Corporate Litigation Study... Practical points of company establishment disputes.

Introduction

 

Company establishment disputes often occur frequently in the process of company establishment, the promoter in order to make the formation of the company to obtain a complete legal personality, must be in accordance with the law to perform strict legal conditions and establishment procedures, so must make a series of relevant legal acts. In this process, in order to achieve the purpose of the establishment of the company, often because of the relevant contract in the company's internal promoters, the establishment of the company, external creditors, such as a variety of legal disputes, the establishment of the company dispute is for the disputes and contradictions arising at this stage of the judicial relief channels set up. Based on the experience of handling such cases, this paper discusses the point of convergence between legal provisions and trial practice, helps companies and shareholders to avoid the legal risks of the establishment stage of the company to the greatest extent, and provides a path to resolve such disputes.

 

1. related regulations

 

(I) law

the People's Republic of China Civil Procedure Law (2017)

Article 26 Special territorial jurisdiction Litigation arising from disputes over the establishment of a company, confirmation of shareholder qualifications, distribution of profits, dissolution, etc., shall be under the jurisdiction of the people's court of the company's domicile.

Article 34 The parties to a dispute over a contract or other property rights and interests may, by written agreement, choose the jurisdiction of the people's court in the place where the defendant has his domicile, the place where the contract is performed, the place where the contract is signed, the place where the plaintiff has his domicile, the place where the subject matter is located, and other places that are actually related to the dispute, but shall not violate the provisions of this Law on jurisdiction by level and exclusive jurisdiction.

2. General Provisions of Civil Law

Article 75 The legal consequences of civil activities undertaken by the establishment person for the establishment of a legal person shall be borne by the legal person; if the legal person is not established, the legal consequences shall be borne by the establishment person, and if the establishment person is two or more persons, they shall enjoy joint and several claims and bear joint and several debts.

If the person who establishes a legal person engages in civil activities in its own name, a third party shall have the right to choose to request the legal person or the person who establishes it to bear the civil liability.

 

(II) judicial interpretation

1, the Supreme People's Court on the application.<中华人民共和国民事诉讼法>the explanation."

Article 22 Jurisdiction shall be determined in accordance with the provisions of Article 26 of the Civil Procedure Law for lawsuits arising from disputes over records in the register of shareholders, requests for changes in company registration, shareholders' right to know, company resolutions, company mergers, company division, company capital reduction, company capital increase, etc.

2. (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law

Article 1 The persons who, for the purpose of establishing a company, sign the articles of association, subscribe for capital contributions or shares from the company and perform the duties of establishing the company shall be recognized as the promoters of the company, including the shareholders of the limited liability company at the time of its establishment.

Article 2 If the promoter signs a contract in its own name for the establishment of a company, and the counterparty to the contract requests the promoter to bear the contract liability, the people's court shall support it.

If the company confirms the contract stipulated in the preceding paragraph after its establishment, or has actually enjoyed the contract rights or performed the contract obligations, and the contract counterpart requests the company to assume the contract liability, the people's court shall support it.

Article 3 If the promoter signs a contract in the name of the established company, and the contract counterpart requests the company to bear the contract liability after the establishment of the company, the people's court shall support it.

After the establishment of the company, there is evidence to prove that the promoter used the name of the company in the establishment to sign a contract with the counterparty for its own benefit, and the company claims not to bear the contract liability on this ground, the people's court shall support it, except for the relative person's good faith.

Article 4 If a company is not established for some reason, the people's court shall support the creditor's request that all or part of the promoters bear joint and several liability for the expenses and debts arising from the establishment of the company.

If some of the promoters, after assuming the responsibility in accordance with the provisions of the preceding paragraph, request the other promoters to share the responsibility, the people's court shall order the other promoters to share the responsibility in proportion to the agreed responsibility; if there is no agreement on the proportion of responsibility, the responsibility shall be shared in accordance with the agreed proportion of capital contribution; if there is no agreement on the proportion of capital contribution, the responsibility shall be shared in accordance with equal shares.

If the company is not established due to the fault of some of the promoters, and the other promoters claim that they bear the expenses and debts arising from the act of establishment, the people's court shall determine the scope of liability of the party at fault according to the circumstances of the fault.

