Viewpoint... Whether the actual investor can "hard" the applicant in the enforcement procedure -- an analysis of the protection of the rights of the trust interests of the hidden shareholders and the ordinary creditors of the prominent shareholders.

Published:

2022-05-13

Foreword The so-called anonymous shareholder is the actual investor, which means that although it contributes to the company, it should enjoy its shareholder rights, but for various reasons it is not registered in the company's register of shareholders, the company's articles of association and the Market Supervision Administration, but holds the company's equity on behalf of the prominent shareholder. The inconsistency between the appearance of rights and the actual capital contribution is derived from the difficulties in confirming the qualification of dormant shareholders, the limitation of the right to know, and the possibility of excluding the enforcement of ordinary creditors of prominent shareholders in judicial practice, which essentially reflects the determination of the legal relationship between dormant shareholders and prominent shareholders, with the company and other shareholders, and with third parties other than the company and shareholders, which is controversial in academic and judicial practice. This paper only from the hidden shareholders to enjoy the civil rights and interests can be sufficient to exclude the prominent shareholders ordinary creditors on behalf of the rights of the enforcement of the application for entry and preliminary combing, analysis, with a view to the practical treatment to provide some help. The judiciary has different views 1. whether the dormant shareholders can block the implementation. Through the search and analysis of the relevant cases, the court has two different ideas and views on whether the civil rights and interests enjoyed by the hidden shareholders can be sufficient to exclude the application for enforcement of the rights of the ordinary creditors of the prominent shareholders. One view is that dormant shareholders are not sufficient to exclude enforcement, while another view is the opposite, that dormant shareholders are sufficient to exclude enforcement. After incomplete statistics, the majority of cases advocate the first view. The inconsistency of judicial views makes the case handling of such problems increase the difficulty and flexibility of the argument. The core of the 2. is whether the ordinary creditors of prominent shareholders enjoy the interests of trust. Regardless of the referee's view, the core of the reasoning is whether the ordinary creditor of the prominent shareholder enjoys a trust interest and whether that trust interest can be protected in preference to the rights of the anonymous shareholder. The interest of reliance stems from the principle of commercial appearance, that is, the transaction decision made by the relative based on the trust of the registered appearance, even if the appearance of the right is inconsistent with the actual right, it should be presumed that the appearance of the right is true and valid, so as to ensure the trust interest of the relative and maintain the security of the transaction. This principle is enshrined in article 65 of the Civil Code and article 32 of the Companies Act. However, whether the ordinary creditor of a prominent shareholder is a "bona fide counterpart" or a "third party" as stipulated by the law, the law does not clearly stipulate that the "bona fide counterpart" or "third party" is limited to a third party based on equity transactions. Whether it includes a non-trading third party, the practical point of view is controversial here, which is supported by a large number of cases such as the Supreme Court and the Provincial Court. The Shandong Provincial High Court issued the "Answers to Several Questions of the Second Civil Division of the Shandong Higher People's Court on the Trial of Corporate Dispute Cases", which limited the "bona fide counterpart" or "third party" to the third party in equity transactions, and the ordinary creditors of prominent shareholders because They are not the third party in the proxy shareholding transaction and do not enjoy the trust interest based on the appearance of the equity registration right have risen to the guiding principle of trial. It is believed that "the actual funder's request for suspension of execution should be supported". The reason is that, according to Article 25 of the (III) of Interpretation of the Company Law, the subject of the system of good faith acquisition of equity is limited to third parties who have equity transactions with nominal shareholders. The scope of application of the principle of commercial appearance does not include third parties to non-equity transactions. In the case of the inconsistency between the appearance right and the actual right, according to the theory of the appearance of the right, if a bona fide third party conducts a civil legal act with the nominal right holder on the basis of trust in the appearance of the right, the effect of the civil legal act shall be protected by the law. However, if the creditor of the nominal shareholder applies for the execution of the general creditor's rights formed by the nominal shareholder due to the loan relationship with the nominal shareholder, and the creditor does not engage in civil legal acts involving equity transactions with the nominal shareholder, from the principle of the appearance of rights, the creditor at this time is not a bona fide third party of civil legal acts that need to be protected based on the appearance of the right, so its claim cannot be protected in priority over the actual right holder. However, when hearing such cases, the evidence submitted by the actual funder to prove the existence of the right should be strictly examined to find out the authenticity of the right, not only to prevent false litigation to avoid debt, but also to prevent the infringement of the actual funder's actual rights. The claim that "bona fide counterpart" or "third party" is not limited to third parties based on equity transactions, but also includes a number of cases of non-trading third parties. For example, the Supreme People's Court (2019) Supreme Law Minzai No. 46 Tuo Siwei and Liu Jin retrial civil judgment held that "even if the enforcement claim is formed before the share registration information is publicized, the creditor does not trade with the debtor based on the share registration information, and there is still the problem of protecting the creditors' trust interests at the enforcement stage. As the law clearly denies the seizure of excessive standards, the applicant for execution must give up the application for seizure of other property in order to realize the seizure of a particular property. If the trust interest of the seizure is not protected, it will not only be unfair to the applicant for execution, but also damage the trust interest of the judicial enforcement agency. Therefore, it is legitimate and reasonable that the scope of protection of bona fide third parties should not be limited to third parties engaged in transactions with respect to a particular subject matter, and that they should be extended to the executing creditors of the nominal shareholders, in the event that the actual contributors to the shares involved in the case are inconsistent with the publicized nominal shareholders." Thus, this view recognizes that ordinary creditors of prominent shareholders enjoy a trust interest, and there are even cases that extend this trust interest to the enforcement stage. Identification