What should be noticed in equity transfer?

The author shares the key items and clauses in the equity transfer, in order to facilitate everyone in the negotiation of shares can be targeted, this article is mainly from the perspective of the transferee.

I. subject clause

In share turn, need to make clear above all namely the appropriate case sex that turns main body. Especially as the transferee, it is important to confirm whether the transferor's equity is defective (discussed below) and whether the signing subject is accurate (whether the authorization is complete).

Ii. Equity defects

As the transferee, the equity to be transferred as the direct object of the contract should ensure the authenticity, legality and integrity of the equity held by the transferor as far as possible.

Authenticity: the transferor really holds the target equity, which is the actual holder.

Legitimacy: the source of the underlying equity held by the transferor is legal.

Completeness: the underlying equity held by the transferor is free from pledge, guarantee, entrustment and other circumstances that may affect the integrity of the equity.

Lawyer's suggestion: equity flaw is an important factor that affects whether the transferee can fully hold the target equity, and whether the transferee can fully exercise the rights of shareholders in the future. Generally, it is suggested that the transferee should add the transferor's declaration and commitment clauses in the share transfer agreement, and set the default clauses accordingly to form the contract basis for rights protection. And when setting breach clause, it is advisable to set breach clause, avoid with "should assume breach responsibility", "compensate transferee loss" and other difficult to quantify general wording.

Iii. Internal resolution on equity transfer

Before signing the formal equity transfer agreement, the transferee shall consult and obtain the shareholders' meeting resolution made by the target company on this equity transfer, that is, it shall obtain the shareholders' meeting resolution made by other shareholders of the target company who agree to this equity transfer (approved by more than half of other shareholders) and other shareholders who waive the preemptive right.

Counsel suggests that the resolution adopted and made by the shareholders' meeting may normally be included in the transfer agreement as one of the contents of the transferor's statement and commitment, and the resolution of the shareholders' meeting may be attached to the transfer agreement. At the same time, the corresponding provisions of liability for breach of contract can be set.

Iv. Payment of capital subscribed by the transferor

The transferee shall at the same time note whether the transferor has fulfilled its capital contribution obligation. Otherwise, the transferee may be jointly and severally liable when the company requires the transferor to perform its capital contribution obligations. Although, the company law judicial interpretation three by the licensee knows or should know, however, from the actual stock, the transferee equity when the transfer is to defend completely don't know the pay of capital of the assigning party, really some counter-intuitive (of course, small make up not to exclude some local tyrants will exist the stroke of a pen and signed paying). Moreover, if the creditor requires the assignee to assume supplementary liability for the unpayable part of the target company's debts, the court will also support it.

Lawyer's suggestion: the transferee shall require the transferor to specify the capital payment situation (shareholding ratio, subscribed capital, capital contribution time, paid-in capital, paid-in time, capital contribution method, etc.) in the share transfer agreement, and set the corresponding clauses of liability for breach of contract.

V. credit status of the target company, litigation and arbitration

Transferee is in before signing formal share turns an agreement, ought to be opposite the credit condition of target company, and be being involved (or have latent possibility) lawsuit, arbitration (each dispute in management, labor USES labor dispute to wait), whether to be carried out compulsively wait for a circumstance to have primary understanding, prevent for no reason become "receive dish person".

Lawyer's suggestion: the assignee may require the assignor to provide the credit report of the target company at the same time, and set the corresponding liability clause for breach of contract for the litigation and arbitration of the target company in the share transfer agreement.

Vi. Assets of the underlying company

For target enterprise belongs to the manufacturing, research and development and other industrial companies, or the target company has significant assets, the assignee shall be confirmed at the same time the ownership of the company's assets integrity (whether there is any mortgage, pledge, seal up, distrain, property dispute, etc.), the condition of using the present situation, the depreciation and other basic information, in order to prevent the stock transfer, the underlying company difficulty in production and operation, leading to the assignee cannot achieve the purpose of the transferee equity.

