Retrial Instance | "Golden Chain of Evidence" for Confirmation of Shareholder Qualification

Whether Li invested in the company and holds 10% of the equity, and whether the factual evidence determined by the original first and second-instance judgments is sufficient.

1. Company Registration and Shareholder Formalities

The Company Industrial and Commercial Registration is a sole proprietorship, with Zhang as the only shareholder, and no record of capital increase or expansion. Li did not provide any articles of association, shareholder register , or capital contribution certificate to prove his shareholder status, nor is there any evidence that his investment was recorded as company capital or confirmed through a legal capital increase procedure.

2. Validity of Partnership Agreement

The content of the partnership agreement photo submitted by Li is incomplete, lacks signatures from all parties, was issued after the investment, and the relevant partners do not recognize its validity, Zhang, as the only registered shareholder, explicitly opposes it, and the parties did not reach an agreement on Li's investment, this contract cannot be used as a basis for confirming shareholder status.

3. Nature of Investment

Li's investment of 400,000 yuan occurred after the establishment of the company, the funds were transferred to the account of Qian, an unrelated third party, and were not marked as investment funds or capital, which is insufficient to prove that he fulfilled his legal obligation to invest.

4. Actual Operating Model

Li and others operated the business in a partnership form using the company's qualifications, and the capital flow falls within the scope of partnership operations, unrelated to company equity, and the distribution of partnership profits is different from the nature of company dividend distribution.

1. Revoke the civil judgment No. (2024) Lu XX Min Chu XX of the People's Court of XX County, Shandong Province, and the civil judgment No. (2024) Lu 14 Min Zhong XX of the Dezhou Intermediate People's Court, Shandong Province.

2. Dismiss all the claims of the applicant Li.

3. The applicant Li shall bear the acceptance fees for the first and second instance cases.

1. Legal Basis

Article 75 of the "Civil Procedure Law of the People's Republic of China (2023 Amendment)" stipulates that "any unit or individual who knows the circumstances of the case has the obligation to appear in court to testify. The person in charge of the relevant unit shall support the witness's testimony. Persons who cannot correctly express their meaning cannot testify." Article 70 of the "Supreme People's Court's Several Provisions on Evidence in Civil Proceedings (2019 Amendment)": "If the people's court grants an application for a witness to appear in court to testify, it shall serve a notice on the witness and inform both parties. The notice shall specify the time and place of the witness's testimony, the matters and requirements for testimony, and the legal consequences of giving false testimony. If the matters for which the parties apply for a witness to appear in court to testify are irrelevant to the facts to be proved, or if there is no need for the witness to appear in court to testify, the people's court shall not grant the parties' application."

2. Grasping the Objective Reality of This Case

Because the witness testimony in this case is key evidence, and the witness testimony is conducive to the court's clarification of the legal relationship between the parties in this case, the signing of the partnership agreement, and key facts such as the operating conditions and whether or not to invest among the partners.

In the original trial, the company applied for witness Zhao to appear in court, Li believed that there might be a conflict of interest, and did not agree to the witness appearing in court, and the original trial court did not allow the witness to appear in court. In the retrial procedure, because the witness testimony is conducive to clarifying the key facts of this case, therefore, applying for retrial on the grounds that the witness testimony is new evidence, and submitting a written application for the witness to appear in court to testify, so that the court can clarify whether the partnership claimed by Li exists, whether Li invested, and support the basic facts of Li's equity in the company.

3. Using "New Evidence" in Retrial

The essential elements of new evidence in a retrial are mainly considered in terms of the relevance of the new evidence to the main disputed facts and the judgment in the original trial. In practice, documentary evidence is the main type of new evidence, but witness testimony can also initiate retrial proceedings. In this case, the witness testimony submitted by the retrial applicant, Zhao, is considered new evidence because it is based on the chat records of the WeChat group between the applicant and Zhao and Zhang, which were accepted in the first and second trials. Zhao in this group meets the criteria of a witness in this case, and this witness's testimony is key evidence for clarifying the facts of the case. Since the courts of first and second instance did not agree to the witness's appearance in court, the retrial applicant's use of witness testimony as new evidence meets both the formal and substantive requirements.

First, from a logical analysis, shareholder qualification disputes are divided into two categories: internal and external company shareholder qualification disputes.

Second, clarify that the resolution of internal company shareholder qualification confirmation disputes should follow the principle of substantive requirements + formal requirements.

The so-called internal company shareholder refers to a natural person or legal person who contributes capital to the company and enjoys rights and bears obligations with respect to the capital contribution. Therefore, capital contribution is a fundamental obligation to become a company shareholder. The company's articles of association stipulated by the Company Law are not only the basis for the establishment of the company but also the common expression of intent of the shareholders to establish the company in written form. According to the requirements of the Company Law, all shareholders of the company should jointly sign or seal the company's articles of association. Specifically, in this case, Li does not meet the formal requirements of shareholder status, nor does he meet the substantive requirements of a shareholder.