of dormant shareholders in 3. The Supreme Court (2016) Supreme Law No. 701 case held that an anonymous shareholder may file an enforcement objection in the enforcement proceedings and request confirmation of the shareholder's qualification. If the dormant shareholders simultaneously file a claim for confirmation of their rights, the people's court shall hear the case and make a decision together. The identification of dormant shareholders is essentially the identification of the rights of dormant shareholders. The dormant shareholder itself has the qualification of the actual investor, but it is not mentioned in the articles of association, the register of shareholders, industrial and commercial registration and other relevant legal documents, which is easy to cause the dislocation of the rights and obligations of the dormant shareholder. Due to the "hidden" nature of dormant shareholders, the identification of their identity has formed three views of "substantive elements", "formal elements" and "compromise. The substantive elements say that capital contribution is the most important element of the identification of shareholders, regardless of whether the register of shareholders, articles of association or whether the registration authority is registered is only a formal element defect, as long as the holding agreement does not violate the mandatory provisions of laws and administrative regulations, then the identification of shareholders should respect the autonomy of the parties. Article 21 of the (III) of Interpretation of the Company Law can also be understood as the identification of anonymous shareholders. The strict implementation of the principle of commercial appearance will inevitably lead to the inability to effectively protect the rights of anonymous shareholders. The compromise states that a distinction is made between the application of different standards within and outside the company. If the interests of a bona fide third party are not involved, the true meaning of the parties shall be explored in accordance with the agreement of the parties, and when the interests of a third party are involved, the commercial appearance doctrine shall be fully reflected and priority shall be given to the protection of bona fide third parties. At present, compromise is the mainstream view, but there are many disputes involving dormant shareholders, and specific cases should be analyzed in order to effectively balance the interests of the parties. Capital contribution is the key issue for the court to determine the identity of shareholders. Under the comprehensive subscription system, the qualification of shareholders is not based on the paid-in contribution, but because the equity generation holds a certain degree of secrecy, the paid-in capital contribution can prove that the anonymous shareholders have the desire to become shareholders, so the paid-in capital contribution becomes an important evidence of the identity of the anonymous shareholders. Relevant financial information, the flow of capital contributions, etc. can be used as direct evidence to determine the actual contribution. In the case of indirect contributions by dormant shareholders, multiple legal relationships need to be identified to determine the contribution. In particular, in cases where an anonymous shareholder has funds injected into the company, the court will still focus on examining the nature of the funds and distinguishing them from indirect shareholdings and private lending relationships. The equity holding agreement is the embodiment of the autonomy of the rights and obligations of the hidden shareholders and the prominent shareholders, in the absence of violation of the provisions of the legal effect, should be considered valid, only insurance, funds and other special industries, in the context of strong national supervision, the corresponding special provisions on equity holdings, such as the Interim Measures for the Administration of Equity in Commercial Banks, the Measures for the Administration of Equity in Insurance Companies, and the Measures for the Administration of Initial Public Offering and Listing, etc. Articles 10 and 12 of the Interim Measures for the Administration of Equity in Commercial Banks explicitly negate the act of holding equity in commercial banks, which requires shareholders of commercial banks not to entrust or accept the entrustment of others to hold equity in commercial banks. For insurance companies, listed companies equity holding, the court in the specific case of different circumstances also invoked different provisions to make different distinctions between the validity of the agreement. In addition, Article 28 of the "Nine People's Minutes" stipulates: "If the actual investor can provide evidence to prove that more than half of the other shareholders of the limited liability company know the facts of their actual capital contribution and have not raised any objections to their actual exercise of shareholder rights, the actual investor The people's court shall support the request to register as a shareholder of the company." In the company's informed equity holding type and incomplete equity holding type, the hidden shareholders often directly or indirectly with the company, other shareholders, influence or exercise part of the rights of shareholders, judicial practice also to a certain extent recognized the company's other shareholders of the "implied consent". Conclusion The value orientation of the judiciary can be seen from the reasoning part of the Supreme Court (2019) Supreme Court Minzai No. 46 case: "From the perspective of the value pursuit of the legal system and the value orientation of the judicial policy, the proxy relationship itself is not a normal shareholding relationship. It deviates from the company registration system, social credit system and other systems, and shareholders arbitrarily create the appearance of rights, this leads to inconsistency between the registered right holder and the actual right holder, while providing convenience to the actual investor, allowing the prominent shareholders to release false signals of asset prosperity to the outside world, causing confusion to the company's legal relationship and registration information, and increasing the overall commercial risks and costs of the society, which should be borne by the actual investor ...... If emphasis is placed on recognizing and protecting the rights of the actual investor to prevent implementation, objectively, it will have the legal effect of encouraging the evasion of supervision and debt through the holding of shares, because the 'holding agreement' is a hidden relationship, the two sides usually have a special identity or interest relationship, it is easy to choose whether to avoid legal risks by 'holding on behalf of the external risks to be faced. Therefore, the determination of the rights of the actual contributor cannot exclude enforcement and is conducive to the realization of the values of security, order and efficiency that the law focuses on and pursues in the commercial field". Through the summary of the theory and judicial practice experience, it can be concluded that it is difficult for the hidden shareholders to exclude the common creditors of the prominent shareholders to apply for the enforcement of the holding rights. The enforcement objection may be accompanied by a claim for shareholder identification, and it is argued that the rights of the anonymous shareholder should be protected in preference to the applicant's trust interests.

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