2023 New China Company Law on Equity Transfer of Limited Liability Company

The 2023 Company Law removes the request for shareholders to seek the consent of other shareholders for external transfers of equity, retains the preemptive rights of other shareholders, and the transfer shareholder’s notification obligation to other shareholders. At the same time, it clearly explains the specific matters of the notification content, including the quantity, price, payment method and term of equity transfer, etc. This revision simplifies the procedural rules for shareholders to transfer their equity to external parties, optimizes the operability of shareholders’ external transfer of equity, strengthens shareholders’ freedom to transfer equity, and balances the interests of the transferring shareholder, other shareholders, and the company.

Article 84  Shareholders of a limited liability company may transfer all or part of their equity to each other. If a shareholder transfers equity to a person other than the shareholder, he or she shall notify the other shareholders in writing of the quantity, price, payment method, term limit and other matters of the equity transfer, and other shareholders shall have the preemptive right under the same conditions. If a shareholder fails to respond within thirty days from the date of receipt of the written notice, it will be deemed to have waived the right of preemption. If two or more shareholders exercise the preemptive right, they shall negotiate to determine their respective purchase proportions; if the negotiation fails, the preemptive right shall be exercised according to the proportion of their respective capital contributions at the time of transfer.

If the company’s Articles of Association have other provisions on equity transfer, those provisions shall prevail.

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