Successful representation: The original claim was rejected for 3.51 million, and the counterclaim was 390,000 won!

---Liang and Tong equity transfer dispute case

Undertaker: Guangdong Jinduo Law Firm, Lawyer Liu Jiang, Lawyer Qiu Yongyue

1. Basic case

  In October 2011, Tong invested and established a household goods company in Guangzhou with a registered capital of 100,000. Tong was the sole shareholder of the company.

In May 2013, after introduction, Liang's mother met and gradually became familiar with Tong (Liang was a college student at the time and did not have much contact with Tong). Since then, Tong has repeatedly stated that it has companies in Canada and China, with strong assets, high profitability, and well-known and popular products.

In May 2013, Mr. Tong proposed to transfer 49% of the shares of a household products company in Guangzhou on the grounds that he was going to Canada in the near future, and said that the company's current total assets value is at least about 8 million yuan. Based on her trust in Tong, Liang’s mother promised to buy 49% of a household products company at a price of 3.9 million yuan, but Tong did not show Liang’s mother’s assets, business, and financial documents for various reasons. And suggested that the equity should be transferred directly to Liang.

A few days later, at Tong’s urging, Liang paid a total of 390,000 yuan for the equity transfer. Both parties went to the Industrial and Commercial Bureau to go through the equity change procedures, and according to Tong’s request, signed a copy for the transaction The "Equity Transfer Agreement" of the industrial and commercial registration stipulates that the subject of the transfer is 49% of the shares of a household products company in Guangzhou held by Tong, and the transfer amount is 49,000 yuan.

On the day of the completion of the industrial and commercial procedures, Liang also signed another "Equity Transfer Agreement" drafted by Tong according to Tong's requirements. The equity transfer price was calculated at 3.9 million yuan, and an IOU was signed. Ming: “Today, Mr. Tong owes RMB 3.9 million as the share capital of Mr. Liang for his shareholding in a household goods company in Guangzhou. This amount has been paid for the first time of RMB 390,000, and the first year is guaranteed to be 1.5 million yuan. clear".

After that, Liang's mother asked Tong to provide company assets and financial information, but Tong refused to give or avoided meeting. Liang's mother felt that she might be deceived.

In March 2014, Liang and his parents went to a household goods company in Guangzhou to look for Tong when the company was no longer there and had been replaced by two other companies. Only after inquiring did they learn that a household goods company in Guangzhou had already withdrawn at the end of 2013. field.

2. The litigation process

(1) First instance-People's Court of Tianhe District, Guangzhou City

In March 2015, Tong sued Liang, claiming that Liang had violated the Equity Transfer Agreement, constituting an expected breach of contract and seriously infringing on his legal rights, and requested an order for Liang to pay the equity transfer price of 3.51 million yuan.

Later, Liang filed a counterclaim, believing that the "Equity Transfer Agreement" was fraudulent and apparently unfair, and requested an order to revoke the "Equity Transfer Agreement" and return Liang's 390,000 yuan of equity transfer money that had been paid.

In the counterclaim, Liang submitted the "Profit Statement" and "Balance Sheet" of a Guangzhou household products company provided by a Guangzhou Financial Consulting Co., Ltd., showing that the Guangzhou household products company was in net loss from January to May 2013 Status, and the total assets of the company at the end of the period were only more than 40,000 yuan. In addition, the 2011 and 2012 "Company Annual Inspection Reports" of a household products company in Guangzhou showed that the total assets of the company at the end of the year were only more than 100,000 yuan, and the company has been in a state of loss. The "Canada International Holding Group" provided by Tong does not currently exist.

The focus of the dispute: whether the contract involved in the case meets the circumstances of revocability.

1. There is a big gap between the actual value of the equity of a household products company in Guangzhou and its transfer value. Regardless of the business license of a household products company in Guangzhou or the "Notice of Approval of Modification (Recording) Registration", it is stated that its registered capital is only 100,000 yuan, and the 49% transfer equity involved in the case is 3.9 million yuan. Exceeding its registered capital, the company’s "Company Annual Inspection Report" and "Income Statement" and "Balance Sheet" showed that the company's assets did not increase significantly from 2011 to May 2013, its turnover was low, and its net profit was average. A negative number, that is, the company has been in a state of loss, which cannot reflect that the company has strong profitability and has a large market value, and the plaintiff failed to submit convincing evidence to prove the value of the company’s equity in the trial .

2. When the transaction involved in the case occurred, the defendant was a student, and the transaction ability of the plaintiff was obviously not equal. Before signing a contract with such a huge transaction amount, the plaintiff should exercise due care and fully protect the counterparty’s right to know. The defendant fully disclosed the company's assets and operating conditions, company accounts, etc., but the plaintiff did not prove in the trial that it fulfilled the aforementioned obligations.

3. Before the equity change of a household products company in Guangzhou, the plaintiff made a resolution that had a fundamental impact on the company’s development direction and the company’s value, and the plaintiff failed to provide evidence to prove that it was in the process of negotiating equity transactions with the defendant. There have been major changes in business methods and business addresses.

The court held that, in accordance with Article 54 of the Contract Law of the People’s Republic of China, the price of the equity transaction involved in this case was significantly different from the value reflected in the relevant financial data, and the plaintiff could not provide evidence to prove the value of its equity when the transaction involved in the case occurred. It was not significantly lower than the transfer price, nor was it able to prove that it fully disclosed the company’s financial status to the defendant so that it could complete the transaction involved in the case with a full understanding of the company’s value. The plaintiff should bear the adverse consequences of the inability to provide evidence.

