Social Sciences in China (Chinese Edition)

No.3, 2017

Freedom of Contract in Company Law: From the Perspective of the Restraint Clause on Disposition of Shares

(Abstract)

Feng Guo and Duan Binghua

From the different perspectives of individual and corporate law, the disposition of shareholders’ rights is not just expressed as the disposition of individual property rights, but also seen, to a greater extent, in terms of the trading conduct of a corporate organization. The disposition of shares goes beyond being a contractual transaction under civil law to display the features of an organizational transaction under commercial law. The restraint clause on the disposition of shares is found everywhere in company articles and legislation as a sign of the self-imposed restraint of the shareholder’s intent and restrictions on the corporation’s intent and even on the public will. This clause embodies the complex relationship between the shareholder’s intent and that of the company. The particularity of organizational transactions determines that the simplistic use of contract theory to deal with commercial disputes related to commercial organizations has limitations. From the perspective of company law, the substantive nature of the boundaries to autonomy lies in the maintenance of harmonious relationships of trust between organizations; the pursuit of stability in organizational governance; and achievement of a balance between legal interests. Both legislation and the justice system should, while stressing the priority of shareholder autonomy, guarantee the legal bottom line and deal appropriately with interest conflicts and the balance between the disposing shareholder, other shareholders, the company and creditors.