Article 5 If the promoter causes damage to others due to the performance of the company's establishment duties, and the victim requests the company to bear the liability for tort compensation after the company is established, the people's court shall support it; if the company is not established and the victim requests all the promoters to bear joint and several liability, the people The court shall support it.

After the company or the promoter without fault has assumed the liability for compensation, it may recover the compensation from the promoter at fault.

3. (V) of the Provisions of the Supreme People's Court on Several Issues concerning the Application of the the People's Republic of China Company Law

Article 5 The people's court shall pay attention to mediation when trying a case involving major differences among shareholders of a limited liability company. If the parties agree to resolve their differences in the following ways, and do not violate the mandatory provisions of laws and administrative regulations, the people's court shall support: (1) the company repurchases some shareholders' shares; (II) other shareholders to transfer some shareholders' shares; (III) others to transfer some shareholders' shares; (IV) the capital reduction of the company; (V) the division of the company; (VI) other ways that can resolve differences, restore the normal operation of the company, and avoid the dissolution of the company.

4. (I) Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Dispute Cases of Foreign-funded Enterprises (Fa Shi [2010] No. 9, August 5, 2010)

The contract of a foreign-invested enterprise stipulates that a party contributes capital or provides cooperation conditions with the subject matter that needs to be registered for change of ownership. The subject matter has been delivered to the foreign-invested enterprise for actual use, and the party who has the obligation to handle the registration of change of ownership has been designated by the people's court. If the registration is completed within a reasonable time limit, the people's court shall determine that the party has fulfilled the obligation to contribute capital or provide cooperation conditions. If a foreign-invested enterprise or its shareholders claim that the party does not enjoy shareholders' rights and interests on the ground that the party has not fulfilled its obligation to contribute capital, the people's court shall not support it. If the foreign-invested enterprise or its shareholder proves that the party concerned has caused losses to the foreign-invested enterprise due to the delay in the registration of the change of ownership and requests compensation, the people's court shall support it.

 

Provisions issued by regional courts in (III)

1. The Application of the Beijing Higher People's Court in the Work of Filing a Case<民事诉讼法>answers to a number of questions."

6 (Review of Corporate Litigation Jurisdiction) Article 26 of the Civil Procedure Law What is the nature of corporate litigation jurisdiction? How to review it in filing a case?

A: The jurisdiction of corporate litigation as stipulated in Article 26 of the Civil Procedure Law is a special territorial jurisdiction. In such disputes, the parties may agree on jurisdiction.

The application of corporate litigation jurisdiction should be judged by whether it is related to the company's organizational behavior. The company's litigation jurisdiction shall apply to disputes related to the company's organizational behavior, such as the establishment of the company, the confirmation of shareholder qualifications, the distribution of profits, the dissolution of the company, the change of the company's organizational form, the merger of the company, the division of the company, the change of the company's capital, etc.

Litigation by shareholders for damage to the interests of the company's creditors, litigation on liability for breach of contract of shareholders' capital contribution, litigation on equity transfer, litigation on capital contribution disputes between the company and shareholders, etc., do not have the nature of disputes in the company's organic law and do not apply to the jurisdiction of corporate litigation.

If the target company has not been established in the merger dispute, the company has been canceled in the division dispute, and the company has not been established in the promoter liability dispute, the jurisdiction of this clause shall not apply.

2. Guiding Opinions of the Higher People's Court of Beijing Municipality on Several Issues concerning the Trial of Company Dispute Cases (for Trial Implementation)

6. How are the parties identified in a lawsuit arising from a dispute over a capital contribution agreement between the company and a third party other than the shareholders?

The company signs a capital contribution agreement with a third party other than the shareholders, and the third party other than the shareholders invests in the company, and the company promises to give it the status of a shareholder, which belongs to the company's capital increase and share expansion. The resulting lawsuit shall be the parties to the company and the signatory of the capital increase and share expansion agreement.

If the shareholders of the company have objections to the capital increase and share expansion agreement, they may file a lawsuit as the plaintiff, and the company and the signatory of the capital increase and share expansion agreement shall be the co-defendants.

1. About Shareholder's Capital Contribution

Article 1 If the investor or promoter makes capital contributions with non-monetary property such as houses, land use rights, ships, vehicles, intellectual property rights, etc., and fails to go through the formalities for the transfer of ownership in accordance with the relevant laws and regulations, it shall be determined that the shareholders have not fulfilled their obligations to make capital contributions. However, the formalities for the transfer of ownership are completed before the conclusion of the court debate of the first instance.

