Should the shareholder who has not paid the capital contribution and transferred the equity be added as the executor?

[Case] Company A was registered and established in August 2015, and its shareholders are Qian Mou and Chen Mou. The registered capital of the company is 1 million yuan, with Qian Mou contributing 5.1 million yuan in cash and Chen Mou contributing 4.9 million yuan in cash. The articles of association of the company stipulate that the contributions of Qian Mou and Chen Mou shall be fully paid before December 31, 2040. In March 2016, Company A passed the resolution of equity transfer, and the company’s shareholders were changed to Guan Mou and Chen Mou. Guan Mou contributed RMB 9 million in cash and Chen Mou contributed RMB 1 million in cash. The revised articles of association stipulated that Guan Mou and Chen Mou’s contributions should be paid in full before December 31, 2040. Failing to pay the consideration when managing the equity of a transferee company.

In July, 2017, the dispute over the sales contract between Company B and Company A was brought to court. In November, 2017, the court decided to cancel the Sales Contract signed by Company B and Company A in December, 2015, and Company A returned the payment of 1,379,517.5 yuan and interest to Company B within ten days from the effective date of the decision. In March 2018, Company B applied to the court for enforcement. During the execution, the court did not find the property of Company A that could be executed. In April 2018, the court ruled that Qian Mou and Chen Mou were added as executors. Qian Mou and Chen Mou refused to accept the execution ruling, and filed a lawsuit against the execution objection of the outsider.

There are two opinions on whether Qian Mou and Chen Mou should be added as executors:

The first opinion is that the company’s articles of association, as an internal agreement of the company, can’t fight against the external third party, and the internal agreement on the capital contribution period in the company’s articles of association is not binding on the external third party. The shareholders’ meeting has the right to amend the company’s articles of association. If the company is insolvent, the shareholders are not required to bear the liability for paying off the debts within the scope of the unfunded capital, then the shareholders can modify the capital contribution period in the company’s articles of association without restriction, thus avoiding the liability and damaging the legitimate interests of creditors. Qian Mou and Chen Mou are no longer bound by the company’s articles of association after the equity transfer, so they should fulfill the obligation of capital contribution that has not been paid, add them as the executed person, and take responsibility within the scope of capital contribution.The second opinion is that Qian Mou and Chen Mou are subscribed capital contributions, and the amount and time limit of capital contributions subscribed by shareholders are clearly recorded in the company’s articles of association. As a publicity document, creditors should know this fact. Company B should also foresee the operational risks arising from the subscribed capital contribution system of Company A. There is a legal basis for requiring subscribed shareholders to accelerate the maturity of their capital contribution only when the company is liquidated or bankrupt. However, in this case, there is no legal basis for requiring subscribed shareholders Qian Mou and Chen Mou to accelerate their capital contribution before the subscription period has expired, so they should not be added as executors.

Subscription shareholders enjoy the term benefits of subscribed capital contributions. In this case, Qian Mou and Chen Mou, as shareholders of Company A, were registered in August 2015, and the articles of association of the company stated that their subscribed capital contributions had been fully paid before December 31, 2040. Article 26 of the Company Law of the People’s Republic of China (hereinafter referred to as the Company Law) stipulates: “The registered capital of a limited liability company is the capital contribution subscribed by all shareholders registered in the company registration authority.” The Company Law has no restrictions on the capital contribution period of the amount subscribed by shareholders. Qian Mou and Chen Mou’s payment deadline for the subscribed capital contribution of Company A does not violate the provisions of the Company Law, and enjoy the benefits of the subscribed capital contribution according to law. When Qian Mou and Chen Mou transfer the equity of Company A, it does not violate the law to fail to pay the capital contribution due to the expiration of the subscription period. Company B’s defense opinion that the execution procedure should be similar to the compulsory liquidation and bankruptcy procedure, and the unpaid capital contribution of the unexpired capital contribution period should be regarded as premature maturity, has no legal basis.

Market entities should reasonably assess the transaction risks and bear them by themselves. Article 11 of the Company Law stipulates: “To establish a company, the articles of association must be formulated according to law. The articles of association are binding on the company, shareholders, directors, supervisors and senior management. ” At the same time, Articles 25 and 29 of the Company Law stipulate that the articles of association of a limited liability company shall specify the mode, amount and time of capital contribution of shareholders, and shall be submitted to the company’s articles of association when applying for registration with the company registration authority, and the company shall change its registration when modifying the articles of association; The public can apply to the company registration authority to inquire about the company registration matters. In this case, Company A has fulfilled the relevant registration procedures according to law, and is effectively existing. In December, 2015, when Company B signed the Sales Contract with Company A, Company B could obtain information such as the investment mode, investment time, change of investment and operating capital of Company A by querying the registration documents of Company A, so as to reasonably evaluate the transaction risk. Qian Mou and Chen Mou’s capital contribution period did not change before and after the equity transfer, and there was no malicious modification of the capital contribution period, thus damaging the legitimate rights and interests of Company B. Company B can claim rights according to bankruptcy, liquidation and other procedures stipulated by law based on Company A’s operating conditions, solvency and shareholders’ investment.

It is not in violation of the law to transfer the shares of subscription shareholders without making any contribution. Article 71 of the Company Law stipulates that shareholders of a limited liability company can transfer their equity to people other than shareholders. There are no restrictions in the Company Law on the transfer of equity by shareholders who have not reached the deadline for capital contribution. Therefore, in March 2016, when the shareholders of Company A transferred their shares, they did not violate the law. At the same time, Company B did not submit any evidence to prove that Qian and Chen Mou maliciously transferred their equity rights and interests. Qian Mou and Chen Mou transfer part of the equity, and the rights and obligations arising from the status of shareholders to the company are transferred to the equity transferee; The transferee becomes a shareholder of Company A and is bound by the Articles of Association of Company A.. The revised Articles of Association of Company A defines the amount and duration of capital contribution of the equity transferee. Company B’s claim that the transferred shares of Qian Mou and Chen Mou are not bound by the company’s articles of association and should make capital contributions has no factual and legal basis.