The verdict:

    1. Cancel the "Equity Transfer Agreement" signed between Tong and Liang on May 15, 2015;

    2. Mr. Tong returned 390,000 yuan of equity transfer money to Mr. Liang within ten days from the date when the judgment became legally effective.

3. Dismissed Tong's request for this lawsuit.

The court of first instance rejected Tong's request for this lawsuit and fully supported our counterclaim request!

(2) Second instance-Guangzhou Intermediate People's Court

Tong refused to accept the first-instance judgment and believed that the facts of the original judgment were unclear. The equity transaction involved in the case was actually a transaction between Tong and Liang’s parents. Liang was only the equity holder, and both parties to the equity transaction were originally equal and voluntary. , The equity transfer price was negotiated and the court had no right to forcibly set the equity value price determination model, etc., filed an appeal, requested to revoke the original judgment, and demanded Liang to pay 3.51 million yuan in equity transfer.

The focus of the dispute: whether the "Equity Transfer Agreement" is fair.

1. According to Article 19 of the "Interpretation of the Supreme People's Court on the Use of the Civil Procedure Law of the People's Republic of China", both Tong and Liang bear the burden of proof for their claims. Liang advocated that the 49% equity price of a household products company in Guangzhou was 3.9 million yuan, showing fairness, and provided the 2011-2012 Annual Inspection Report of the Company, and a household products company in Guangzhou provided by a Guangzhou Financial Consulting Co., Ltd. January 2013 -In May, the "Income Statement" and "Balance Sheet" showed that the total assets of a Guangzhou household products company at the end of the year were low, the total profit, and the net profit were all negative. Tong did not prove that a Guangzhou household products company was at the time of the equity transfer. The value of the asset.

2. Article 6 of the "Contract Law of the People's Republic of China" stipulates that the parties shall follow the principle of good faith in exercising their powers and performing their obligations. During the equity transfer process, Tong should disclose to Liang the relevant assets and financial status of a household products company in Guangzhou. However, Tong did not provide evidence to prove that he had shown to Liang the financial account books of a Guangzhou household products company that effectively reflected the company’s assets and financial status. Liang also denied that Tong had shown him the company’s assets and financial information. Therefore, Mr. Tong asserted that he fulfilled his obligation to disclose the company's assets and financial status to Mr. Liang, which was not accepted by this court. Tong decided that the equity price was negotiated between the two parties, and the irrevocable opinion of the "Equity Transfer Agreement" was not based on insufficient basis and this court would not accept it.

The verdict:

The appeal was rejected and the original verdict was upheld.

The court of second instance made a fair judgment and upheld the original verdict of the first instance. We won a great victory!

3. Lawyer's opinions and practical significance

Civil and commercial transactions require equal consultation. As long as the two parties’ intentions are true, the transaction should be legal and valid without violating the laws and regulations and the principles of public order and good customs.

How to be deemed unfair? According to the Supreme People’s Court’s "Opinions on Several Issues Concerning the Implementation of the General Principles of the Civil Law (for Trial Implementation)", "Where one party takes advantage of its advantages or takes advantage of the other’s inexperience, causing the rights and obligations of both parties to obviously violate the principle of fairness and equal value compensation, it can be determined as Obviously unfair."

 Therefore, the determination of obvious unfairness requires the following conditions:

1. The content of the contract is objectively unbalanced;

2. One party makes an expression of intent due to inferiority or lack of experience;

3. The other party uses its own advantages or uses the other party's inexperience, which is subjectively malicious;

4. The rights and obligations of both parties obviously violate the principle of fairness and compensation;

5. The imbalance of interests occurred at the time the contract was concluded.

In general equity transactions, both parties should fully consider the company’s profit, liabilities, prospects and many other factors when determining the equity transaction price. Equity based on the company’s assets, turnover, net profit and other data that can reflect the company’s current situation. Value can correspond to the value of company assets.

However, it does not mean that the equity transaction price and the actual price must be equal. After fully disclosing the company’s assets and financial situation, the transaction price determined by both parties on the basis of their true intentions and equal negotiation, even if the consideration does not deviate from the actual price. , Is also binding between the two parties. Otherwise, the relevant transaction contract is very likely to be cancelled due to a major misunderstanding or obvious unfairness.

It can be seen that full disclosure of company assets and financial conditions is a very important part of equity transactions.

In this case, there is a big gap between the actual value of the equity of a household products company in Guangzhou and its transfer value, and from the existing evidence, Tong also failed to provide valid evidence to prove the value of the company’s equity. In addition, when the transaction involved in the case occurred, Liang was a student with insufficient social experience, and did not have rich investment experience and judgment ability. He and Tong were obviously not equal in transaction ability. Before Tong and Tong signed a contract with such a huge transaction amount, he should To exercise due care, fully protect the counterparty’s right to know, fully disclose the company’s assets, operating conditions, and company accounts to Liang, so that he can conduct transactions with a full understanding of the company’s value, but Tong did not prove During the equity transaction process, it fully disclosed to Liang the information sufficient to prove the value of the company, but not enough to prove that the two parties completed the transaction involved on the basis of equality and sufficient information. If the contract continues to be performed, the rights and obligations of both parties will be in a state of obvious imbalance.

Therefore, the court of first instance in this case found that the "Equity Transfer Agreement" signed between Liang and Tong was obviously unfair, and ruled to revoke it according to law, and required Tong to return the equity transfer money. The court of second instance also upheld this, showing that the judgment was in line with facts and by law.

Attorneys Liu Jiang and Qiu Yongyue acted as Liang's agents. During the two-year trial of the case in the first and second instance, they analyzed the case in detail and used strong evidence to compete with the other party and finally won the support of the court. Effectively safeguard the legitimate rights and interests of the parties!