Proxy profile of equity transfer dispute in a certain distillery

——Lawyer Zhou Xiangen

The only way for a company to survive is to sell as a whole

A certain distillery is a state-owned enterprise, which was transformed into a joint-stock enterprise in July 1998. It was jointly invested and established by 155 natural persons, with a registered capital of 7.6 million yuan; The enterprise has collective and individual shares, with a total share capital of 7605497 yuan, including 3922480 yuan for employee collective shares and 3683017 yuan for individual shares. After the restructuring of the enterprise, a board of directors was formed. Due to the implementation of everyone holding shares and one person one vote system in the restructured enterprises, internal management has become lax and cohesion has been weakened. At the end of May 2000, the distillery proposed a plan for deepening enterprise reform. After all shareholders chose, it was deemed that the overall sales plan of the enterprise was more appropriate. Since June 2000, the production of the distillery has been stagnant, resulting in losses of over 600000 yuan; Employees rely on the distillery to pay for their living expenses. In August 2000, the distillery established a liquidation team and entrusted legal intermediaries to evaluate the company's assets; On September 19, 2000, the distillery held a shareholders' meeting and passed an asset restructuring plan, proposing to sell the distillery's assets through equity transfer and stating:

1. Return the full amount of capital stock in advance based on the income from asset restructuring;

2. One-off cancellation of major illness insurance;

3. The withdrawal of pension insurance benefits, with the duration determined by the shareholders themselves, can be uniformly paid by the distillery or paid by the shareholders themselves;

4. The remaining assets are distributed evenly among the total number of shareholders.

The ups and downs of asset sales

After the company's restructuring plan was approved by the shareholders' meeting, the distillery issued a notice on the television station in mid October 2000, stating that the assets of the distillery would be restructured through a resolution passed by the shareholders' meeting. If you are interested in participating in the asset restructuring of the distillery, please come to request information and negotiate. By the end of October, four companies had participated in bidding for the sale of distillery assets. Due to the provisions of the distillery's articles of association that shareholders must transfer their equity to internal employees, four companies are unable to participate in the bidding process through equity transfer. In early November 2000, the distillery held a general meeting of all shareholders and made modifications to the equity transfer objects restricted by the articles of association, allowing third parties other than employees to acquire employee equity; In mid December 2000, the local government department approved the asset restructuring plan for the distillery. In this case, the distillery notified the four companies that had registered to participate in the bidding, and all four companies stated that they would no longer participate in the auction for the sale of distillery assets. Helplessly, the distillery held a general meeting of shareholders on December 25, 2000, and announced the price and method of selling the distillery's assets in the factory. The announcement stated that the distillery would transfer its equity with a total asset of RMB 15.5 million, and the registration deadline was December 27, 2000; At the end of the registration deadline, only a certain real estate development company registered and paid the bid security as required. Therefore, the distillery issued a bid winning notice to the real estate company and signed the "Equity Transfer Agreement" on January 5, 2001; At this point, the restructuring work of the enterprise has been temporarily completed.

Dispute arising from serious illness insurance

Enterprise restructuring inevitably involves social pension insurance matters for employees; When the distillery sells its enterprise assets through equity transfer, it only stipulates with the transferee that the transferee is required to pay the serious illness medical insurance fees for employees after retirement. As employees of various shareholders of the distillery, I believe that during the restructuring, Zhao, the former chairman of the distillery, once said that shareholders can enjoy serious illness medical insurance benefits the following month after the overall sale of the enterprise's assets. After consulting with the local social security department, Xu and some other employees found that in order for them to enjoy serious illness medical insurance benefits before the retirement year limit expires, they must pay additional serious illness medical insurance benefits. However, the fees paid by the transferee real estate company to the social security department according to the equity transfer agreement are only the medical insurance expenses after the employee retires; Therefore, shareholders and employees such as Xu attacked the distillery and forcibly closed the gate and pulled off the power switch of the distillery, citing the concealment of facts by the original distillery's board of directors during the asset restructuring process. Due to frequent interference from some shareholders of the distillery, the distillery has been unable to produce since the end of March 2001 until the time of the lawsuit.

Multiple attacks to find cause of action

85 shareholders including Xu claimed that:

1. Request confirmation that the equity transfer agreement signed between the real estate company and the distillery is invalid;

2. Request confirmation that the power of attorney signed between the board of directors of the distillery and 85 shareholders including Xu is invalid and request its revocation;

3. Order the real estate company to return the equity of 85 shareholders, including Xu, that it has acquired and restore to its original state.

