What Is a Nominee Shareholder?

Holding is the act of finding an institution or individual to sign an agreement on behalf of holding equity, bonds, etc. Generally, it cannot be held directly. Equity holding, also known as entrusted shareholding, anonymous investment, or pseudonymous capital contribution, refers to a method of equity or stock disposal that the actual investor and others agree to perform shareholder rights and obligations on behalf of the actual investor.

Holding

The so-called equity holdings, also known as entrusted holdings, anonymous holdings, and equity attachments, refer to the actual investor (that is, the nominee) and the nominal investor (that is, the nominee) to agree by agreement or other forms. An arrangement of rights and obligations in which the nominal shareholder performs the rights and obligations of the shareholder on behalf of the actual investor, and the actual investor fulfills the investment obligation and enjoys investment rights and interests.

In such cases, the actual investor and the nominal investor often determine the fact that there is a shareholding or shareholding through a single agreement. If equity holding is still ambiguous, equity trust is a concept that is well known and applied by many trust and investment companies. Equity trust means that the trustee transfers the equity of a company it holds to the trustee, or the trustee transfers its legally owned funds to the trustee, and the trustee uses the funds in his own name and according to the wishes of the trustee For a targeted investment in a company, the trustee's gains from holding the company's shares are vested in the beneficiary designated by the client. ^[1]

Regarding the views on equity holdings, there are two kinds of popular views in the theoretical world: formal and substantial. The formal theory holds that from the perspective of protecting transaction security, only the nominal investor should be regarded as the company's shareholders. Because for a limited liability company, it has a very strong partnership, and our company law gives company shareholders voting rights and pre-emptive rights in the transfer of equity, which is nothing more than emphasizing the stability of the company. Even for joint stock companies, especially listed companies, because the integrity of the operators and the transparency of the operating conditions directly affect the confidence of the stock market and the vital interests of millions of people, the degree of disclosure is not high. If shareholders are allowed to take equity holdings This approach will inevitably cause disorder and chaos in the securities market. On the other hand, from the perspective of party autonomy, as long as it does not touch the prohibitive provisions of law or public morals, public order and good customs, the true intentions of the transaction parties should be satisfied and protected as much as possible, not simply by registration or publicity. The true wish of the trader.

Paragraph 2 of Article 332 of the Korean Commercial Law states: "Persons who subscribe for shares in their name under the commitment of others shall bear the responsibility of joint payment with others." While clarifying the obligations of the nominal shareholder, it also clarifies the actual investor's related obligations. Responsibility is theoretically focused on substance. The "Nominee" concept is also mentioned in Articles 2, 28A and 128 of the Hong Kong Companies Ordinance. Section 168 of the Ordinance affirms the holding of shares by a nominee: "The nominee represents the transfer Shares held or acquired by a person company; or (if the assignee company is a member of a group of companies) shares held or acquired by a member company of the same group of companies, or held or acquired by a nominee on behalf of the member company , The shares must be deemed to be held or acquired by the assignee company .... "As can be seen from the above, although the Hong Kong Companies Ordinance does not directly provide for the definition of the legal liability between the" nominee "and the nominee, However, the legal legal status of the nominee has been established in essence, and theoretically it tends to be substantive.

Compared with other jurisdictions that have successively accepted or regulated the concept of "holding equity", the gap in China's legislation is still a regret. Throughout China's laws, administrative regulations and even other regulatory documents, there are no provisions on equity holdings so far. The only issue related to this issue is the "Regulations on Several Issues Concerning the Trial of Company Dispute Cases (I)" (draft for comments) published by the Supreme People's Court in the second half of 2003. Article 19 states that: "If the investor and others agree to invest in the name of the other person, the agreement must not be against the company. However, more than half of the other shareholders of the limited liability company know the actual investor's investment, and the company has recognized that it can use the shareholder In the case of exercising rights as a status, if there is no violation of the mandatory provisions of the law, the people's court can determine that the actual investor has equity in the company. " Realism and substance say that more attention has been paid to the parties' true intentions, but unfortunately the rule has not been officially promulgated so far.

Since modern times, legal scholars have divided the law into two parts, public law and private law, on the basis of individual and society. In the field of commercial law, the concepts of personal law and public law are gradually being distinguished based on the freedom of conducting business activities or in the consideration of transaction security. When we explore the nature of equity holdings and in practice, we also face the problem of distinguishing different types of legal relationships in order to determine their ultimate legal effect. It should be said that the effectiveness of equity holdings is uncertain until the specific legal relationship it holds is analyzed.