1. Li does not meet the formal requirements of shareholder status.

(1) The company registration information of Company A shows that it is a one-person company owned by Zhang, with zero paid-in capital, and Li is not listed in the shareholder register, nor has the company issued him a capital contribution certificate. Li has also not provided evidence to prove that he is listed in the shareholder register of Company A, nor has he proven that Company A issued him a capital contribution certificate or other capital contribution documents.

(2) Company A is a one-person company registered by Zhang. According to Article 57, Paragraph 2 of the Company Law of the People's Republic of China (2018 Revision), a one-person company is a limited liability company with only one natural person shareholder or one legal person shareholder. The uniqueness of the shareholder is a fundamental characteristic of a one-person company. To restrict the abuse of the principle of limited liability by shareholders of one-person companies, the Company Law stipulates that if the shareholder of a one-person company cannot prove that the company's property is independent of the shareholder's own property, he shall bear joint and several liability for the company's debts. The above legislative design for one-person companies is intended to protect the interests of company creditors.

(3) Company registration, shareholder register records, and capital contribution certificates are important formal requirements for determining shareholder status, and they have public notice and credibility, which are crucial for maintaining transaction security and market order. Li has not provided evidence to prove that he participated in the operation of Company A, nor has he provided evidence of fulfilling his shareholder obligations. The original judgment, in the absence of relevant evidence from Li, determined that he has shareholder status, which clearly lacks evidentiary support.

2. Li does not meet the substantive requirements of shareholder status.

(1) There is no agreement between Li and Zhang to operate Company A. A legally valid contract requires clear parties, complete content, and the true expression of intent and agreement of all parties involved. The partnership agreement submitted by Li is incomplete in form, lacks content, and is unsigned, failing to meet the basic legal requirements for a contract. The content does not clearly reflect a true and valid agreement between Li and Zhang to establish Company A, failing to meet the basic constituent elements of a contract. Moreover, Li did not provide the original of this evidence, making it impossible to verify its authenticity. Therefore, it cannot prove that he reached an agreement with Zhang to establish Company A, and it cannot serve as valid evidence for determining shareholder status. The original judgment's acceptance of this evidence is clearly erroneous.

(2) Li did not fulfill his capital contribution obligations. His payment of 400,000 yuan to a third party is not related to Company A and cannot prove that he fulfilled his capital contribution obligations.

Li claims to have signed a cooperation agreement but did not contribute capital according to the agreed amount. The relevant funds were not deposited into Company A's account. Before the establishment of Company A, Li and others had business cooperation, and the funds exchanged between them were not related to Company A. The 400,000 yuan claimed by Li did not indicate capital contribution, and Company A did not issue Li a capital contribution certificate or record the capital contribution in the company's accounts. Therefore, there is no investment fact between the two parties.

(3) Li's claim of receiving profit distribution from Company A is factually incorrect.

Article 14 of the Supreme People's Court's Provisions on the Application of the Company Law of the People's Republic of China (IV) (2020 Revision) stipulates that "if a shareholder submits a valid resolution of the shareholders' meeting or general meeting of shareholders specifying a specific distribution plan, requests the company to distribute profits, and the company refuses to distribute profits and its defense that the resolution cannot be executed is untenable, the people's court shall rule that the company distribute profits to the shareholder according to the specific distribution plan specified in the resolution." Before a company distributes profits to shareholders, a valid resolution of the shareholders' meeting or general meeting of shareholders specifying a specific distribution plan must be formed. However, throughout the proceedings, Li failed to provide any evidence to prove that Company A formed such a valid resolution, nor did he submit evidence to prove that the funds he received actually came from Company A's profits. The original court's determination that the funds received by Li were profit distributions from Company A, thereby supporting his claim of shareholder status, is clearly erroneous in the absence of sufficient evidence.

3. The courts of first and second instance set an obligation for the parties based on the "lack of objection".

The courts of first and second instance both believe that Li submitted Zhao's publication of the partnership agreement and partnership agreement video, Company A's profit statement, etc., in the WeChat group, and Zhang and others did not object in the group, which is considered as Company A knowingly accepting the applicant Li's capital contribution for company operations. We believe that Zhao's act of issuing the partnership agreement in the WeChat group does not have an implied legal consequence for the legal representative (sole shareholder) of the retrial applicant, Company A. The determination of whether an equity transfer has the intention of equity transfer should be based on the completion of the corresponding equity business change registration. The sole shareholder of Company A, as the transferor, did not express his intention to transfer equity through explicit or implicit means. The partnership agreement published by Zhao is not Zhang's expression of intent and does not have the legal effect of Zhang transferring equity. Therefore, the courts of first and second instance lacked sufficient evidence to determine that the applicant Li has the shareholder status of the retrial applicant, Company A.