The main factual reasons are: 1. concealing the fact of serious illness insurance benefits;

2. Refusing 85 shareholders including Xu to inquire about the financial situation of the company. The accountant of the original liquor factory did not handle the misappropriation of funds, the whereabouts of the 500000 yuan raised funds for building houses by the enterprise were unclear, and some equity transfer funds were intercepted;

3. The distillery originally had four enterprises participating in the bidding process, but now it has become one enterprise participating in the bidding process, unknown to 85 shareholders including Xu;

4. The total assets of the distillery were only 7.6 million yuan in the equity transfer agreement, which does not match the 15.5 million yuan in the bidding announcement; And the transfer agreement also includes the finished products, packaging materials, liquor, sauce, and book payments that were not transferred in the resolution of the distillery's shareholders' meeting on December 31, 2000, which violates the requirements of the shareholders' meeting resolution;

5. The board of directors of the original distillery maliciously colluded with 85 shareholders, including Xu, to handle the equity transfer procedures in the industrial and commercial department without signing an equity transfer agreement with the real estate company;

6. The board of directors of the original liquor factory, composed of Zhao, on the one hand accepted the commission of the real estate company to transfer the equity, and on the other hand accepted the commission of 85 shareholders such as Xu to transfer the equity, which belongs to the agency of both parties. Due to the fact that the equity transfer agreement signed between the distillery and the real estate company has not been voted on by the shareholders' meeting, it should be confirmed as invalid in accordance with the law; Under the circumstances where 85 shareholders, including Xu, were unaware of the true situation and equity value of the enterprise, the transfer process, and the fact that the original distillery's board of directors had concealed serious illness insurance, there was a significant misunderstanding of the power of attorney issued by themselves, which is invalid

A civil act that requires revocation in accordance with the law.

In response to the claims, facts, and reasons of 85 defendants, including Xu, Zhou Xiangen, a lawyer representing the real estate company, distillery, and former board members of the distillery in the first instance, as well as lawyers Lu Huafu and Zhang Weijuan, made the following targeted defenses to this case:

1. The original board of directors of the distillery signed a power of attorney for equity transfer and a power of attorney for equity transfer with 85 shareholders including the real estate company and Xu. After the distillery and the real estate company signed an equity transfer agreement, in order to implement the relevant provisions of the agreement, both parties entrusted the original board of directors of the distillery to engage in some transactional work. The resulting legal relationship is the legal relationship stipulated in the contract law, rather than the agency relationship between both parties;

2. When the distillery sells its enterprise assets through equity transfer, it strictly follows the provisions of the articles of association. Before the asset sale, it conducts asset evaluation, and all shareholders have held multiple shareholder meetings and made plans for enterprise asset restructuring; Real estate companies participate in enterprise bidding and register according to the requirements of the distillery's announcement. When signing the equity transfer agreement, they only realize that there was only one registered company at that time, and there was no illegal procedure in the entire transfer process;

3. The equity transfer agreement did not violate the resolution of the shareholders' meeting, and the company's assets were not transferred for 7.6 million yuan; The agreement divides 15.5 million yuan into two categories for valuation: the total equity amount is 7.6 million yuan, and the compensation for serious illness, pension insurance, and employee living expenses is 7.9 million yuan. Therefore, the terms of the agreement clearly stipulate that the payment of the above-mentioned funds to the real estate company shall not exceed 7.9 million yuan;

4. After the signing of the equity transfer agreement, the real estate company has transferred the equity of 147 shareholders, including some of the sued shareholders in this case, and has paid the equity transfer payment to the transferee shareholders in accordance with regulations; After acquiring the majority of the equity of the original distillery shareholders, the real estate company has gone through the procedures for changing the industrial and commercial registration in accordance with the law. For the original distillery shareholders who have not been transferred, they still retain their shareholder status in the industrial and commercial registration, and there is no collusion; Accordingly, it is requested to reject the appeal requests of 85 shareholders including Xu.

