the actual investor of Company B, thus confirming Yang's shareholder qualification and equity share.

In the case of retrial applicant sun mou (defendant of first instance and appellant of second instance) and respondent Zhang mou (plaintiff of first instance and appellant of second instance) and respondent limited company (defendant of first instance and appellant of second instance), the people's court held that although there was no formal shareholding agreement between Zhang mou and sun mou, they also held different opinions on the existence of oral shareholding agreement, however, when a limited company is established, it should have common commercial interests to consider, on the consistency of commercial interests between the two sides can be judged to have the agreement of equity holding, in line with the subjective conditions for the establishment of the legal relationship of equity holding. After the establishment of the company, Zhang, directly or indirectly through others, has more control over the development of the company's business, capital and financial control than Sun, which is in line with the objective conditions for the establishment of the legal relationship of equity holding, and can be determined to have formed a de facto legal relationship of equity holding. Through the above comprehensive analysis, the characteristics of the establishment of the legal relationship between Zhang and Sun are more obvious and more convincing, and can form a relatively complete chain of evidence and make a reasonable explanation, so Zhang's claim should be supported.

Another key point of the equity-holding relationship is the issue of actual capital contribution. In the actual process, regarding the payment between the parties, the actual investor often claims that it belongs to the company's capital contribution, but it cannot completely rule out the possibility that the two parties are borrowing, purchasing products or services, which requires screening in combination with other evidence., Make it form a complete chain of evidence, so as to judge whether the money belongs to entrusted capital.

The provisions of Article 24 of China's "Interpretation III of the Company Law" affirm the validity of the equity holding agreement within certain limits, and in judicial precedents, the Supreme People's Court has determined that the equity holding agreement is valid in principle, with the aim of protecting the legitimate rights and interests of the actual investors. Generally speaking, if the equity holding relationship does not violate the mandatory provisions of laws and administrative regulations, does not violate public order and good customs, does not collude maliciously, and damages the legitimate rights and interests of others, it will generally be considered valid. It is worth noting that in some cases, the people's court has found that the shareholding is invalid or that it is valid but violates the non-effective mandatory provisions, resulting in illegality.

1. The shareholding of the proposed listed company is invalid.

The Measures for the Administration of Initial Public Offering and Listing of Shares stipulate that the shares of the issuer must be clear, and there can be no material disputes over the ownership of the shares of the issuer held by the controlling shareholder and the shareholders controlled by the controlling shareholder and the actual controller. The Measures for the Administration of Information Disclosure of Listed Companies stipulates that the obligor who fulfills the obligation of information disclosure shall disclose in accordance with the law, and the disclosed information shall also meet the requirements of authenticity, completeness and accuracy, and there shall be no false, misleading or material omissions.

The above regulations are important requirements for the supervision of listed companies. If the equity of the promoters of the proposed listed company is not clear, then other supervision and management measures such as information disclosure, executive avoidance, and other supervision and management measures will also lose their effect, and the result will damage other non-specific The legitimate rights and interests of investors will endanger the trading order of the stock trading market, and financial security and social public interests will inevitably be damaged. Therefore, the shares of the issuer of the proposed listed company should be real, and it is not allowed to hide the real shareholders in the process of issuing the shares, and if this happens, the shares shall not be listed and issued.

2. The shareholding of the insurance company is invalid.

Article 31 of the Measures for the Administration of Equity in Insurance Companies stipulates that investors of insurance companies shall not entrust equity to a third party or accept the entrustment of a third party to hold equity in an insurance company. The provisions of this article are from the starting point of strengthening the supervision of the equity of insurance companies, maintaining the operation of insurance companies, and then protecting the rights and interests of the insured and investors, so the act of holding the equity of insurance companies is prohibited.

Although the "Measures for the Administration of Equity in Insurance Companies" is a departmental regulation promulgated by the China Insurance Regulatory Commission (now revoked), it has the same legislative purpose as the "the People's Republic of China Social Insurance Law", that is, to maintain the national financial order and social economy Order and protect the public interests of the society and the legitimate interests of the insured, it is prohibited to hold the equity of insurance companies on behalf of others. The "Measures for the Administration of Equity of Insurance Companies" do not conflict with laws and regulations, and the provisions prohibiting the holding of equity of insurance companies have substantial legitimacy and legality. In this regard, the relevant judicial decisions also agree with the effectiveness of Article 31 of the measures for the Administration of Equity of Insurance companies, and the violation of the provisions of the measures for the Administration of Equity of Insurance companies on the prohibition of holding equity of insurance companies, to a certain extent, has the same legal consequences as a direct violation of the Insurance Law and other laws and administrative regulations, therefore, the equity holding agreement should be deemed invalid.

3. The determination of the shareholding of state civil servants.

Article 59 (16) of the "the People's Republic of China Civil Servants Law" stipulates that civil servants shall not engage in or participate in profit-making activities in violation of relevant regulations, and hold concurrent positions in enterprises or other profit-making organizations. The purpose of this paragraph is to regulate that civil servants should perform their official duties fairly and impartially in accordance with the law, prevent civil servants from abusing their power to engage in or participate in profit-making activities, and provide convenience for certain enterprises.

At present, most judicial decisions and opinions hold that paragraph (16) of Article 59 of the the People's Republic of China Civil Service Law belongs to the administrative prohibition norm in nature and does not belong to the effective compulsory norm. Therefore, engaging in or participating in profit-making activities in violation of this regulation does not of course lead to the invalid consequences of the equity holding agreement. Although the civil servants engaged in or participating in profit-making activities can enjoy the property rights and interests of the corresponding equity under the equity holding agreement, however, it cannot be registered as a shareholder of the company. Of course, if there is a prohibition to evade laws, regulations and other provisions of the equity holding, the equity holding agreement should be deemed invalid.