If the above-mentioned property has gone through the formalities for the transfer of ownership, and the property has been delivered to the company for actual use before that, the people's court shall determine that the time of actual delivery is the time for fulfilling the obligation of capital contribution.

Article 2 If the shareholders of a limited liability company fail to perform or fully perform their capital contribution obligations, the company requests them to make up the capital contribution, or the company's creditors request them to bear joint and several liability for the company's debts within the scope of the defective capital contribution, the people's court shall support it.

3. Opinions of the Higher People's Court of Jiangsu Province on Several Issues Concerning the Trial of Cases on the Application of the Company Law (for Trial Implementation)

4. on the establishment of the company's civil liability.

34. The establishment of a company refers to the organization that exists to perform the necessary acts of the establishment of the company, starting from the date of the signing of the articles of association or the establishment agreement, and finally the date of the issuance of the company's business license.

The necessary act of establishing a company refers to the legal and economic necessary act for the direct purpose of the establishment of the company and for the creation of the necessary conditions for the establishment of the company as stipulated in the company law.

35. If the promoter of a company establishes a necessary act for the company in the name of the company, the legal consequences shall be borne directly by the company after its establishment, and the creditor may claim civil liability for the defendant.

36. If the promoter of a company acts in the name of the company in the establishment of the company, the creditor can only require the promoter of the company to bear civil liability, but if the company after the establishment recognizes the act, it may require the company after the establishment to bear civil liability.

37. If the promoter of a company establishes an act for the company in its own name, the creditor may sue the promoter directly as the defendant for civil liability. If the company recognizes that the promoter's act or the interests of the act are vested in the company, the creditor may choose the promoter or the company after its establishment to claim civil liability for the defendant, but once the creditor has selected the defendant, it may not change it.

38. Where a company is being established or the establishment of a company fails, the civil liability between the promoters, both internally and externally, shall be governed by the legal provisions relating to partnerships or partnership-type joint ventures:

(1) The debts incurred by the promoters of the company as a result of the necessary acts of establishing the company shall be jointly and severally liable by all the promoters; after the promoters are liable to the outside world, they may require the other promoters to bear the corresponding civil liability in accordance with the agreement.

(2) The creditors shall have the right to choose whether the promoter shall bear or require all promoters to bear joint and several liability for the debts incurred by the promoter in its own name for the necessary acts of establishing the company.

(3) The promoter of the company shall be jointly and severally liable for the debts incurred by the non-essential act of establishing the company in the name of the company, and the other promoters shall ratify it. The promoter shall bear the corresponding civil liability for the debts arising from the non-essential acts of the promoter in its own name for the establishment of the company.

 

(IV) Articles

1. Jurisdiction in cases involving corporate litigation

Supreme People's Court Judicial Viewpoint Integration (New Edition) Civil Litigation Volume I, Page 197 Viewpoint No. 125

The 2005 "Company Law" and the 2007 "Civil Procedure Law" have no special provisions on the jurisdiction of corporate litigation cases. Only the "(II) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law" [hereinafter referred to as the "Company Law Interpretation (II)"] stipulates that corporate dissolution litigation cases are under the jurisdiction of the people's court of the company's domicile, which has an adverse impact on the people's court's trial of corporate litigation cases. In response to the particularity of corporate litigation, the 2012 Civil Procedure Law added a new article 26: "Litigation arising from disputes over the establishment of the company, confirmation of shareholder qualifications, distribution of profits, dissolution, etc., shall be under the jurisdiction of the people's court of the company's domicile." For the determination of the company's domicile, the General Principles of Civil Law and the 2005 Company Law have corresponding provisions. Article 39 of the General Principles of Civil Law stipulates that a legal person shall be domiciled in the place where its principal office is located. Article 10 of the Companies Act 2005 provides that a company shall be domiciled in the place where its principal office is located. According to Article 12 of the Regulations on the Administration of Company Registration in the People's Republic of China, the domicile of a company shall be within the jurisdiction of its company registration authority, so the domicile of the company shall be the place of registration of the company. In this regard, Article 24 of the (II) for interpretation of the Company Law further clarifies that litigation cases of dissolution of a company shall be under the jurisdiction of the people's court in the place where the company is domiciled. It can be seen that the domicile of the company refers to the location of the company's main office; if the location of the company's office is not clear, it shall be under the jurisdiction of the people's court of the place of registration.

