A Practical Examination and Path Selection of Equity Transfer Models: Focusing on the Alteration of the Shareholder Register

Abstract

Article 86 of the Company Law of the People’s Republic of China (2023 Revision) provides that an equity transferee may assert shareholder rights against the company from the time when the transferee is recorded in the shareholder register. However, the provision does not clarify whether alteration of the shareholder register constitutes a constitutive requirement for the effectiveness of an equity transfer, a question that has generated significant academic and practical debate. Historically, the shareholder register was designed primarily as strong evidence of shareholder qualification and, on that basis, as an institutional mechanism for constructing the outward appearance of equity rights. Determining the effectiveness of equity transfers was not part of its original functional scope. While the legislature, by virtue of its freedom of institutional design, could designate the shareholder register as the constitutive requirement for equity change effectiveness, the PRC Company Law has remained cautious at the legislative level. Moreover, such a model lacks a realistic commercial environment for implementation, conflicts with the text and logic of the statute, and is therefore ill-suited as China’s default framework for equity transfers. From the perspective of reconciling the tension between the law of legal acts and the organizational law of companies in equity transfers, Article 86 can be more appropriately interpreted as adopting a doctrine of formal corporate consent. Under this model, once the parties have entered into a valid equity transfer agreement, the company conducts a formal review to ensure that the transfer complies with applicable laws, administrative regulations, and the company’s articles of association, and then expresses its consent or refusal. Upon corporate consent, the equity transfer becomes effective, without awaiting amendment of the shareholder register. This model balances transactional autonomy with corporate governance needs, avoids the governance and associational challenges of the intention-based model, and circum-vents both the normative and practical dilemmas of the shareholder-register-based model. Operating fully within the framework of the existing law, it offers a more coherent, feasible, and doctrinally defensible approach for resolving disputes over equity transfers in China.