1. Risk of identification of actual contributors

Because the equity holding agreement may be found to be invalid, or the people's court does not recognize the equity holding relationship between the parties, such as the act of holding the equity of the proposed listed company or the equity of the insurance company in violation of the provisions. Under the above circumstances, there is greater uncertainty in the confirmation of the shareholder identity of the actual contributor, and the exercise of shareholder rights and the sharing of dividends by the actual contributor will be restricted.

According to the third paragraph of Article 24 of the interpretation of the Company Law, the actual investor must be "named" with the consent of more than half of the other shareholders of the company, and request the company to change, issue a certificate of capital contribution, record the actual investor in the register of shareholders and the articles of association of the company, and handle the registration of industrial and commercial changes. If more than half of the other shareholders of the company do not agree, the people's court will not support the actual investor's request for the company to handle the above matters.

2. Risks arising from personal reasons of nominal shareholders

If the nominal shareholder fails to repay the personal debts owed to the outside world, or if the individual provides guarantee to other debtors, the equity held on behalf of the shareholder may be used to repay the debts or bear the guarantee liability. Furthermore, when the nominal shareholder is a natural person, there may be inheritance disputes, divorce and property division disputes, etc. Therefore, the rights of the actual investor may be at risk due to the personal reasons of the nominal shareholder.

3. Risk of abuse of shareholder rights by nominal shareholders

In the process of shareholding, the nominal shareholder may not obey the instructions of the actual contributor and abuse the shareholder's rights, mainly in the form of abuse of management rights, voting rights, dividend rights, or private transfer or pledge of the shares held, which will eventually lead to damage to the interests of the actual contributor.

The actual investor should pay attention to the risk prevention in the process of holding, protect their legitimate rights and interests, the main measures to deal with the risk are as follows:

1. The nominee agreement stipulates the scope of work entrusted by the actual contributor to the nominal shareholder: the nominal shareholder shall follow the instructions of the actual contributor and stipulate the liability clause for breach of contract when signing the establishment documents, paying the capital contribution, attending the shareholders' meeting, exercising the voting rights of shareholders, signing the documents of the shareholders' meeting and distributing the dividend and bonus rights.

2. It is agreed that the nominal shareholder shall exercise the shareholder's rights in accordance with the wishes of the actual investor, in line with the principles of personal handling, prior communication and good management, clarify the amount of capital contribution, payment time, payment path and other matters of the target equity, confirm that the owner of the equity is the actual investor, and inform the shareholders' meeting of the relevant holding matters together.

3. Although the actual contributor is not recorded in the company's register of shareholders, articles of association, and business registration, the actual contributor can manage the company by participating in the operation of the company or becoming management.

4. The agreement on the holding of shares, the power of attorney, the waiver of the right of first refusal and other materials may be notarized through negotiation.

5. Through the relevant provisions of the articles of association, the possibility of the equity being recognized as the joint property or inheritance of the husband and wife is excluded, and the risk of the spouse and close relatives of the nominal shareholder claiming rights and interests in the equity is avoided.

1. Risk of fulfilling capital contribution obligations

Article 26 of China's Company Law stipulates that the registered capital of a limited liability company shall be the amount of capital contribution paid by all shareholders registered with the company registration authority. Article 13 of the Regulations on the Administration of Registration of Market Entities stipulates that, unless otherwise provided by laws, administrative regulations or decisions of the State Council, the registered capital or capital contribution of market entities shall be subject to a subscription registration system, expressed in RMB. In practice, if the actual contributor fails to pay the capital contribution in full after the expiration of the company's registered capital contribution period, or if there is a withdrawal of capital contribution, the nominal shareholder will bear the responsibility of fulfilling the capital contribution obligation due to the company's debt, and the equity holding agreement between the actual contributor has no effect against the bona fide third party.

2. Risks of a nominal shareholder acting as the legal representative of the company

According to the provisions of the Company Law, if the nominal shareholder acts as the legal representative of the company, if the company has its business license revoked or ordered to close down due to violation of the law, if the nominal shareholder bears personal responsibility, the company shall not serve as a director, supervisor or senior manager of the company within three years of the date of revocation of its business license; moreover, if the company fails to perform the obligations determined by the effective legal documents, nominal shareholders acting as legal representatives will be summoned, detained, recorded in the credit system, restrictions on high consumption and other measures. Therefore, the company's illegal operation, the object of accountability often includes the legal representative, as the company's legal representative of the nominal shareholders will bear the corresponding responsibility.

The main risk responses that nominal shareholders should take to protect their legitimate rights and interests are:

1. Investigate the company's operating conditions

Nominal shareholders should investigate the company to be held on behalf of the company, fully understand the company's operating conditions, financial situation and the relationship between shareholders, analyze and consider the risks of holding on behalf of the company and whether there are circumstances to circumvent laws and regulations, to avoid liability for the company's mismanagement or invalid holding on behalf of the company.

2. Signing a proxy agreement

The two sides reached an agreement in the holding agreement that the signing of the equity holding agreement includes the requirements of the actual investor's behavior, the agreement on the termination of holding, the arrangement of liability for breach of contract and the requirement for the actual investor to pay in capital, etc. the rights and obligations of both parties will be clarified in writing, and the legitimate rights and interests of nominal shareholders will be protected by signing the equity holding agreement, To provide solutions for future disputes between the two parties.

3. Guarantees by actual contributors

In the process of holding on behalf of the actual contributor, the actual contributor is required to provide property security or a third party to provide guarantees and other measures, and when the nominal shareholder is liable for the fault of the actual contributor, the actual contributor shall be recovered in a timely manner.