In 2012, the Civil Procedure Law adopted the method of listing and covering the bottom, and determined the types of corporate litigation under the jurisdiction of the people's court of the company's domicile. It can be seen that not all corporate-related litigation is corporate litigation, and not all corporate-related litigation applies the principle of jurisdiction under the domicile of the company under this article. For example, the litigation of liability for breach of capital contribution between shareholders, the litigation of equity transfer, the litigation of capital contribution disputes between companies and shareholders, etc., mainly belong to the litigation nature of payment. Although these lawsuits more or less involve the company, they either belong to the category of traditional civil disputes, or involve the relationship of rights and obligations in the company law, but they do not have the nature of disputes in the organization law, nor do they involve multiple legal relationships, general civil procedure may be applied for acceptance and adjudication. Therefore, whether the company-related litigation is under the jurisdiction of the company's domicile should be comprehensively judged and analyzed, including "whether the dispute involves the interests of the company and whether the Company Law applies to the application of the law of the dispute.

2. The determination of the performance of capital contribution obligations in the establishment of foreign-invested companies.

Notice of the Supreme People's Court on Issuing the Minutes of the Second National Working Conference on Foreign-related Commercial Maritime Trials (No. 26 [2005] of December 26, 2005)

Under the premise that the Sino-foreign joint venture contract and the Sino-foreign cooperative enterprise contract are valid, the investors of the Sino-foreign joint venture and the Sino-foreign cooperative enterprise shall fully perform their respective capital contribution obligations or provide cooperation conditions in accordance with the manner, amount, and time limit stipulated in the contract, otherwise they shall bear the corresponding liability for breach of contract. For Sino-foreign joint venture enterprise contracts and Sino-foreign cooperative enterprise contracts that agree to contribute capital or provide cooperation conditions in the form of land use rights, plant, machinery and equipment that need to go through transfer procedures, a distinction shall be made between the joint venture or cooperative enterprise that has been delivered for use but has not gone through the transfer procedures and the situation that has not been delivered for use and has not gone through the transfer procedures, and the party responsible for fulfilling the obligation shall be liable for breach of contract.

 

Overview of 2. Litigation

 

1. The company has not been established, and the promoter's lawsuit for the assumption of expenses or profit distribution during the establishment phase of the company.

Plaintiff: Originator

Defendant: Other promoters

Jurisdiction: if the contract has jurisdiction over the dispute, it shall be in accordance with the contract; if no agreement is made, it shall be under the jurisdiction of the people's court of the place where the defendant is domiciled or the people's court of the place where the contract is performed.

(Basis: Articles 34 and 23 of the the People's Republic of China Civil Procedure Law)

Litigation request:

The claims are generally expressed as follows:

1, the order to terminate the original defendant signed between the promoter agreement;

(Article 94 of the the People's Republic of China Contract Law)

2, ordered the defendant to return the investment;

(Article 4 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law)

3. Order the defendant to pay the profits during the joint operation period and the profits in the inventory;

(Article 4 of the (III) of the Supreme People's Court on Certain Issues Concerning the Application of the the People's Republic of China Company Law stipulates that when a company cannot be established, the promoter shall bear the debts arising from the establishment stage in proportion to the capital contribution, but it does not stipulate how the profits generated by the establishment of the company in the establishment stage of the company shall be distributed. According to the legal principle of consistency of rights and obligations and the principle of fairness of civil law, the distribution of claims at the stage of the establishment of the company shall be subject to the provisions of debt commitment, and the promoter shall have the right to distribute the profits generated by the company's business activities at the stage of establishment in accordance with the proportion of capital contribution)

4, the case acceptance fee, preservation fee and other litigation costs are borne by the defendant.

The claim needs to distinguish between the status of the company's initiation without the establishment of the company. If there is a loss or other cost, the claim for the return of the investment shall be the investment-the balance of the cost or loss in proportion to the contribution.

Or the claim as "ordered the defendant to bear the costs of the cooperation period" or in accordance with the contract to bear the liability for breach of contract, and so on.

 

3. Disputes and Judgment Rules

 

(I) dispute issue one: the company failed to establish in accordance with the law, the legal relationship between the establishment of the person.