Justify the facts around the focus

Based on the claims of 85 shareholders, including Xu, and the defense of the real estate company, this case engaged in intense debates during the trial around the following focal points:

1、 Is the equity transfer signed between the real estate company and the distillery effective

85 proxy lawyers, including Xu, believe that the equity transfer agreement signed between the real estate company and the distillery in this case is invalid, with the following reasons:

1. The original board of directors of the distillery concealed the true facts of the enterprise, resulting in the original shareholders of the distillery making decisions at the shareholders' meeting that violated their true intentions; At the same time, the agreement signing process is illegal and does not comply with the procedures stipulated in the company's articles of association regarding the non transfer of equity and the agreement that should be discussed and approved by the shareholders' meeting;

2. The agreement violates the provisions of the "Trial Measures for the Equity Cooperation System of Light Industrial Collective Enterprises" and the "Guiding Opinions on the Development of Urban Equity Cooperation Enterprises", which stipulate that enterprise shareholders are not allowed to withdraw their shares and that equity can only be transferred within the enterprise, as well as Article 15 of the "Regulations on Urban Collective Owned Enterprises", which stipulates the approval procedures for equity transfer;

3. The registered capital of the changed distillery is false and covers up illegal purposes in a legal form.

Lawyer Zhou Xiangen believes that:

1. The entire process of selling the distillery through equity transfer indicates that the original board of directors of the distillery did not conceal the fact of enterprise assets. Considering the poor performance of the distillery after its restructuring in 1986, all shareholders have conducted multiple discussions on the deepening of the enterprise's reform, formed a deepening reform plan and asset restructuring plan, formed a liquidation team, and entrusted legal intermediaries to audit and evaluate the enterprise's asset status. During this process, the original board of directors of the distillery did not conceal the fact of the enterprise's asset status; As for the issue of accounting misappropriation of funds, the procuratorial organs have dealt with it and have nothing to do with the original board of directors; The funds raised by employees for building houses are not corporate assets and do not require the responsibility and explanation of the board of directors. The funds have been used for employee fundraising for building houses.

2. The transfer process of the distillery indicates that there are no violations. Firstly, when the shareholders' meeting decided to sell the company's assets through equity transfer, due to the restrictions on the transfer objects in the articles of association, the shareholders' meeting promptly revised the relevant provisions of the articles of association; And during the sale process of the enterprise, it shall be announced on television stations and factories through public announcements; Secondly, the price at which the enterprise sells assets through equity transfer shall be decided by the shareholders' meeting; In this case, 82 of the sued shareholders agreed to transfer the company's assets for 15.5 million yuan when filling in the sale price, indicating that there was no hidden manipulation of the transfer price. Xu and 85 other shareholders also did not have a significant misunderstanding of the equity value; Once again, the transferee participated in the bidding and signed the agreement as required by the distillery announcement, without prior knowledge that only one of them participated; After the amendment of the articles of association, the distillery also notified the original four registration units that they did not participate. This fact was explained by the board of directors of the distillery at the shareholders' meeting on December 25, 2000; After receiving the notification of winning the bid from the distillery, the real estate company signed an equity transfer agreement with the distillery within the specified time, which does not violate the resolution requirements of the shareholders' meeting. The shareholders' meeting also did not require the agreement to be determined through voting procedures after signing.

3. The relevant normative regulations and documents provided by 85 proxy lawyers such as Xu cannot serve as the basis for invalidity of equity transfer agreements, because Article 52 of the Contract Law stipulates invalidity, which stipulates that invalidity violates mandatory provisions of laws and administrative regulations, and the above regulations are not laws or administrative regulations; At the same time, Article 15 of the Regulations on Urban Collective Owned Enterprises only stipulates the matters related to approval and does not provide for the invalidity of agreements that have not been approved through this procedure. The first paragraph of Article 9 of the Interpretation of Several Issues in the Contract Law has already been explicitly stipulated.

4. After the real estate company signs an equity transfer agreement with the distillery, each shareholder entrusts the board of directors of the original distillery and signs a shareholder equity transfer authorization letter. On the surface, it appears that the shareholder entrusts the board of directors of the original distillery to transfer the equity, but in reality, the shareholder entrusts the distillery to transfer the equity externally. As the equity transfer authorization letter is stamped with the distillery's official seal, the implementation of equity transfer by the distillery should be considered as the equity transfer behavior of each shareholder; After the signing of the shareholder equity transfer commission, 147 shareholders of the original distillery shall receive equity transfer payments and compensation from the real estate company, which shall be deemed as recognition of the signing of the distillery's contract and equity transfer agreement.

