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  • JAVY Insight | A probe into the recognition and treatment of common property when one of the husband and wife accepts the parents' equity in marriage and divorces

    Release Time:2022-07-26

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    The divorce rate in China is rising, and the types of common property between husband and wife are becoming more and more complex. It is no longer a simple deposit, and equity, a family investment and operating asset, is also becoming more and more. Equity is different from general property. As a kind of family wealth, it has characteristics that other properties do not have. To realize the inheritance of family wealth through equity transfer, we need to pay attention to some matters. Otherwise, if the husband and wife divorce in the future, their equity division may be controversial. This paper only explores whether the equity of parents accepted in marriage will be recognized as the joint property of husband and wife.


    1、 Whether the equity can be used as the joint property of husband and wife


    Equity is an independent and comprehensive right that integrates the benefits of identity, property and management. The acquisition of equity in a limited company is based on personal partnership and is closely related to the shareholders themselves. The qualification of shareholders does not constitute a common object. At the same time, equity changes involve the interests of the company, other shareholders and even a third person. Therefore, equity has the characteristics different from other husband and wife common property, For the equity obtained by one of the husband and wife during the existence of the husband and wife relationship, if it is confirmed to have the nature of joint property by law, the non shareholder spouse should enjoy the property benefits brought by the equity, rather than the equity itself.


    Attachment: when equity is the joint property of husband and wife, the judicial interpretation of the court trial stipulates:

    Interpretation of the Supreme People's Court on the application of the marriage and family series of the civil code of the people's Republic of China (I)


    Article 73 If the people's court hears a divorce case involving the amount of capital contribution in a limited liability company in the name of one party in the division of the joint property of the husband and wife, and the other party is not a shareholder of the company, it shall be dealt with separately according to the following circumstances:


    (1) If the husband and wife agree to transfer part or all of the capital contribution to the spouse of the shareholder through consultation, and more than half of the other shareholders agree, and the other shareholders expressly waive the preemptive right, the spouse of the shareholder can become a shareholder of the company;


    (2) After the husband and wife reach an agreement on the transfer share and transfer price of the capital contribution, if more than half of the other shareholders do not agree to the transfer, but are willing to purchase the capital contribution under the same conditions, the people's court may divide the property obtained from the transfer of capital contribution. If more than half of the other shareholders do not agree to the transfer and are unwilling to purchase the capital contribution under the same conditions, it shall be deemed that they agree to the transfer, and the spouse of the shareholder can become a shareholder of the company.


    The evidence used to prove the consent of the shareholders specified in the preceding paragraph may be the materials of the shareholders' meeting or the written statements of the shareholders obtained by the parties through other legal means.

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    2、 Is it the personal property of one of the husband and wife or the joint property of the husband and wife to accept a gift from their parents or "it is called a sale and is regarded as a gift"


    First, as personal property:

    Please refer to Article 7 of the third judicial interpretation of the marriage law. If the property right of a real estate purchased by one parent for their children after marriage is registered in the name of the investor's children, it shall be regarded as a gift only to their own children, and the real estate shall be recognized as the personal property of one of the husband and wife.


    In the book "judicial interpretation (III) understanding and application of the marriage law of the Supreme People's court", the Supreme People's judge min Yiting, Wu Xiaofang believed that from the perspective of the original spirit of the legislation of the marriage law, its focus is to connect and register in the name of one of its own children, and determine that only one party belongs to one party, rather than emphasizing what real estate is, so if one party's parents contribute and the equity is registered in the name of one of its children, It should be regarded as a gift to only one of its own children.


    Because both equity and real estate achieve the final legal effect through the publicity generated by registration, they have certain similarities. Therefore, it is reasonable to refer to Article 7 of the judicial interpretation of the marriage law, but from the practice of various places, this view has not become the mainstream.


    Cases using this theory:

    (2019) Yue 0118 min Chu No. 3378: the judge believes that, The first paragraph of Article 7 of the interpretation of the Supreme People's Court on Several Issues concerning the application of the marriage law of the people's Republic of China (III) stipulates: "if the property right of a real estate purchased by one parent for their children after marriage is registered in the name of the investor's children, it can be regarded as a gift only to one of their children in accordance with the provisions of item (3) of Article 18 of the marriage law, and the real estate shall be recognized as the personal property of one of the husband and wife." Regardless of whether the equity held by Dong 2 is true or not, from the equity contribution of Dong 2 and its claims, the capital contribution is either from his parents or from his sister Dong 1. In the case of the former, with reference to the above provisions, the equity involved in the case should be recognized as a gift from his parents to Dong 2; If it is the latter, director 1 makes capital contribution for director 2, similarly, the equity involved in the case can also be determined as a gift from director 1 to director 2 by referring to the above provisions. Therefore, whether it is held on behalf or given, the equity involved in the case does not belong to the joint property of Ouyang XX and Dong 2. In view of this, the donation of the equity involved by Dong 2 to Dong 1 is not an act of malicious collusion between the two parties. To sum up, Ouyang XX's claim is not well founded and the court will not support it.