If the company is not established in accordance with the law, the relationship of the establishment person during the period of preparation for the establishment of the company shall be a partnership. Xie Haiqiao, Nanchang Honggutan New District Township Enterprise Urban Management Committee, Jiangxi Zhiguang Industrial Development Co., Ltd. joint venture contract dispute application retrial case [Supreme People's Court (2016) Supreme Fa Minshen No. 37 Civil Ruling] The Supreme People's Court held that: on the qualitative issue of this case. The dispute in this case was caused by the failure of the Changling Management Committee and the two outsiders to jointly establish a joint venture company in accordance with the contract, because the joint venture was not established in accordance with the law, the relationship between the parties during the preparation of the company should be a partnership, and the property income invested and accumulated by the parties during the preparation of the company shall be shared by the parties. It is not improper for the court of first instance to characterize the case as a joint venture contract dispute according to the specific litigation request of the parties and to identify the relationship between the parties during the preparation of the company as a partnership.

 

(II) Controversial Issue 2: Determination of relevant establishment expenses or losses in the establishment of a company

Dalian Gongmei Enterprise Co., Ltd. and Hongren (Dalian) Group Co., Ltd. sponsor liability dispute appeal case [Supreme People's Court (2015) Min Er Zhong Zi No. 90 civil judgment]

The main purpose of the decision: This case is a typical dispute over the liability of the company's promoter arising from the sharing of the cost of the establishment of the company. Regardless of whether the company is established or failed, it is inevitable that the establishment of the company will incur related costs or losses, etc., which will inevitably involve issues such as the identification of related establishment costs or losses and the rules for apportioning them. The current "Company Law Interpretation (III)" has relevant provisions, but in the case of the failure of the establishment of this case, there is still a lack of accurate basis for the specific identification and judgment of the establishment costs and losses. The judgment of the second instance of this case further ascertained the relevant facts, and made a case-by-case analysis and judgment on the so-called expenses and losses of the establishment of the company involved in the dispute, which is a very rare reference case for dealing with the liability disputes of the promoters of similar companies.

The Supreme People's Court held that:

1. the question of whether the appellant Gongmei Company should compensate the appellee Hongren Company for the loss of 4.2603 million yuan and its related interest. The Court held that the case was a dispute over the liability of the promoter arising from the establishment of the company, and the original trial characterized the case as an improper dispute over a joint venture contract and was hereby corrected. In the case of the promoter's liability for the costs or losses of incorporation, the first thing to be judged in the context of the present case is the question of whether the loss actually occurred. According to Hongren Company's claim and the original judgment, 4.2603 million yuan in this case consists of three expenses: first, 2.577804 million yuan and interest for decoration and design expenses incurred in decorating office houses and designing five monosodium glutamate projects; The second is to handle the industrial and commercial registration of the evaluation fee of 1.3225 million yuan and interest incurred in the asset evaluation of the invention patent of Tiaoyuan five monosodium glutamate products owned by Liu Xianzhong and the real estate owned by Gongmei Company; third, the capital verification report fee of 360000 yuan and interest incurred in setting up the new company to entrust fair accounting. The court further found out that among the three expenses, Hongren Company always admitted that it had only paid 90000 yuan, and the rest were the outstanding external debts of Hongren Company. Obviously, except for 90000 yuan, the rest of the expenses are not actually paid, so the so-called actual loss can not occur. Hongren's request for compensation from Gongmei for its outstanding external debts as actual losses lacks not only a factual basis, but also a legal basis. The original trial identified Hongren's outstanding external arrears as actual losses, which was clearly inappropriate. Further review of the $4.2603 million loss claimed by Hongren on a case-by-case basis can be judged more clearly and cannot be supported. ......

The Court believes that the original trial, without finding out whether 4.2603 million yuan and its interest actually occurred and whether it was actually paid, and without finding out the specific fact that each expense of 4.2603 million yuan claimed by Hongren Company occurred, simply identified this as the loss incurred by Hongren Company to form the company, and ordered Gongmei Company to pay compensation, which is a factual error and should be revoked.

 

(III) Controversial Question 3: The conceptual elements of the company's establishment of an actor.

The person who establishes the company shall have the characteristics of signing the articles of association for the establishment of the company, subscribing for capital contributions or shares, and performing the duties of establishing the company.

