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On uncover corporate veil system in the plight of China's judicial practice

Author: ZhangZhenGuo¡¡ZongYanYan From: www.yourpaper.net Posted: 2009-11-27 21:14:15 Read:
[Abstract] piercing the corporate veil system with limited liability system is the core of the modern corporate system. At present, our company law on piercing the corporate veil system in relation to, but, in practice, this provision is difficult to be implemented. In order to improve the status quo of some companies use wantonly damage the interests of the creditors of the limited liability system, we should proceed to change the burden of proof, so piercing the corporate veil system truly implement.
[Words] opened the interests of creditors of the corporate veil system

In 2008, a bank, a piece of paper pleadings, A company is taken to court, to require the company to repay a loan of 14 million. Defendant at the same time, there are several other companies, they are guaranteed for Company A and Company B, and suspected to be confused with A Corporate Personality C, B corporate personality to be confused with the small company, allegedly financed untrue E company of the shareholders of the Company A has company. After the first trial, the second trial, court judgments and B bear the responsibility for repayment, but requires C, D, E, has bear joint and several liability for repayment claim was dismissed. In accordance with this judgment, the bank can not recover the loans, because Company A and Company B are three no company that is a non-cash, no stock of goods, no fixed assets. Odd on odd, and B Company of Business examined and seems, both a year in profit, that huge sum of loans and an enormous amount of registered capital in the end gone?
Throughout the case, banks are able to recover the loans, the key is whether piercing the corporate veil. Piercing the corporate veil system, also known as "Disregard of Corporate Personality, corporate legal personality denied" exception to the treatment of limited liability of shareholders, "Shareholders Straight Responsibility", refers to the controlling shareholder and breach of the principle of good faith in order to evade legal obligations or responsibilities abuse of legal personality or the treatment of limited liability of shareholders, resulting in serious damage to the interests of creditors, the court or arbitration institutions have the right to order the controlling shareholders directly to fulfill their legal obligations to the creditors of the company, liable for. Disregard of Corporate Personality System and shareholders limited liability system is one of a, together constitute the core content of the modern corporate system. The view of the shareholders of a limited liability system is the cornerstone of the modern corporate system, is the essence of the entire company system, therefore, the corporate veil can not be easily opened, which is the consensus of the national company system. Some companies, however, is the use of the system, the name of a limited liability, accusing him of prejudice to the interests of the creditors of the real and full of tricks, doing their utmost. In this case, if the limited liability shield is damage allowed the benefit of creditors, I am afraid that will be a significant departure from the original intention of the modern corporate system.
A relatively complete system of companies in developed countries, most countries make use of precedent on the detailed rules for piercing the corporate veil system. The third paragraph of Article 20 of China's new company law provisions for piercing the corporate veil system: "The abuse of shareholders of the Company the corporate independent status and limited liability of shareholders, to evade the debt, and serious damage to the interests of the creditors of the company, should the company's debts jointly and severally liable. "the liability of the shareholders of this provision, although clearly using illegal prejudicial to the interests of the creditors, but the the complex practice illegal situation can be described as beyond their grasp. This will combine the above case, unite representations practice illegal situation, learn from foreign companies regime scientific attitude, to seek the protection of the interests of the creditors in the corporate system in China.

Illegalities registered funds are not available, and the withdrawal of funds for

In the above case of amyl company and have the company on the use of means of false registered capital. A company established view from the industrial and commercial registration, registered capital of 450 million, after the capital was increased to 24,500,000. The company was founded inject capital verification certificate as evidence of audit firms, but the change of its registered capital, only prove operand of an administrative agency. The problem is to increase the registered capital in accordance with the legal provisions of the parties, the company must have an accounting firm or audit firm verification certificate, Company A capital increase with a paper proof is puzzling. Bank after the discovery of this problem, several apply to the court for replenishment A Forensic Accounting rejected. Company A and E, F Company also firmly opposed to the application of the bank, more doubtful of the authenticity of the capital increase.
False registered capital more easily eluded capture, the withdrawal of funds for "security" much more. First, a fund patchwork cope through verification, once the company is established, that an enormous amount of registered capital for capital to bank loans. Once the loans hand, immediately buy high and sell low, held their own company quality equity borrowing activities between associated companies can not achieve the adverse equity or non-performing loans, or even directly through affiliated companies, emptied the essence etc. Bank found that these acts may have been more than the right to revoke the exercise period, can only sit back and large loans were missing.
View from our judicial practice, only the company of these circumstances there is conclusive evidence, will it be possible to pierce the corporate veil, but in the United States, a wider range prove more difficult is also greatly reduced. U.S. courts in the judicial practice refined significantly less than the concept of equity capital, namely: the company's equity capital invested by shareholders from creditors to debt financing of capital between obviously not a direct proportion of the company's capital phenomenon. Significantly less than the equity capital of the company is too thin an equity capital of the company. "Equity capital" refers to the defendant shareholders, including the shareholders' investment in the company's total equity capital and debt capital refers to the debt financing of capital by the Company from all creditors, including the plaintiff creditor, but not limited to the proposition of piercing the corporate veil The specific amount of the claims of creditors. Equity capital significantly less than both the the shareholders funded below the minimum registered capital, including shareholders' capital contribution is higher than the minimum registered capital, but significantly lower than the nature of the industry, the company is engaged in the scale of operation (including turnover, sales), hired scale and liabilities of scale required equity capital. Significantly less than the equity capital, including capital shortage and the company at the beginning of the start-up of the company after the operations into a lack of capital, the court as a reason and successfully opened the proportion of the corporate veil to 73.3%, and China's court in piercing the corporate veil carefully In stark contrast. Second, the legal personality of the illegal circumstances be confused with

In the above case, Company A and C companies held by the main property - hall - the same, attributable to C Company took over the accounts receivable of the Company A and Company C to carry out the business is Prorocentrum business, usually C Co claiming A company changed its name from, Once the door Yaozhang is, C Company immediately "disowned", said any relationship with the Company A. Moreover, a certificate issued by the company C can not prove A, C Company showroom transactions between company C should belong to the A's receivables returned to Company A can not prove. In view of this, the bank side application between the A and C companies of the so-called financial dealings Forensic Accounting, A, C do not agree to the same court also rejected the bank's application.
The other two companies, B, D, A, C situation much in common: the same shareholding structure, the same registered address, the same business were exactly the same, and even Contact, in short, except for the name is different, B is Ding, Ding B. Even if this is the case, B, D veil or has not been opened.
Legal personality confused with tend to be more complex, the situation is changing as assets or property boundary confusion between the two companies, regardless; in the financial aspects of the confusion between the two companies, regardless, and even share an account, shared a bank account; in the operational aspects of the confusion between the company, regardless of, or presence of inheritance relations; the institutional confusion between the shareholders and the company, regardless of the two companies a marketing department, office, etc.; confusion, regardless of the company in terms of personnel between between the company's directors, managers and other senior management personnel the cross worked excessive number; a mean authorities paralyzed, another company directly manipulate the company's decision-making activities, as well as other aspects of personality confused with.
Legal personality to be confused with the obvious, the higher frequency compared to the previous case, the veil has been lifted According to statistics, in the United States due to the company's records or personnel confused with, including directors, managers, bank accounts, books, property, business activities be confused with, contract management, and therefore the court should be regarded as a legal personality to be confused with the proportion of 85.7%.
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