    The second is the common property of both husband and wife

    The joint system of marital property stipulated in article 1062 of the civil code (Article 17 of the former marriage law). According to articles 1062 and 1063, the property donated by one of the husband and wife after marriage belongs to the joint property of the husband and wife, unless the gift contract determines that it belongs to only one party.


    Cases using this theory:

    (2022) Liao 05 min Zhong No. 777: it is not clear that the gift is only given to Jin, so Jin and Dong are the joint owners of the equity interests involved in the case, and Jin has no right to dispose without authorization.


    Third, summary

    The view of common property between husband and wife is the mainstream view in the current theoretical circle, and it is also mostly used in court practice.


    It should be noted that the third judicial interpretation of the marriage law has been abolished and replaced by the first interpretation of marriage and family, which came into force on January 1, 2021.


    According to Article 29 of the interpretation of marriage and family series I, the view of "being regarded as a gift to one's own children" is no longer adopted in marriage, even in real estate. On the contrary, legislators believe that we should first judge according to the agreement; If there is no agreement, unless the gift contract clearly stipulates that it belongs to one party, it still belongs to the joint property of husband and wife.

    According to the time when the equity transfer occurred, when applying the law, it should be in accordance with the provisions of the second paragraph of Article 1 of the provisions of the Supreme People's Court on the application of the time effect of the civil code of the people's Republic of China. Civil disputes caused by legal facts before the implementation of the Civil Code shall be subject to the provisions of the then legal and judicial interpretation, unless otherwise provided by the legal and judicial interpretation.


    Attachment: Article 29 of interpretation 1 of marriage and family series


    Before the marriage of the parties, if the parents contributed to the purchase of the house for both parties, the contribution shall be recognized as a personal gift to their children, except that the parents expressly expressed the gift to both parties.


    After the parties get married, if their parents contribute to the purchase of houses by both parties, they shall be dealt with in accordance with the agreement; If there is no agreement or the agreement is not clear, it shall be handled in accordance with the principles stipulated in Item 4, paragraph 1, article 1062 of the civil code.


    3、 One of the husband and wife claims that it is not the common property of the husband and wife on the ground of holding on behalf of the other

    In judicial practice, if the holder claims that the equity is held on behalf of others, the fact of holding on behalf must be proved, otherwise the equity will be divided as the common property of husband and wife. As for the surrogate relationship between relatives, the evidentiary requirements are more stringent. The judge will make a comprehensive determination in combination with the agency agreement, common sense, capital exchanges, time nodes, etc., so as to deduce the true meaning between the parties.

    Case: (2019) zhe 01 min Zhong No. 371: about whether the 6.0606% equity of Jiaxing cross-border investment partnership registered in the name of Shi is the joint property of Shi and Tong. The court believes that this part of the equity was changed and registered in the name of Shi in February 2016, which belongs to the duration of the relationship between the two parties. If there is no sufficient evidence to refute, this part of the equity should be recognized as the joint property of the husband and wife. To this end, Mr. Shi submitted evidence such as holding agreement and transfer voucher to prove that 3.0303% of his equity was held on behalf of outsiders. The court of first instance also verified with the original shareholders and employees of the company. In combination with the facts of Mr. Shi and Mr. Tong about the funds and sources invested in purchasing the company's equity, as well as the fact that the amount of money remitted by the nominee to the original shareholders and the corresponding share of equity can be matched one by one, it is enough to convince people that Mr. Shi and Mr. Tong were able to raise 500000 yuan of funds to purchase 3.0303% of the company's equity under the condition of borrowing about 400000 yuan from their relatives.


    Suggestions on equity transfer

    In view of the current provisions of the civil code and the first interpretation of marriage and family, the author suggests that the following points should be paid attention to in future practice:


    1. When transferring equity, it is suggested to sign a written equity transfer contract agreement, in which it is agreed that the equity will be transferred to the transferee free of charge.


    2. When transferring equity, it may be recognized as a gift to both husband and wife in the following two cases.

    (1) Transfer the equity directly without signing a written agreement. If the agreement is unclear, it is recognized as a gift to the husband and wife.

    (2) Signed the equity transfer contract agreement, but did not practice the performance of the consideration, which was determined by the court: it is called a sale, but it is actually a gift. If the agreement is unclear, it is recognized as a gift to the husband and wife.


    3. If you hold equity on behalf of your parents, you'd better sign a written proxy agreement and keep remittance records.


    4. Article 1056 of the marriage Code stipulates that the husband and wife agree on the property system, and the husband and wife can agree on the ownership of the property obtained after marriage and the property obtained before marriage in the form of a contract before the conclusion of the marriage or during the existence of the marriage.


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