Hainan Hailian Industry and Trade Co., Ltd. cooperated with Hainan Tianhe Tourism Investment Co., Ltd., Sanya Tiankuo Real Estate Co., Ltd. and Sanya Liyuan Investment Management Co., Ltd., Wang Jiajin, China Adi Real Estate Development Co., Ltd., and Hangzhou Fulida Real Estate Co., Ltd. to develop real estate contract disputes. Application for retrial [Supreme People's Court (2015) Minti Zi No. 63 Civil Judgment]

The Supreme People's Court held that it 1. the question of whether Tiankuo Company was a project company jointly established by Hailian Company and Tianhe Company.

According to the ascertained facts, on April 23, 2007, Hailian Company and Tianhe Company signed the "Cooperation Project Contract", stipulating that Hailian Company will provide 46.5 mu of construction land and project development rights, and Tianhe Company will provide all construction funds to cooperate in the development of real estate projects. The sales revenue of the completed commercial housing will be distributed according to the proportion of 23.8 of Hailian Company and 76.2 of Tianhe Company. In order to protect the rights and facilitate management, the Parties agree to form a project limited liability company with independent legal personality for the development of the Project. The registered capital of the project company is 10 million yuan, Hailian Company contributes 2.38 million yuan, accounting for 23.8 percent of the equity, Tianhe Company contributes 7.62 million yuan, accounting for 76.2 percent of the equity, and the capital contribution payable by Hailian Company is paid by Tianhe Company. However, the two parties did not establish the project company in accordance with the "Cooperation Project Contract", but borrowed the Tiankuo Company, which was established as early as October 16, 2006, as the project company for cooperative development. According to the industrial and commercial registration of Tiankuo Company, the registered capital of Tiankuo Company is 10 million yuan, all of which is contributed by currency. The shareholders are Tianhe Company and three natural persons, of which Tianhe Company contributes 6.87 million yuan, accounting for 68.7 percent of the shares. Wang Jiajin contributed 750000 yuan, accounting for 7.5 percent of the shares. Xing Jian contributed 1.38 million yuan, accounting for 13.8 percent of the shares. Xing Wei contributed 1 million yuan, accounting for 10% of the shares. In order to fulfill the agreement of the "Cooperation Project Contract", on May 9, 2007, Hailian Company and Tianhe Company jointly wrote to the Sanya Development and Reform Bureau, requesting that the Sanya Municipal Government originally decided to develop and construct Hailian Company and Shiying Company. The owner of the "Shiying Garden" project was changed to Tiankuo Company, and the project name was also changed to "Tiankuo Plaza". On May 11 of the same year, the Sanya Development and Reform Bureau approved the change of the project name of "Shiying Garden" to "Tiankuo Square" and the owner to Tiankuo Company. Subsequently, according to the application of Hailian Company, the "Construction Planning Permit", "Demolition Permit" and other government approvals for the "Tiankuo Plaza" project were all changed to Tiankuo Company. On April 1, 2008, Hailian Company sent another letter to the Sanya Municipal Government, promising to transfer the investment compensation rights and interests of the Sanya Financial Development Zone that the Sanya Municipal Government has not yet fulfilled to Tiankuo Company. According to this commitment, the Haikou Arbitration Commission ruled on February 2, 2009 that the investment compensation contract relationship between Hailian Company and Sanya Municipal Government and the agreement of Sanya Municipal Government to transfer land to Hailian Company were changed to Sanya Municipal Government and Tiankuo. In the investment compensation relationship between the company, the Sanya Municipal Government agreed to transfer the land use right of the Tiankuo Plaza project to Tiankuo Company. So far, Hailian Company has completed the obligations stipulated in the "Cooperation Project Contract", and Tiankuo Company has become a project company for the development and construction of "Tiankuo Square" in cooperation between Hailian Company and Tianhe Company. Although Tiankuo Company undertakes the development and construction functions of the "Tiankuo Square" project, Tiankuo Company is not a cooperative development project company jointly established by Hailian Company and Tianhe Company in accordance with the "Cooperation Project Contract". It is only a project company borrowed by Hailian Company and Tianhe Company for the cooperative development of "Tiankuo Square", which can be further confirmed from the time of its establishment and the composition of shareholders. Tiankuo Company was established on October 16, 2006. The shareholders are Tianhe Company and Xing Jian, Xing Wei, and Wang Jiajin; and Hailian Company and Tianhe Company signed the "Cooperation Project Contract" on April 23, 2007. The partners are Hailian Company and Tianhe Company. Accordingly, it can be concluded that Tiankuo is not a project company jointly established by Hailian and Tianhe.