1. Li did not fulfill his capital contribution obligations in accordance with the law.

According to the Company Law, disputes concerning the confirmation of shareholder status between shareholders and between shareholders and the company are mainly based on the substantive requirements of a shareholder, namely, signing the company's articles of association, making actual contributions, obtaining a contribution certificate, and exercising shareholder rights. The dispute in this case belongs to this type of shareholder status confirmation dispute. According to the judgment requirements for the substantive requirements of this type of shareholder status confirmation dispute, obtaining a contribution certificate is one of the substantive requirements for internal qualification confirmation. Li does not meet the legally prescribed content and form of the contribution certificate, and his payment to the third party cannot serve as a valid contribution certificate. Therefore, the first and second instance courts held that there was insufficient evidence to prove that Li fulfilled his capital contribution obligation.

Shareholders should obtain equity through capital contribution; the original court's misfinding of facts led to misapplication of the law. The original court's finding that Li has shareholder status in the company lacks legal basis. To obtain complete shareholder status and rights, both substantive and formal requirements must be met. The company is a sole proprietorship with Zhang as the shareholder, and the paid-in registered capital is still "-". Li has not provided evidence of holding shares in the company, nor evidence of his shareholder status, or evidence of enjoying shareholder rights and obligations.

2. Li bears the burden of proof for his shareholder status in the company. According to the law and judicial interpretations, Li should bear the legal consequences of failing to provide sufficient evidence.

Article 21 of the "Supreme People's Court's Provisions on Several Issues Concerning the Application of the Company Law of the People's Republic of China (III)" stipulates: "If there is a dispute between the parties as to whether the capital contribution obligation has been fulfilled, and the plaintiff provides evidence that reasonably doubts the shareholder's fulfillment of the capital contribution obligation, the defendant shareholder shall bear the burden of proving that he has fulfilled the capital contribution obligation." Article 23 stipulates: "If there is a dispute between the parties concerning the ownership of equity, and one party requests the people's court to confirm that he enjoys the equity, he shall prove one of the following facts: (1) He has legally contributed capital to or subscribed for capital to the company, and does not violate the mandatory provisions of laws and regulations; (2) He has transferred or otherwise succeeded to the company's equity, and does not violate the mandatory provisions of laws and regulations." Article 28 of the "Notice of the Supreme People's Court on Issuing the Minutes of the National Court's Civil and Commercial Trial Work Conference" states: "[Conditions for the explicit naming of the actual contributor] If the actual contributor can provide evidence to prove that more than half of the other shareholders of the limited liability company know the fact of his actual contribution, and have not raised any objection to his actual exercise of shareholder rights, the people's court shall, in accordance with the law, support the request of the actual contributor to be registered as a shareholder of the company. If the company argues that the request of the actual contributor does not comply with the provisions of Article 24 of the Judicial Interpretation (III) of the Company Law, the people's court shall not support it." Article 509 of the Civil Code of the People's Republic of China: "[Principles of Contract Performance] The parties shall perform their obligations comprehensively in accordance with the agreement. The parties shall follow the principle of good faith and perform their obligations of notification, assistance, confidentiality, etc., according to the nature, purpose and trading habits of the contract. In the process of performing the contract, the parties shall avoid wasting resources, polluting the environment and damaging the ecosystem." Article 67 of the Civil Procedure Law of the People's Republic of China (2023 Amendment): "The parties shall be responsible for providing evidence for their claims. If the parties and their litigation agents cannot collect evidence on their own due to objective reasons, or if the people's court considers that the evidence is needed for the trial of the case, the people's court shall investigate and collect it. The people's court shall, in accordance with the legal procedures, comprehensively and objectively examine and verify the evidence." The evidence provided by Li is insufficient to prove his shareholder status in the company.

3. Enterprise business registration has public credibility.

Li submitted a partnership agreement issued by Zhao in a WeChat group, but did not submit the expression of intent of Zhang, the shareholder of the company, to sign the agreement. The company's business registration still shows that the shareholder is Zhang as a sole proprietorship. Before the company is changed and registered as an ordinary limited liability company, if Li's claim to confirm his shareholder status in the company is accepted, it would contradict the provisions of the Company Law concerning sole proprietorships and objectively lead to the loss of the public notice effect of the enterprise's business registration, which is very likely to harm the interests of the company's creditors. Interests of trust This is detrimental to maintaining a normal trading order.

(Declaration: This article is a summary of the author's views based on experience and is for exchange and discussion only.)