What are the legal risks of equity transfer?

I. Subject Qualification Risk The legal risk in this respect lies in whether the procedures, qualifications, conditions and methods for the establishment of the target company comply with the provisions of laws, regulations and normative documents at that time, and whether the company that needs to be approved for establishment has obtained the approval of the competent department before registration. At the same time, whether the asset evaluation and capital verification in the process of the establishment of the target company have fulfilled the necessary procedures and conformed to the provisions of laws, regulations and normative documents at that time. In addition, whether the target company exists in accordance with the law, whether there are legal obstacles to continuous operation, and whether the business scope and mode conform to the provisions of relevant laws, regulations and normative documents are also the risks of equity acquisition. Due diligence, as the main qualification, is mainly understood by looking at the business license, articles of association and other registration documents of the target company; At the same time, it is also necessary to verify whether there are approval documents, whether the contents of approval and authorization are clear and certain, and the possible impact of the contents on this merger. Second, the risk of property and property rights The acquisition risks involved in the property of the target company are mainly reflected in the following aspects: Whether there are property rights disputes or potential disputes in the land use rights, real estate, trademarks, patents, software copyrights, franchise rights and major production and operation equipment owned by the target company; In what way did the target company obtain the ownership or use right of the above-mentioned property, whether it obtained complete ownership certificates, and if not, whether there are legal obstacles to obtaining these ownership certificates; Whether the target company has any restrictions on the exercise of the ownership or use right of its main property, and whether there are any restrictions on the guarantee or other rights; Whether the target company has leased houses and land use rights, etc. , as well as the legitimacy and validity of the lease. The value of land and real estate mainly depends on property right certificate and land use certificate, and its right status determines the value of land and real estate. The original purchase vouchers of machinery and equipment should be checked and their net value should be evaluated after deducting appropriate depreciation. For the machinery and equipment obtained through financial leasing, the ownership shall not be owned by the company until it is paid in full. Three. The acquisition risks related to the risk of creditor's rights and debts are as follows: whether the accounts receivable and other accounts receivable and payable of the target company with a large amount are legal and effective, and whether the creditor's rights can not be realized; The legality and validity of major contracts that the target company will perform, is performing and may have potential disputes, and whether there are potential risks; Whether the external guarantee of the target company has the risk of repayment on behalf of the company and the risk of recovery after repayment on behalf of the company; Whether the target company has infringing debts due to environmental protection, intellectual property rights, product quality, labor safety, personal rights and other reasons. When doing due diligence, lawyers should ask the shareholders or management of the target company to make a written commitment to the creditor's rights and debts, especially the possible creditor's rights and debts. At the same time, the responsibilities of both parties should be clearly defined in the equity transfer contract, requiring that all responsibilities before formal delivery, whether intentional or negligent, should be borne by the transferor. Four. Whether there are unresolved or foreseeable major litigation, arbitration and administrative punishment cases in the target company of administrative judicial risk; Whether there are unresolved or foreseeable major litigation, arbitration and administrative punishment cases in the controlling shareholders and major shareholders of the target company, which will have an impact on the target company; Related to this, whether the shares of the target company held by the controlling shareholder and the major shareholder are pledged; In addition, whether the chairman and general manager of the target company have any unresolved or foreseeable major litigation, arbitration and administrative punishment cases, because if such cases exist, it may have a negative impact on the production and operation of the target company. Judicial administrative risks mainly consult courts, industry and commerce, taxation and other administrative departments and law firms. V. Procedural Risks of Transfer The conclusion of the equity transfer contract shall conform to the procedural requirements of the Company Law. When a shareholder of a limited company transfers its capital contribution to a person other than a shareholder, it must be agreed by more than half of all shareholders; Shareholders who do not agree to the transfer shall purchase the transferred capital contribution. If you don't buy the transferred capital contribution, it is deemed that you agree to the transfer. Under the same conditions, other shareholders have the preemptive right to purchase the capital contribution transferred with the consent of shareholders. Equity transfer contracts that are not signed according to the above procedures will be deemed invalid or revoked due to defects in the procedures. When doing due diligence, a lawyer may ask the target company to convene a shareholders' meeting and make a resolution of the shareholders' meeting to approve the transferor's shareholders to sell their shares, which shall be signed in person. Other risks of intransitive verbs In China, there are various tax incentives and financial subsidies. If the target company enjoys preferential policies, financial subsidies and other policies, it should pay attention to whether the policies are legal and compliant. Whether the production and business activities of the target company and the projects to be invested meet the requirements of environmental protection, whether the competent department issues opinions, and whether the products of the target company meet the relevant product quality and technical supervision standards; Has the target company been punished for violating environmental protection, product quality and technical supervision and other laws, regulations and normative documents in recent years? In due diligence, lawyers should see the original official documents of subsidies, relevant EIA documents of environmental protection issues, and quality and technical supervision issues mainly depend on the quality inspection certificates of enterprises. To sum up, we can easily see the legal risks of equity transfer, and the biggest cost is the so-called legal cost. If you have entered the transaction process of equity transfer, then I think you must have made a careful plan for the economic risks in advance. However, the general traders always ignore the legal cost, and subject qualification, judicial supervision and due process are the main risks that affect the acquisition results. Therefore, it is suggested that relevant people hire professional lawyers and consultants in the transaction process to avoid investment failure.