Although Hailian Company also admitted in the complaint that Tiankuo Company was a project company jointly established by it and Tianhe Company, and in the later period, Hailian Company stated to Sanya Development and Reform Bureau "Request for Instructions on Changing" Shiying Garden "Project and Project Owner" and "Letter of Commitment" submitted by Hailian Company to Haikou Arbitration Commission that Tiankuo Company was a project company jointly established by it and Tianhe Company, however, as Hailian Company stated in the statement, Hailian Company and Tianhe Company jointly invested and established Tiankuo Company as the project company. The project was invested, constructed and managed by Tiankuo Company, and requested that the site selection opinions of the project and the "Construction Land Planning Permit" be handled under the name of Tiankuo Company for the smooth development of the project. This just shows that Tiankuo Company is a project company borrowed by Hailian Company and Tianhe Company to facilitate the smooth development of the cooperation project, and Hailian Company is fulfilling its obligations in accordance with the provisions of the Cooperation Project Contract. How to determine that Tiankuo Company is a project company jointly established by Hailian Company and Tianhe Company should be based on the provisions of the Company Law, and should not rely solely on the self-admission of the parties. According to the provisions of the Company Law on the establishment of a limited liability company, the establishment of a limited liability company shall be submitted to the company registration authority by a representative designated by all shareholders or an agent jointly entrusted by all shareholders to submit an application for registration, articles of association, capital verification certificate and other documents to apply for establishment registration; shareholders shall pay in full and on time the amount of capital contribution stipulated in the articles of association; after the establishment of a limited liability company, a certificate shall be issued to shareholders. Tiankuo Company was not established by Hailian Company and Tianhe Company, nor did it jointly formulate the articles of association of Tiankuo Company, nor did it pay the capital contribution according to the articles of association, nor did Tiankuo Company issue a capital contribution certificate to Hailian Company, nor did it register Hailian Company on the register of shareholders of Tiankuo Company. If Tiankuo Company is determined to be jointly established by Hailian Company and Tianhe Company, the industrial and commercial registered shareholders of Tiankuo Company should be Hailian Company and Tianhe Company. Even if, as determined by Hainan High Court, the equity registration of Tiankuo Company is jointly discussed with Tianhe Company under the names of Xing Jian and Xing Wei, how does Wang Jiajin, another shareholder of Tiankuo Company, become a member of the cooperation project between Hailian Company and Tianhe Company. Although Tiankuo Company, as the project company for the development of Tiankuo Square, is an objective fact recognized by all parties and has assumed the functions of a cooperative project company, it cannot be determined that Tiankuo Company is a project company jointly established by Hailian Company and Tianhe Company. Sanya Intermediate People's Court and Hainan High Court determine that Tiankuo Company is a project company jointly established by Hailian Company and Tianhe Company. Even if Tiankuo Company is a project company jointly established by Hailian Company and Tianhe Company as determined by the judgment of Hainan High Court, Tiankuo Company is only the carrier for both parties of Tianhe Company and Hailian Company to carry out the cooperative development of Tiankuo Square Project and fulfill their respective rights and obligations according to the Agreement of Cooperation Project, and is not the contract subject of the Agreement of Cooperation Project, not to mention the contractual counterparties of Hailian and Tianhe in the cooperative development agreement.

 

(IV) Dispute Question 4: The company cannot be established, and how to deal with the operating profits and claims of the established company between the promoters.