There are mainly three types of legal relationships in equity holdings. The first is the legal relationship between actual shareholders and nominal shareholders. The second is the legal relationship between actual shareholders, nominal shareholders and the company. The third is actual shareholders, Relationship between a nominal shareholder and a third party outside the company. The first relationship involves only two individuals and belongs to the category of personal law. Therefore, if there is a dispute between the two, as long as it can be proven that the two have an equity holding relationship, the actual shareholder's contribution should be confirmed at least from the perspective of debt. But the problem is that equity is often more important to actual shareholders than claims created by capital contributions. On the issue of the actual shareholder's request for confirmation of the identity of the shareholder, some people think that the agreement of the equity holding contract should be considered. If the contract explicitly states that the actual shareholder is a true shareholder and enjoys shareholders' rights and interests and assumes corresponding shareholder obligations and responsibilities, the actual shareholder should be identified Be a true shareholder.

However, the author believes that although the equity holding relationship is established between actual shareholders and nominal shareholders, it is in the comprehensive consideration of the company's stability that the consideration of the second type of legal relationship becomes inevitable. Therefore, if the actual shareholders conceal their identities, the nominal shareholders come forward to exercise the shareholders 'rights in accordance with the will of the actual shareholders, and to maintain the stability and protection of the company's legal relationship without the company and other shareholders of the company being aware of the actual shareholders' equity holdings The interests of other shareholders should not encourage the identification of shareholders as actual shareholders. If the actual shareholders are anonymous by the nominal shareholders, but the company and other shareholders of the company are aware of the existence of the actual shareholders, the actual shareholders directly exercise shareholder rights and assume shareholder responsibilities. In this case, the company has lost the defense reason to protect the stability of the company due to other shareholders' knowledge, and the actual shareholder has not allowed the company to deny the personality of the actual shareholder after participating in the company's business affairs as its shareholder. The actual shareholders should also be recognized as true shareholders from the perspective of maintaining the stability of the company.

Since China has not yet entered the concepts of "nominee" or "equity holding", the court should require the company to change its actual shareholder to a registered shareholder in handling similar disputes. In the third type of legal relationship, the protection of genuine rights holders and the protection of bona fide third parties are a contradiction. In this world with a lot of information, it is almost impossible for traders to investigate the anonymous shareholders outside the company registration, and it is not conducive to protecting the security of the transaction. It is for this reason that modern civil law theory has established good faith acquisition, protection of third parties in good faith, See the basic principles of civil law such as agency. Therefore, when the equity is transferred without authorization by the nominal shareholders, the actual shareholders have no right to defend against the grounds that the nominal shareholders have not obtained their consent. Similarly, when the nominal shareholders are being held to blame for the shareholder's responsibility due to inaccurate capital contributions or other reasons, they also have no right to use their own rights. The defense is not based on actual shareholders. In addition, when a third party has a legitimate reason not to know the contents of the industrial and commercial registration and regards the actual shareholder as a shareholder, the actual shareholder shall not use the non-registered shareholder as a defense.

It is true that if the purpose of anonymity is to circumvent the law, for example, to allow foreign companies or individuals to hold equity in Chinese companies or individuals on behalf of preferential foreign investment policies, some to avoid legal restrictions and industry restrictions, and some to obtain Tax incentives. According to the basic principles of contract law, violations of the provisions of the law are invalid, so the qualifications of anonymous shareholders cannot be recognized by law. In October 2004, Pacific Insurance Group co-founded Fudan Pacific College of Finance with Fudan University, and then CPIC Group received the notice of rectification from the CIRC. To this end, CPIC Group and Beijing Shide Investment Co., Ltd. made relevant shareholding arrangements. However, the author believes that because CPIC has circumvented the relevant provisions of the Insurance Law that "insurance companies are not allowed to invest in non-insurance industries", it is difficult to legally confirm the arrangement of such holdings.

Several earlier cases involving the confirmation of shareholder rights have been published in the "Selected Cases of the People's Court" and "Summary of China's Trial Cases", although actual shareholders held so-called internal "shareholder credentials" due to capital contributions. "Or, after signing the articles of association and attending the general meeting of shareholders, but ultimately failed to complete the formalities of industrial and commercial registration or other shareholders' recognition procedures required by law, they ultimately lost the case. It can be seen that a few years ago, the Shanghai Local Court was more inclined to registerism and essentialism in hearing similar cases. On August 5, 2004, the Haidian District People's Court of Beijing accepted a case of shareholder rights disputes caused by innovative technology research. Five old experts from the Chinese Academy of Sciences will cooperate with the Beijing Institute of Electrical and Mechanical Technology to the court, asking Dissolve the equity entrustment relationship between the two parties. So far this case is under further trial. The author believes that if other shareholders of the company investing in can provide evidence to recognize the true shareholder status of Academician Five, and the contract between Academician Five and the defendant is clear and clear in stating the true shareholders and related rights and obligations, it will not violate the prohibition of law. In the circumstances, the true shareholder identity of the five academicians should be identified.

Equity holding as a method of equity treatment will no doubt continue to exist, even if the results of its operation are still unknown at this stage, even if such disputes and lawsuits continue. In view of this, it is hoped that the relevant highest legislative and judicial organs of China will issue relevant laws or judicial interpretations as soon as possible to provide a legal basis for the standardized operation of equity holdings.