After the shareholders withdraw their capital

This article is transferred from: Jiangsu Legal News

【Case Facts】

A company was established on March 24, 2009, with Geng as the legal representative, and shareholders Geng and Di, who also served as the company’s supervisor. At the time of establishment, the company’s registered capital was 6.66 million yuan, with Geng contributing 6 million yuan and Di contributing 660,000 yuan. During this period, the company underwent multiple rounds of capital increases, with both shareholders increasing their contributions. On February 11, 2015, the company further increased its registered capital by 30 million yuan, with Geng and Di contributing 18.3 million yuan and 11.7 million yuan, respectively. After the capital increase, the company’s registered capital was 66.66 million yuan, with Geng’s contribution amounting to 40.6626 million yuan and Di’s contribution to 25.9974 million yuan. On February 13, 2015, Geng transferred 30 million yuan from the company’s account to his personal account and closed that account on March 5, 2015.

Geng and Di are married, having registered their marriage in 1989, and they divorced by mutual agreement on February 26, 2016.

In 2019, a court tried the case of Geng and Di’s withdrawal of capital, determining that Geng and Di’s act of transferring 18.3 million yuan of capital increase funds out and closing the capital increase account constituted capital withdrawal. The court ruled that Geng should bear supplementary compensation responsibility for the principal and interest of the portion of the company’s debts that could not be repaid within the scope of the 18.3 million yuan withdrawn. Di should bear supplementary compensation responsibility for the portion of the company’s debts that could not be repaid within the scope of the 11.7 million yuan withdrawn.

On July 26, 2022, creditors applied for a “transfer to bankruptcy” for the company, and the court ruled to accept the bankruptcy liquidation case of the company. During the bankruptcy liquidation, the creditors’ meeting agreed to convert the bankruptcy liquidation to reorganization and approved the reorganization plan. Meanwhile, the company’s administrator pursued debt recovery externally according to the decisions of the creditors’ meeting and the reorganization plan and held shareholders accountable for capital withdrawal.

【Analysis】

After Geng and Di made the capital contributions, they transferred the capital increase funds from the company’s account to Geng’s personal account under the guise of a loan and closed the account, which constitutes capital withdrawal. When shareholders withdraw capital, the company can request that they return the principal and interest of the capital and hold other shareholders who assisted in the capital withdrawal jointly liable, which should be supported by the people’s court. In this case, although the entire 16 million yuan of capital increase funds was withdrawn to Geng’s personal account, the withdrawal occurred on February 21, 2014, during the existence of Geng and Di’s marriage. Additionally, since Di was both a shareholder and supervisor of the company, she is deemed to have knowledge of and assisted Geng in the capital withdrawal and should bear joint liability for Geng’s capital withdrawal. Both defendants should jointly return the 16 million yuan of withdrawn capital and interest to the company. The 18.3 million yuan capital already had a court ruling that Geng should bear supplementary repayment responsibility for the portion of the company’s debts that could not be repaid within the scope of the 18.3 million yuan withdrawn. If Geng has fulfilled the obligations determined by the effective judgment of the court, then in this case, Geng should return the principal and interest of the withdrawn capital to the company after deducting 4.7 million yuan from the 18.3 million yuan. Di bears joint liability for this.

After the company was “transferred to bankruptcy,” with the agreement of the administrator and the creditors’ meeting, it transitioned to bankruptcy reorganization and approved the reorganization plan. The company’s reorganization was successful, with investors using cash to properly settle the company’s employees’ debts, achieving 100% repayment of employee claims. The administrator improved the repayment rate of ordinary creditors gradually by liquidating the company’s land and properties and recovering funds from shareholders who withdrew capital, resolving debts of over 50 million yuan. During the handling of the bankruptcy case, the court guided the administrator based on the debtor’s asset status and creditor situation, maximizing the realization of the enterprise’s asset value and operational value, promoting the optimal allocation of market resources, achieving a rebirth of the bankrupt enterprise, and creating a sound economic order and business environment, truly reflecting the role of bankruptcy adjudication in optimizing the business environment and serving the high-quality economic development of the jurisdiction.