5. Even if the registered capital of the changed distillery is false, it cannot be used as a basis for demonstrating whether an agreement covers up illegal purposes in a legal form. Whether an agreement covers up illegal purposes in a legal form should be based on the facts that exist in the signed agreement, and whether the registered capital is false should be defined by the administrative department for industry and commerce. It is not related to whether the agreement in this case is invalid.

The main content of the court's judgment is that after the restructuring of the distillery, the efficiency has been declining year by year, and production is very abnormal. Therefore, the shareholders' meeting has decided to carry out asset restructuring. After evaluation, articles of association modification, bidding, and bidding procedures, the real estate company has acquired the equity of Xu and others, and signed a equity transfer agreement. The content of the agreement does not violate mandatory provisions of laws and administrative regulations. The transfer price is determined by the shareholders' meeting, so the agreement is legal and valid. After acquiring equity, real estate companies have the right to handle business registration and establish equity structures in accordance with the law; As for whether the registered capital is false, it should be reviewed and handled by the industry and commerce department, which is not related to this case.

2、 The Legal Nature and Effectiveness of Power of Attorney

After the distillery signed an equity transfer agreement with the real estate company, the real estate company signed a power of attorney for equity transfer with the distillery's board of directors to simplify the procedures for shareholder equity transfer and save its own time and energy; Each shareholder of the distillery has also signed a shareholder equity transfer authorization letter with the board of directors of the distillery, which has been stamped with the distillery's official seal. Therefore, the aforementioned authorization letter should be considered as signed with the distillery, rather than with the board of directors. Therefore, it is baseless and inconsistent with the fact that 85 proxy lawyers, including Xu, regarded the board of directors as the signatory of the power of attorney and deemed the power of attorney invalid.

85 shareholder lawyers, including Xu, believe that the power of attorney is an agency contract, so the original board of directors of the distillery belongs to both parties as agents, which violates the legal prohibitive provisions of the General Principles of the Civil Law and its interpretation that agents cannot represent both parties, and is an invalid civil act. Lawyer Zhou Xiangen believes that the equity transfer power of attorney signed between shareholders and the distillery belongs to the agency contract, because the power of attorney stipulates the price and payment method of equity transfer when the distillery transfers shareholders' equity. According to the agency system stipulated by Chinese law, the agent engages in civil legal acts with a third party in the name of the principal when implementing the agency act. In fact, after the distillery signs the equity transfer power of attorney with each shareholder, It is to sign an equity transfer agreement with the real estate company in the name of each shareholder and settle the equity price, and the consequences arising from this shall be borne by each shareholder. The equity transfer power of attorney signed between the distillery and the real estate company only stipulates that the distillery shall pay relevant equity prices, compensation, and other transactional work to each shareholder when acquiring their equity. After the power of attorney is signed, there is no fact that the distillery has a civil legal relationship with a third party in the name of the real estate company. Therefore, there is no fact that the distillery accepts the agency entrusted by both parties. Due to the different nature of the power of attorney between the two and the fact that the content of the power of attorney does not violate mandatory laws and administrative regulations, 85 shareholders, including Xu, believe that the power of attorney is invalid and demand revocation without factual and legal basis.

The main content of the court's judgment is as follows: the power of attorney for equity transfer signed between the real estate company and the distillery only stipulates that the distillery is engaged in some transactional work, which is an entrustment contract. Moreover, after the power of attorney is signed, the distillery has not engaged in any civil legal act with a third party in the name of the real estate company, which is an entrustment contract; The power of attorney for equity transfer signed between each shareholder and the distillery. After the distillery signs the power of attorney for equity transfer, it signs an equity transfer agreement with the real estate company in the name of the shareholder. This power of attorney belongs to the agency contract. Due to the varying nature of the power of attorney, the distillery does not engage in any agency behavior between both parties, and the content of the power of attorney does not violate the prohibitive provisions of laws and administrative regulations, and should be deemed valid.