Lawyer's suggestion: the asset information of the target company should be clearly defined in the share transfer agreement, and this should be one of the contents of the transferor's statement and commitment, and the liability for breach of contract should be set at the same time. In addition, assignee pays special attention to the assets of the target company, or the assets of the target company affect the transfer of the price, in the transferor and the transferee can not form a consensus on the price in a timely manner, it is recommended to hire a professional third party evaluation or appraisal institutions to evaluate the assets or appraisal, can fairly confirm the price.

Vii. Handover of the contract, business data, official seal and seal of the target company

To licensee after the transferee equity become the controlling shareholder, 100% stake or acquisition target, the assignor and assignee or to mark the company's future business division of labor, only within the shares transfer agreement for the underlying business contracts, business data, company seal (including contract seal) and bank seal, social security and accumulation fund to pay material documents and the information of delivery or custody makes clear agreement.

Lawyer's suggestion: generally, the transferor is required to hand over the above materials in time in the share transfer agreement, and guarantee the authenticity, accuracy and completeness of the above materials. At the same time, a part of the share transfer fund can be reserved, and the transferee can pay again after obtaining all the above documents and materials.

Viii. Equity delivery point

For a limited liability company, as long as the provisions of mandatory laws and regulations are not violated, the equity delivery point can be agreed by the transferor and the transferee. Therefore, industrial and commercial change registration is not the only or legal equity delivery date.

Lawyer: can be set up through equity delivery point further restrict the assignor's behavior, and lock clear requirements from the date of delivery of equity, the assignor shall not exercise the relevant shareholder rights, with the result of the guarantee law firms and the club to do as possible with the target company to its original state, and the underlying company itself during the stock turn basic stand.

Ix. Payment of share transfer

The transferee may, according to the actual situation, combine the advance progress of the share transfer, the due diligence progress of the intermediary, determine the time and amount of the share transfer payment by installments. Of course, the reasons, progress and amount of installment payment should also fully consider the acceptability of the transferor, and try to negotiate a more fair and reasonable payment method of share transfer.

Lawyer elucidates: general and common share turns fund to pay a way to be ok (offer reference only, specific still ought to undertake adjusting with the actual situation that share turns) : after share turns an agreement to sign, pay 20%; Pay 20% after handing over documents and materials; The law firm and the club shall pay 50% upon completion of due diligence and no material objection; 10% upon completion of business change registration.

X. liability for breach of contract

In stock transfer, relatively, the transferee needs to know and consider more information, so often the transferee will put forward more requirements on the transferor, and then there will be more content to restrict the transferor in the stock transfer agreement. On the contrary, for the transferor, the main consideration is whether the timely and full amount of the received share transfer. Therefore, in terms of the number of breach clauses in the share transfer agreement, it is more inclined to restrict the transferor. However, the transferee should also note that the default clause is reasonable.

Lawyer's suggestion: the nine points mentioned above in this paper can basically bind the transferor by setting the breach clause at the same time. It should be noted that: 1. As mentioned above, similar general and vague breach clauses such as "assume liability for breach" and "compensate for loss" should be avoided, since it is not possible to carry out practical operation. It is suggested to set specific breach penalty (which can be specific amount or a certain proportion of share transfer). 2. The breaching party may be required to bear the expenses incurred by the non-breaching party for safeguarding its rights (such as notary fee, appraisal fee, assessment fee, attorney fee, etc.), because in judicial practice, the court generally does not support the expenses incurred by the non-breaching party for safeguarding its rights under contract breach. However, if there is a contract, the court will uphold it by exercising its discretion.

Above are some simple shares of the key issues involved in equity transfer. It still needs to be pointed out that it is very necessary for law firms and clubs in equity transfer to make due adjustment to the target company. Due diligence is just like a major disease screening, which can prevent the possible major risks in advance. Know that problems are more costly to solve than to prevent.