There is no agreement between the parties in this case on how to deal with the profits generated by the company's production and business activities at the establishment stage, nor is there any specific provision in the law, and there is no substantive law article that can be directly applied to deal with the relationship between rights and obligations. Based on the fact that the established company is essentially a partnership, the legal provisions on partnership should be chosen. In accordance with the principle of the application of special law over common law, the application of the Company Law and its judicial interpretation is first considered for disputes over the establishment of a company. Article 4, paragraph 1, of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law stipulates: "If a company is not established for some reason, the people's court shall support the creditor's request that all or part of the promoters bear joint and several liability for the expenses and debts incurred in the establishment of the company." The second paragraph stipulates: "if some promoters request other promoters to share the responsibility after assuming the responsibility in accordance with the provisions of the preceding paragraph, the people's court shall order the other promoters to share the responsibility in proportion to the agreed responsibility; if there is no agreement on the proportion of responsibility, the responsibility shall be shared in accordance with the agreed proportion of capital contribution; if there is no agreement on the proportion of capital contribution, the responsibility shall be shared in accordance with equal shares." The legislative purpose of this article is to solve the problem of the promoter's responsibility for the expenses and debts arising from the establishment of the company when the company is not established, and is intended to protect the interests of third parties. The most similar provision for individual partnerships in Section V of the General Principles of Civil Law is Article 35, which states that "the debts of a partnership shall be settled by the partners with their respective property in accordance with the proportion of capital contribution or the agreement." The above-mentioned laws and judicial interpretations do not stipulate how to deal with the profits of the partnership, and there are legal loopholes. Since the law stipulates that the debt of the partnership is borne in accordance with the proportion of capital contribution or the agreement, then weightlifting is light, and the principle of partnership claims-profits should also be applied analogously and distributed according to the proportion of capital contribution. Since the provisions of the above-mentioned laws and judicial interpretations are not suitable for direct application, this case can only apply Article 5 of the "General Principles of Civil Law", that is, "The lawful civil rights and interests of citizens and legal persons are protected by law, and no organization or individual may infringe." The principle provisions for the protection of legitimate civil rights and interests shall be dealt.

Case: Shaanxi Higher People's Court Retrial (2012) Shan Min Zaizi No. 00010

The company cannot be established, and although the promoter may be punished by the industrial and commercial department for the conduct of production and operation at the stage of the establishment of the company, the people's court shall allocate the profits from the operation according to the proportion of the promoter's capital contribution to bear the debt at that stage.

The court's effective judgment held that the focus of the dispute in this case is:(1) whether Wang Jun has the right to request the distribution of the profits and assets of his 73 days of operation. (2) If you have the right to distribute, how much profit and assets generated during the operating period will be distributed to Wang Jun. On the question of whether Wang Jun has the right to request the distribution of the profits and assets of his 73 days of operation. According to the agreement of the records of the board of directors and the records of the shareholders' meeting from August 25 to August 26, 2007, 12 people including Wang Jun and Li Chengjun agreed to set up Qin'an Company. Wang Jun contributed in cash and 12 people including Li Chengjun contributed in his partnership property in Qin'an Magnetic Separation Plant. It also made an agreement on the establishment and staffing of Qin'an Company, the handling of the debts of the former Qin'an Magnetic Selection Plant and the industrial and commercial registration of Qin'an Company, elected Wang Jun as the legal representative of Qin'an Company, and determined the board members, supervisors, managers, cashiers and accountants of Qin'an Company. After the above agreement was made, before the Qin'an Magnetic Separation Plant ceased production on November 23, 2007, Wang Jun was responsible for the production and operation of the Qin'an Magnetic Separation Plant as the chairman of the Qin'an Company. Major matters were decided by the Qin'an Company's board of directors or shareholders meeting. Qin 'an Magnetic Separation Plant was not dissolved during the establishment of Qin 'an Company, but no matter from its institutional setup and personnel composition, or the source of operating funds and business behavior, Qin 'an Magnetic Separation Plant is actually engaged in production and operation with the established Qin 'an Company. Article 4 of the (III) of the Provisions of the Supreme People's Court on Certain Issues Concerning the Application of the the People's Republic of China Company Law stipulates that when a company cannot be established, the promoter shall bear the debts arising from the establishment stage in proportion to the capital contribution, but it does not stipulate how the profits generated by the company's business activities during the establishment stage of the company shall be distributed. In accordance with the jurisprudence of the consistency of rights and obligations and the principle of fairness in civil law, the distribution of claims at the stage of establishment of a company shall be subject to the provisions of the assumption of debt, and the promoter shall have the right to distribute the profits arising from the conduct of business at the stage of establishment of the company in proportion to its capital contribution. Therefore, Wang Jun has participated in the distribution of the profits and assets generated during the 73 days of his participation in the operation in proportion to his capital contribution.