(Source: 21st Century Economic Report 2024-01-18)
The ownership of equity between husband and wife is a complex issue in legal practice, especially in the common and special business form of "mom-and-pop shop".
The "community property system" collides with the modern corporate structure. When a couple breaks up, the equity transfer validity and equity division issues become judicial difficulties. At w88 casino games login time, whether to protect the special family property between the husband and wife or respect market transactions, resulting in constant property disputes.
In the past three years, the number of first-instance marriage and family inheritance dispute cases concluded by courts across the country has reached approximately 2 million each year, of which divorce dispute cases account for nearly 80% of all family cases. In these divorce disputes, property division has become the focus, showing the new characteristics of increasing the amount of the subject matter involved and diversifying the types of property. Issues in the fields of marriage, family and property are intertwined, resulting in an increase in difficult and complex cases, and the standards for legal application are in urgent need of unification.
In response to w88 casino games login challenge, on January 15, 2025, the Supreme People's Court published the "Interpretation (II) on the Application of the Marriage and Family Section of the People's Republic of China" (hereinafter referred to as "Interpretation (II)"). Articles 9 and 10 of it provide detailed provisions on equity-related issues in the division of marital property, providing judicial answers to the difficulties in the ownership of limited liability company equity in marital property.
Does the transfer of equity require the consent of both spouses?
Article 9 of "Interpretation (2)" stipulates the validity of the unilateral transfer of equity in the name of one spouse to another.w88 casino games login provision states that if one spouse transfers the equity of a limited liability company that is invested with the couple’s common property but registered in his or her own name, and the other party requests confirmation that the equity transfer contract is invalid on the grounds that it infringes upon the interests of the couple’s common property without their consent, the people’s court will not support it, unless there is evidence that the transferor and the transferee maliciously colluded to harm the other party’s legitimate rights and interests.
So, if a spouse signs an equity transfer contract unilaterally, will it be invalid because it does not have the consent of the spouse?
Lawyer Zhang Ying, a partner at Beijing Haotian (Xi’an) Law Firm, said in an interview with a reporter from the 21st Century Business Herald that if the equity transfer does not infringe the interests of the spouse, the equity transfer contract will generally not be invalid. And if the shareholding party maliciously colludes with a third party and harms the interests of the spouse who does not directly hold shares, the legal consequences of the equity transfer may be invalid.
Assistant Dean and Associate Professor Lou Qiuran, w88 casino of Law, w88 casinofurther explains the reasoning behind w88 casino games login rule.He said that w88 casino games login provision reflects respect for the commercial appearance doctrine in civil law.For example, a husband and wife jointly invest in a company, but the company's equity is only registered in the name of one party. At w88 casino games login time, for a third party, whether they check the shareholder list, company articles of association or industrial and commercial registration, they can only see the appearance that the equity belongs to one person. If the equity transfer contract can be invalidated simply because there is no spouse’s consent, then the third party will lose the security of the transaction, and the final result will only be a large increase in unnecessary transaction costs.
At the same time, Article 9 also stipulates that when the shareholding party maliciously colludes with a third party to harm the interests of the spouse who does not directly hold shares, the legal consequences of the equity transfer may be invalid.
Zhang Ying said: "In practice, w88 casino games login type of collusion with a third party is very common. During divorce proceedings, we often encounter one party transferring equity at a price that is significantly lower than the value of the equity or even 0 yuan in order to transfer property. The purpose is to let the other party get less or no share. "Previously, in a divorce dispute over equity transfer announced on Judgment Documents Network, one spouse transferred the company's equity, which was valued at 5 million yuan at the time, to another person at an unreasonably low price of 600,000 yuan.
How to divide the equity of "mom and pop shop"
Article 10 of "Interpretation (2)" stipulates the issue of equity division of "mom and pop shops".w88 casino games login article states that: The husband and wife invest in a limited liability company with common property and both are registered as shareholders. The parties have no agreement or the agreement is unclear about the ownership of the corresponding equity. When divorcing, if one party requests to determine the equity division ratio based on the respective capital contributions recorded in the shareholder list or the company's articles of association, the people's court will not support it; the people's court shall handle the party's request to divide the husband and wife's common property in accordance with Article 1087 of the Civil Code.
Zhang Ying explained that the Civil Code has stipulated the equity division of "mom-and-pop shops", but in practice, many people still directly regard the industrial and commercial registration information as the basis for the husband and wife to have agreed on the ownership of the shares, that is, whoever registers in the name, the equity will belong to whom. w88 casino games login misunderstanding leads to the parties often having disputes over the division of equity during divorce.
Lou QiuranIt is further pointed out that "Interpretation (2)" once again emphasizes that no matter whether the equity is registered in the name of one spouse or both spouses, the equity must still be divided in accordance with the general provisions of the Civil Code when the couple divorces. He said, "Unless the husband and wife have other agreements before marriage, under normal circumstances, the husband and wife should equally distribute the equity. Of course, if one spouse is at fault, the share should be less or no share in accordance with the provisions of the Civil Code."
It is worth noting that when a couple breaks up, the judiciary adopts different approaches to industrial and commercial registration in terms of handling external transfers and internal divisions of equity.To w88 casino games login,Lou QiuranExplained that the reason for w88 casino games login difference is that during equity transfer, in order to protect transaction security and maintain transaction order, "Interpretation (2)" provides protection to bona fide third parties based on the equity registration situation. However, in the case of property division after divorce, there is no need to protect transaction security and maintain transaction order. Therefore, the property should be divided according to its true status rather than its registration status.
A spokesman for the Information Bureau of the Supreme People's Court stated that the "Interpretation (2)" has been reviewed and approved by the Judicial Committee of the Supreme People's Court and will be officially implemented from February 1, 2025.
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