Shareholders'Right to Asset Income

Article 4 of the Company Law of China stipulates that "shareholders of a company enjoy the rights of assets income, participation in major decisions and selection of managers according to law." Accordingly, the shareholders of the company enjoy the right of return on assets, which includes the following contents:

I. The Right to Acquire Certificates of Investment or Stocks
Article 31, paragraph 1, of the Company Law stipulates that after the establishment of a limited liability company, a certificate of investment shall be issued to the shareholders. Article 132 stipulates that "after the establishment of a joint stock limited company, the shares shall be formally delivered to the shareholders. The company shall not deliver shares to shareholders before its establishment." The certificate of investment is the shareholder's equity certificate of the limited liability company, and the stock is the certificate of the shareholder's shares of the limited liability company. They are the certificate and basis for the shareholder to exercise the rights of asset income.

II. The Right of Claim for Profit Distribution
Article 34 of the Company Law stipulates that "shareholders shall receive dividends according to the proportion of paid-in capital..." Paragraph 4 of Article 166 stipulates that: "A limited liability company shall distribute the profits after tax after making up for losses and drawing up the provident fund in accordance with Article 34 of this Law; a joint stock limited company shall distribute the profits according to the proportion of shares held by shareholders, except those not distributed according to the proportion of shares held by shareholders as stipulated in the articles of association of a joint stock limited company." Therefore, when the legal conditions are met, shareholders may request the distribution of profits according to law.

III. Share Transfer and Disposal Right
Article 71 of the Company Law stipulates: "Shareholders of a limited liability company may transfer all or part of their equity to each other. When a shareholder transfers his equity to a person other than a shareholder, he shall obtain the consent of more than half of the other shareholders. Shareholders shall notify other shareholders in writing of the transfer of their shares for consent. If the other shareholders fail to reply within 30 days from the date of receipt of the written notice, they shall be deemed to agree to the transfer. If more than half of the other shareholders disagree with the transfer, the shareholders who disagree with the transfer shall purchase the equity transferred; if they do not purchase, they shall be deemed to agree to the transfer..." Article 137 stipulates: "Shares held by shareholders may be transferred according to law." These provisions give shareholders the right to transfer or dispose of their shares, and make profits by transferring or disposing of them.

Ⅳ.Priority
Priority includes the preemptive right to subscribe for capital and the preemptive right to buy shares. Article 34 of the Company Law stipulates: "... When a company adds new capital, the shareholders have the right to subscribe their capital according to the proportion of paid-in capital. Article 133 states: "... When a company issues new shares, the shareholders'meeting shall make a resolution on the following matters:... (4) The types and amounts of new shares issued to the original shareholders." Article 71 states: "... Under the same conditions, other shareholders have the preemptive right to transfer their shares with the consent of shareholders. Where two or more shareholders advocate the exercise of the preemptive right, the respective purchase proportion shall be determined through consultation; if the consultation fails, the preemptive right shall be exercised in accordance with the respective investment proportion at the time of transfer.... These provisions give priority to shareholders.

V. Claim for Acquisition of Companies
Article 74 of the Company Law stipulates that: "In any of the following circumstances, the shareholders who voted against the resolution of the shareholders'meeting may request the company to acquire their shares at a reasonable price: (1) the company does not distribute profits to the shareholders for five consecutive years, while the company shall make profits for five consecutive years and meet the conditions for the distribution of profits stipulated in this Law;"（ (2) The merger, division and transfer of the main property of the company; (3) the expiration of the business period prescribed in the articles of association or other reasons for dissolution prescribed in the articles of association occur, and the shareholders'meeting adopts a resolution to amend the articles of association so as to make the company survive...." Article 142 states: "... A company may not acquire shares of the company. However, except in one of the following cases:... (4) Where a shareholder objects to the resolution of merger or division of the company made by the shareholders'meeting and requests the company to acquire its shares..." It can be seen that shareholders can ask the company to acquire their shares when they meet the legal conditions.

Ⅵ. Claim for the Distribution of Residual Property
When the company is dissolved, through the liquidation procedure, shareholders have the right to request the distribution of surplus property. Article 186, paragraph 2, of the Company Law stipulates that: "The property of a company shall be distributed according to the proportion of shareholders'capital contribution, and the share ratio of a joint stock limited company shall be in accordance with the proportion of shareholders' shares." Case allocation."

Ⅶ. Inheritance of Shareholder Qualifications of Natural Persons
Article 75 of the Company Law stipulates that "after the death of a natural shareholder, his legal heir may inherit the shareholder's qualification, except as otherwise stipulated in the articles of association of the company." Therefore, unless otherwise stipulated in the company's articles of association, after the death of a natural shareholder, his legal heir may inherit the shareholder's qualification and enjoy the property rights and interests brought about by the equity.

Author: Liangjun Ma, founding partner and lawyer of Shanghai G-road Law Firm

Statement:
This article was originally created by the lawyer of Shanghai G-road Law Firm and represents the author's own opinion. It should not be regarded as the formal legal opinions or suggestions issued by G-road Law Firm or its lawyers. If you need to reproduce or quote anything in this article, please indicate the source.