Can the equity be returned after the termination of the equity transfer agreement?

2022-07-08 0 By

If a contract has not been performed after it is terminated according to the Civil Code, the performance shall be terminated;Where performance has been performed, the parties may request restoration of the original condition or take other remedial measures in light of the performance and the nature of the contract.So if the equity transfer contract has actually been performed, once the contract is removed, how to restore the original state?Can the company’s equity be restored to the equity transfer before?Classic case: On April 28, 2017, A, as the transferor, and B, as the transferee, signed the Transfer Agreement between The Company’s Equity and the Mall (hereinafter referred to as the “Transfer Agreement”), which stipulated that COMPANY A was established in Shanghai on August 7, 2013 with A registered capital of 500,000 yuan.A is A shareholder of Company A with 100% shareholding.Now A transfers 100% equity of COMPANY A and the Tmall store to B at the transfer price of 270,000 yuan.Another contract, b should be in the contract is signed on the day of payment transfer section, and party b to take control of the target store and stake in A company after the change, shall be immediately to the mall the platform’s registration data (including the legal representative of the identity and contact information, the company’s business license and other information) to the corresponding change, more than 30 days did not change as the fundamental breach of contract, party A shall have the right to rescind the contract.After signing the contract, Party B paid the transfer fee. On May 23, 2017, Party A and Party B went through the industrial and commercial registration procedures for the transfer of Company A’s equity and change of its legal representative.On June 7, 2017, B borrowed more than 460,000 yuan from company A on the platform. On June 10, A received A text message from Zhejiang E-commerce Bank urging the loan to be returned.Party A and Party B shall enter into a separate Settlement Agreement, agreeing that the original Transfer Agreement shall continue to be performed, the transfer payment paid by Party B shall be deducted from the loan, and the rest shall be paid by Party B in installments.Party B fails to perform as stipulated in the Settlement Agreement.Party A appeals to the court to cancel the Transfer Agreement signed by both parties, and Party B shall cooperate in handling the equity transfer and the legal representative’s change of industrial and commercial registration, and pay the signed loan and penalty.After trial, the court considers that party B’s failure to change the registration data of the platform and use the platform to borrow money is a fundamental breach of the contract, and Party A has the right to terminate the contract.However, the equity transfer fee involved in the case has been paid off, the registration procedures for the change of equity transfer have been completed, the control right of the Taobao shop associated with Company A has been transferred, the main contractual obligations of both parties have been paid, and the main contractual objectives agreed in the contract have been realized.In addition, Company A has carried out new business activities, and the company’s assets and liabilities have changed. Even if the industrial and commercial registration is restored to the state before the change, the company’s assets and liabilities cannot be restored to the original state, and the two parties may have new disputes due to the consequences of the defendant’s business behavior.To sum up, the court believes that if the contract involved has not been performed after termination, the performance shall be terminated;Those already performed shall not be reinstated to their original state.Therefore, the court does not support a’s claim for reinstatement.As a typical commercial transaction, the risk equity transfer needs to be considered from the perspective of maintaining market order and promoting transaction to maintain efficiency value and corporate stability.As for whether the rescission of the equity transfer contract should be restored to its original state, the court will generally strictly grasp the rescission right and the applicable conditions for restitution from the particularity of commercial transactions. Therefore, the rescission of the contract does not guarantee the restitution of the equity.Corporate governance suggests how the non-breaching party can better safeguard its own interests after the equity transfer contract is terminated. We suggest:1, installment payment in the equity transfer agreement, the termination of the contract and compensation terms equity transfer transaction as an amount is larger, more complex commercial activities, we recommend that you enter into a written equity transfer agreement, suggested assignee after finish to do adjustment of the target company, the transfer price can pay installment, and preset the future ahead of the other possible default behavior,And in the contract for different breach of contract to make different provisions.What is the specific agreement? Can we ask for the return of dividends if the Equity Transfer Agreement we issued is cancelled?(Click the title of the article to view) this issue is elaborated in detail for your reference.2. Claim for loss compensation after the equity transfer agreement is rescinded. If the equity transfer agreement is rescinded due to the breach of one party, the aggrieved party can claim that, first of all, the subject of liability for loss compensation shall be determined according to the failure of both parties.If both parties are not at fault, it is generally shared in accordance with the principle of fairness, if one party is at fault, the fault party should be responsible for the loss compensation.If both parties are at fault, the liability of the other party may be appropriately mitigated.Secondly, the scope of loss compensation.Loss compensation includes not only the loss suffered after the contract is rescinded, but also the loss of available interests, as well as the reasonable expenses such as due diligence fee, attorney’s fee and evaluation fee included in the losses agreed in the contract.3. It is generally not necessary for the transferee to return the company’s share dividends after the termination. In the equity transfer transaction, the transferee also enjoys the shareholder rights to participate in major decisions, select managers, supervise the company’s operation and obtain distribution after obtaining the shareholder qualification.However, the behaviors carried out by shareholders in the capacity of shareholders involve the interests of other shareholders and the transaction relationship with unspecified third parties of the company.Even if the contract of equity transfer is terminated later, the rights exercised by the transferee in accordance with the law during the period when the transferee legally holds the equity shall still have legal effect.Therefore, the dividends obtained by the transferee in accordance with the law during the period when the transferee held shares as the original shareholder are still valid and need not be returned after rescissions and restoration.Forwarding circle of friends, so that more entrepreneurs less detours!