3、 Can the power of attorney for equity transfer signed between shareholders and the distillery be revoked

Xu and others made a fundamental logical mistake during the prosecution, which was to request the court to confirm the invalidity of the power of attorney signed with the distillery, and to request the court to revoke it on the grounds of significant misunderstanding; Although the legal consequences of invalidity and revocation are the same, the reasons for the two are completely different. Lawyer Zhou Xiangen believes that the prosecution of Xu and others reflects the uncertainty of their claims and the impropriety of the cause of action from one side. Regarding the lawsuit filed by Xu and others requesting the revocation of the power of attorney on the grounds of significant misunderstanding of the serious illness insurance, Lawyer Zhou Xiangen believes that in this case, whether it is the form of signing the shareholder equity transfer power of attorney or its content, there is no factual reason or basis for significant misunderstanding among the parties. Firstly, Xu and others believe that the original board of directors of the distillery concealed the issue of the starting time for enjoying the serious illness insurance; The decision of the shareholders' meeting of the original distillery and the agreement signed between the distillery and the real estate company clearly stipulate that the benefits of serious illness insurance can only be enjoyed after the retirement of shareholders, and there is no provision or decision that can be enjoyed after paying the serious illness insurance benefits in the following month; Secondly, the decision of the shareholders' meeting on December 25, 2000 and the equity transfer agreement stipulate that the real estate company should pay a serious illness insurance amount of 1.57 million yuan, which is determined based on the serious illness insurance benefits enjoyed by shareholders after retirement; Once again, Xu and others believe that the chairman of the original distillery promised to enjoy the serious illness insurance benefits the following month, and in this case, Xu and others did not provide sufficient evidence to prove it. Finally, according to the relevant provisions of the General Principles of the Civil Law and its judicial interpretations, a major misunderstanding is often a misunderstanding of the nature, subject matter, etc. of the act by the parties due to their own fault, causing the consequences of the act to contradict their own intentions and causing significant losses. Only then can it be recognized as a major misunderstanding; In this case, the parties did not have any objections to the content of the power of attorney and received the equity transfer payment and living compensation as required by the power of attorney, indicating that there was no significant misunderstanding of the content of the behavior by the parties; At the same time, the content of the power of attorney did not violate the resolutions of the shareholders' meeting, such as the asset restructuring plan, in which each shareholder participated.

The main content of the court ruling: According to the content of the power of attorney and the provisions of the equity transfer agreement, the serious illness medical insurance benefits paid by the real estate company are only the serious illness medical insurance benefits that shareholders can enjoy after retirement; The benefits enjoyed by this insurance were resolved at the shareholders' meeting on December 25, 2000; The significant misunderstanding raised by Xu and others does not comply with the legal situation, and their request to revoke the power of attorney for equity transfer is not supported.

Side note of this case: The difference between commission and agency

Lawyer Zhou Xiangen participated in the litigation agency activities in the first instance of this case, and the first instance rejected the litigation requests of 85 shareholders including Xu; 85 shareholders, including Xu, were dissatisfied and appealed to the Zhejiang Provincial Higher People's Court. The Higher People's Court's first instance judgment only held that the terms of the equity transfer agreement signed between the distillery and the real estate company that had passed the resolution of the shareholders' meeting on December 31, 2000 regarding the transfer of property were invalid, while other terms were valid; The property acquired by the real estate company based on invalid terms should be returned to the distillery. The content of other first instance judgments shall be maintained. This revision of the judgment did not meet the requirements of Xu and others, as the object of the property judgment returned beyond the resolution of the shareholders' meeting was the distillery, rather than the 85 shareholders of Xu and others. During the agency process in this case, two other lawyers, Lu Huafu and Zhang Weijuan, jointly participated in the first instance litigation agency activities and provided many valuable opinions on the comprehensive formation of agency opinions.

In this case, the key focus of the dispute is the nature and effectiveness of the power of attorney, which involves whether the distillery has an agency between the two parties that is not allowed by law and the effectiveness of the overall equity transfer agreement signed between the distillery and the real estate company. Therefore, distinguishing the differences between the legal relationship of the commission contract and the legal relationship of the agency contract is the key to this case. In theory, there are fundamental differences between commission contracts and agency contracts in the following aspects:

1. The agent's agency behavior in the agency contract does not include factual behavior, while in the commission contract, when the trustee is entrusted to handle entrusted affairs, it can include factual behavior;

2. In an agency contract, when an agent engages in agency behavior, a legal relationship occurs with a third party in the name of the principal, which is manifested as external behavior; The commission behavior in the commission contract only exists between the principal and the trustee, and there is no relationship or contact with any third party;

3. The generation of agency power is based on the authorization of the principal, which is a unilateral legal act, while a commission contract is a bilateral legal act.