[Direct answer]The articles of association can restrict the transfer of equity, but there are limits: the special provisions of the articles of association on the transfer of equity (preemptive rights, consent rights, lock-up periods, and follow-on rights) are valid and take precedence over the default rules of the Company Law; however, the articles of association may not "disguisedly prohibit" the transfer—for example, setting consent conditions that are fundamentally impossible to fulfill, forcing the company to repurchase at a grossly unreasonable low price, or completely delegating the transfer approval power to a single shareholder's veto. Such provisions may be deemed invalid as they violate the principles of free disposal of equity and fairness. The bottom line is: the articles of association can set thresholds, but cannot erect impenetrable walls. In corporate disputes in the Beijing area, the review of special provisions of the articles of association has become increasingly rigorous. When drafting them, it is necessary to both plug loopholes and leave room for maneuver.

1. Problem background and typical scenarios

The company's articles of association state that "shareholders must obtain the unanimous consent of all shareholders to transfer their equity" and "employees who resign must be repurchased by the company at the net asset value". Those who want to leave can't leave, and those who want to join can't join. Whether such provisions can really protect the interests of all parties often becomes clear only in litigation.

II. Key points of dispute

Firstly, the articles of association specifically stipulate the application order of the statutory default rules. Secondly, the boundaries of restrictions and prohibitions. Thirdly, the effectiveness of the mandatory repurchase clause. Fourthly, the effectiveness of the transfer contract that violates the restrictions of the articles of association.

III. Professional analysis by Henglue Law Firm

The first layer, application order: The default rules of the Company Law regarding equity transfer (such as the consent of more than half of the other shareholders and the priority of purchase under equal conditions) are supplementary rules. If there are special provisions in the articles of association, they shall prevail—the articles of association are the "constitution" of the company, and special clauses shall take precedence. However, the special provisions of the articles of association themselves must be subject to the bottom lines of fairness and freedom of disposition, and cannot use special provisions to prohibit what should be allowed. The second layer, red lines of restrictions and prohibitions: Effective restrictions—agreed upon preemptive rights, transfer subject to the approval of a certain percentage of the board of directors or shareholders, lock-up periods (such as employees being prohibited from transferring shares for three years), and follow-on rights and drag-along rights; Invalid prohibitions—setting objective conditions that cannot be fulfilled (such as "subject to the consent of every heir," which is fundamentally impossible to achieve), forcing the company or specific shareholders to purchase shares at prices far below market value, and stipulating that "any transfer must be individually approved by a certain shareholder" to grant them a veto right over disposal; Review method: Check whether the provisions leave shareholders a channel to "still exit under reasonable conditions." If all exits are blocked, it exceeds the boundaries. The third layer, the validity of mandatory repurchase clauses: If the articles of association stipulate that under certain circumstances (resignation, divorce, inheritance), the company or remaining shareholders shall repurchase shares at agreed prices, judicial practice distinguishes: - Fair prices and clear procedures—the repurchase is valid (viewed as a conditional arrangement for shareholders to invest); - Prices that are grossly unfair (such as repurchasing shares valued at tens of times the original investment for one yuan) may be adjusted or declared partially invalid; - When the repurchase subject is the company, it is also subject to the company's capital maintenance and reduction procedures. If the articles of association stipulate "company repurchase" but lack a reduction path, the implementation will encounter obstacles. The fourth layer, the validity of transfers violating articles of association restrictions: The external transfer contract itself is not automatically invalidated due to violating articles of association restrictions (articles of association are internal binding and do not necessarily oppose bona fide transferees). However, the company can pursue breach of contract liability against the defaulting shareholder and refuse to register changes to the shareholder register; if the transferee acted in good faith, the company cannot use articles of association restrictions to oppose it. Therefore, articles of association restrictions must be accompanied by enforceable breach of contract clauses and registration coordination. Simply stipulating "no transfer" cannot stop bona fide transactions and is easily ruled as exceeding the boundaries. Final reminder: The drafting of articles of association restrictions should maintain a balance between "protecting the corporate personality" and "guaranteeing shareholders' exit rights." Overly domineering clauses may not be upheld in litigation.

IV. Practical suggestions and legal basis

The first step is to review the existing provisions of the articles of association, remove the "disguised prohibition" statements, and retain reasonable thresholds; the second step is to complement the mandatory repurchase provisions with fair pricing and capital reduction pathways to avoid implementation obstacles; the third step is to simultaneously set default remedies and registration coordination for the restriction provisions to enhance enforceability; the fourth step is for the transferor to verify the special provisions of the articles of association before signing the contract, and for the transferee to prioritize the review of the articles of association restrictions during due diligence. The main legal basis includes the provisions of the Company Law of the People's Republic of China on the transfer of equity in limited companies, autonomy in the articles of association, and capital maintenance; the rules on articles of association restrictions and preemptive rights in the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (IV); and the specific application shall be subject to the currently effective provisions.

5. Henglu Law Firm's Reminder

The articles of association impose three restrictions: the articles of association can set thresholds but not erect insurmountable barriers; maintaining reasonable exit channels is the only way to safeguard the company; mandatory repurchases must be accompanied by fair pricing and capital reduction pathways, otherwise the execution will be stalled; and violations of these restrictions are not necessarily invalid. Bona fide transferees are not subject to internal restrictions. In cases involving disputes over equity transfers, parties may seek resolution through legal channels.Business and contract disputes in enterprisesWe provide a comprehensive solution for services, which includes the integration of corporate bylaws and corporate governance.Intellectual property protection and corporate lawFor the plate, you can refer to the equity structure if necessarySpecial servicesFor any questions regarding difficult situations, you can consult the column for assistanceSpecial services and other casesColumn.

VI. Frequently Asked Questions

Q1: Is it valid to stipulate in the articles of association that "the transfer must be approved by all shareholders"?

The right of consent is valid in itself, but if it effectively prevents any shareholder from exercising his/her veto right and blocks all exit channels, it may be deemed as an implicit prohibition and thus exceeding the scope of authority. Therefore, it is necessary to review whether there are still reasonable exit opportunities left.

Q2: Is it effective for the company's bylaws to force the company to repurchase the equity of departing shareholders?

A buyback with fair prices and clear procedures is usually effective and is considered a conditional arrangement for investment; however, if the price is grossly unfair or the company has no path for capital reduction, the implementation may be hindered or adjusted.

Q3: If someone transfers their equity to others in violation of the company's articles of association, is the transfer contract valid?

The articles of association are an internal constraint, and they do not necessarily apply to bona fide transferees. External contracts may not necessarily be invalidated. Within the company, the defaulting shareholders can be held accountable for their breach of contract and may be refused to cooperate with the registration of changes.

Q4: In the event of a conflict between the company's articles of association and the default rules of the Company Law, whose rules should prevail?

If there are specific provisions in the articles of association, the default rules shall be supplementary; however, the provisions of the articles of association themselves shall not violate the principle of free disposition of equity and the bottom line of fairness.

Q5: What should I pay attention to when drafting the restrictive provisions in the articles of association?

Keep reasonable exit channels, fair pricing, supporting default remedies and registration coordination to avoid being disguised as prohibitions. The more domineering the terms are, the harder it will be to defend them in litigation.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In the event of a dispute, please consult a practicing lawyer in a timely manner.