Point of View... What is the liability of shareholders who fail to pay their capital contributions in full if the joint venture agreement and articles of association are not expressly agreed?
Published:
2023-10-23
In practice, many shareholders and enterprises have not clearly agreed in the joint venture agreement and the articles of association that if there is a shareholder who has not paid the full amount of capital contribution, what kind of responsibility should be borne? This paper will introduce the judicial practice of this kind of situation through a number of cases.
Foreword
According to the provisions of Article 28 of the Company Law of the the People's Republic of China (2018 Amendment), shareholders shall pay in full and on time the amount of capital contributions they have paid as stipulated in the articles of association of the company ...... If a shareholder fails to pay the capital contribution in accordance with the provisions of the preceding paragraph, he shall not only pay in full to the company, but also bear the liability for breach of contract to the shareholders who have paid the capital contribution in full and on time.
In practice, many shareholders and enterprises have not clearly agreed in the joint venture agreement and the articles of association that if there is a shareholder who has not paid the full amount of the capital contribution, what kind of responsibility should be borne?
This paper will introduce the judicial practice of this kind of situation through a number of cases.
(I) shareholders who have not paid their capital contributions in full are not entitled to claim liability for breach of contract against other shareholders who have not paid their capital contributions in full.
According to the "Civil First Instance Civil Judgment on Dispute over Capital Contribution of Shareholders of Xinjiang Yuanjiang Xinyang Ecological Animal Husbandry Co., Ltd. and Tan Kaijie" [Case No.:(2022) Xinxinjiang 2828 Minchu No. 473] issued by the People's Court of Heshuo County, Xinjiang Uygur Autonomous Region, it is stated:
With regard to the third focus of the dispute, according to the provisions of paragraph 2 of Article 28 of the the People's Republic of China Company Law, if a shareholder fails to pay his capital contribution in accordance with the provisions of the articles of association, he shall, in addition to paying the full amount to the company, be liable for breach of contract to the shareholders who have paid the capital contribution in full and on time. The plaintiff Xinyang Company's loan to Heshuo County Rural Credit Cooperatives was the result of a resolution by all shareholders holding a shareholders' meeting for the company's production and operation, and it could not be confirmed that there was a direct causal relationship between the act and the capital contribution involved in the case,And the right party that requires the shareholders to bear the liability for breach of contract due to insufficient capital contribution shall be the other shareholders who have made the full capital contribution, so the plaintiff company has no right to require the defendant to bear the interest on deposits and loans caused by the failure to make capital contribution on time.
It is disputed whether a shareholder who has (II) paid his capital contribution in full, except for a shareholder who has not paid his capital contribution in full, can require the shareholder to calculate and pay liquidated damages to the company in accordance with the interest on the bank loan of the unpaid capital contribution.
1. definitely say
According to the "Civil First Instance Civil Judgment on Shareholder Investment Disputes of Shandong Xinhua Real Estate Co., Ltd. and Huanghuaihai Investment Holding Group Co., Ltd." [Case No.:(2021) Lu 0191 Minchu No. 7052] issued by the People's Court of Jinan High-tech Industrial Development Zone, Shandong Province The stated point of view:
The articles of association of the new mileage company state that Huang huaihai company has subscribed 26 million yuan in currency, with the contribution period being December 31, 2020. the current contribution period has expired. Huang huaihai company has approved to contribute only 2 million yuan, while the rest has not contributed. Xinhua company requires Huang huaihai company to pay 24 million yuan of shareholder contribution to the new mileage company. the facts are clear and the law is well-founded, and our hospital supports it.For Xinhua Company's claim that Huang Huaihai Company shall pay it the liquidated damages for overdue capital contribution, the Court supports the calculation of the loan market quotation rate published by the National Interbank Lending Center from January 1, 2021 to the date of completion of capital contribution based on 24 million yuan in accordance with the law. The insurance premium of 24700 yuan claimed by Xinhua Company has actually been paid, and our hospital supports it.
2. Negative said
According to the "Second Instance Civil Judgment on Capital Increase Dispute between Henan Zhongyuan Petroleum and Natural Gas Group Co., Ltd. and Jiaozuo Yellow River Group Co., Ltd." [Case No.:(2021) Yu 01 Min Zhong No. 1261] made by the Intermediate People's Court of Zhengzhou City, Henan Province View stated:
On the issue of Zhongyuan Oil Company's claim that the Yellow River Company shall bear the liability for breach of contract by paying interest. Due to the involvement of the Capital Increase Agreement in the liability for breach of contract section,It is not agreed that shareholders who fail to fulfill their capital contribution obligations shall bear the liquidated damages calculated in the form of interest to the shareholders who have made the capital contribution, so the claim of Zhongyuan Oil Company shall not be supported on insufficient basis.
Shareholders who have (III) paid their capital contributions in full may require shareholders who have not paid their capital contributions in full to pay interest on the use of funds to the company based on the interest on bank loans for the portion of the unpaid capital contributions.
The People's Court of Yongping County, Yunnan Province also insisted on this view in the "Civil Judgment of First Instance on Disputes over Capital Contribution between Chen Wenhua, Liu Bihong, He Jinqin, Guo and Other Shareholders" [Case No.:(2023) Yun 2928 and Min Chu No. 95].
In this case, Chen Wenhua, Liu Bihong and Zhang Long, as shareholders of Dawantang Hydropower Company, requested He Jinqin to pay the capital contribution to Dawantang Hydropower Company and pay the corresponding interest, which was supported by the court.
The judgment shall be made by the defendant He Jinqin to pay the capital contribution of 4 million yuan to the third party Yongping County Dawantang Hydropower Development Co., Ltd. within 30 days from the effective date of this judgment, and pay the interest from September 25, 2007 to the date of payment based on this amount (the interest is calculated in sections: from September 25, 2007 to August 19, 2019, according to the benchmark interest rate of similar loans of the People's Bank of China for the same period, from August 20, 2019 to the date of payment, based on the one-year loan market quotation rate published by the National Interbank Lending Center);
The (IV) company shall not have the right to substitute the shareholders who have made the full capital contribution to make the intention to waive or waive the liability for breach of contract by the shareholders who have not paid the capital contribution in full.
According to the "Second Instance Civil Judgment on Capital Contribution Disputes between China Railway Second Bureau Construction Co., Ltd. and Zoomlian Heavy Branch Co., Ltd. and Other Shareholders" made by the Beijing Higher People's Court [Case No.:(2021) Jingmin Zhongzong No. 143] stated:
Regardless of whether China Railway Asia-Europe Company issues the above-mentioned letter or not, the defective capital contribution shareholders stipulated in the articles of association shall bear the liability for breach of contract for the timely and full payment of capital contribution shareholders based on the contractual relationship between shareholders. The company has no right to replace the timely and full payment of capital contribution shareholders, namely China Railway Second Bureau Company, to waive or waive the requirement for defective capital contribution shareholders to bear the liability for breach of contract.It must be emphasized that the articles of association of the company on the time, proportion or responsibility of the shareholders of the company's capital contribution is an obligation arising from the unanimous agreement of the shareholders of the company, and the performance of the shareholders' capital contribution obligation is directly related to the certainty and authenticity of the company's capital, and this shareholder's obligation cannot be waived by the company's consent or changed without legal procedures.
Concluding remarks
At the same time, there is no case to explain whether there is a competition in the case of overdue capital contribution by shareholders to require defaulting shareholders to bear the liability for breach of contract and to pay interest on the use of funds to the company. However, considering that the dispute has not formed a unified judgment standard, it is recommended that shareholders in the capital contribution agreement, the articles of association and other documents to clearly agree on the liability.
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