On The Analysis And Reconstruction Of Shareholders’ Liability Rules

The company law of our country is in a great change that has not happened in a century.Under the dual drive of promoting entrepreneurship innovation and curbing abuse of rights,the legislation and judicial practice of shareholders’ liability rules are often uncertain,which is rooted in the lack of clear theoretical guidance and unified rule system.The basic theories of shareholders’ liability rules mainly include the theory of entity law,the theory of enterprise law,the dualistic theory,the responsibility theory based on control and decision-making,etc.China’s legislation and judicial practice adopt the principles and concepts of the theory of entity law,but it also draws on the specific rules of the theory of enterprise law to varying degrees,which not only triggers the internal conflicts of mainstream theory,legislation and judicial practice,but also leads to a large number of false referees,and even forms a paradox of different judgments in the same case.Therefore,the rule of shareholders’ liability in China is to adhere to the theory of entity law,or to adopt the theory of enterprise law,or to open up a new path,which is a major theoretical issue that needs to be resolved urgently.In order to clear up the fog of the theory,we should study it deeply and analyze the specific rules of shareholders’ liability in China one by one.Firstly,the obligation of capital contribution is the most important obligation of shareholders.As for the capital subscription system,the existing research mainly focuses on whether the non-matured capital contribution should be accelerated to maturity,but has not yet paid attention to the legal effect of accelerating the expiration of the non-matured capital contribution in the case of bankruptcy and dissolution:once a company forms a high and long-term capital contribution structure,it will form a trap effect,which will drag shareholders into the risk of joint and several liability;it will form a lame effect,which makes it difficult for the company to cope with the occurrence of major adverse events;will form a lock-in effect,making it meaningless for the company to amend its constitution.For long-term and rigid payment deadlines,it is of little significance to introduce a call-up payment mechanism.China has already abolished the minimum capital limit,and the capital subscription system has been harmful but not beneficial.We should abolish it rather than patch it up.At the same time,due to the limitations of the capital system and the abolition of the minimum capital restriction,even if shareholders fulfill their investment responsibilities,it is difficult to solve the problem of insufficient capital of the company.Therefore,we should introduce the rule of undercapitalization.The relationship between the undercapitalization and shareholders’ liability needs to be specifically developed in the rule of piercing the veil and equitable subordination.Secondly,the rule of piercing the corporate veil is the most important exception to the principle of limited liability of shareholders.The Supreme People’s Court’s judgment on the rule of piercing the veil is in fierce conflict with the mainstream theory.The former requires the plaintiff to prove that the abuse of corporate personality by controlling shareholders seriously damages the interests of corporate creditors,which belongs to the theory of entity law;the latter holds that controlling shareholders are supposed to be responsible for corporate debts based on the existence of complete control relationship or undercapitalization,which tends to the theory of enterprise law.On the basis of tracing back to the origin of the case law of piercing the veil in the United States,the rule of piercing the veil can be divided into two types:the rule of regulating the direct behavior of shareholders and the rule of regulating the abuse of control by controlling shareholders or actual controllers.The theory of entity law has obvious advantages in transaction costs,property rights protection,capital agglomeration and judicial practice.The Company Law has established a legislative system based on the theory of entity law.The Supreme People’s Court’s determination to defend the legislation is rock solid and should be upheld.Mainstream theory violates the principle of prohibiting abuse of rights,rules of proof and other legal provisions,which can easily lead to wrong judgments and damage the legitimate interests of innocent shareholders and their creditors,and should be corrected.However,the Supreme People’s Court limited the legal basis for piercing the veil to Article 20 of the Company Law,failed to fully understand the scope of actual controllers,and failed to expand the types of piercing the veil that regulate the abuse of control by controlling shareholders or actual controllers in accordance with Article21 of the Company Law.The rule system of piercing the veil should be reconstructed in accordance with the provisions of Article 20 and Article 21 of the Company Law.Thirdly,the rule of equitable subordination developed from the rule of piercing the veil.Since the Supreme People’s Court promulgated the typical case of "Shagang case" which used the rule of equitable subordination for reference,people’s courts at all levels in China have actively explored the rule of equitable subordination,but their judgment ideas are quite different and need to be unified urgently.The focus of the controversy is whether it is based on the identity of shareholders,or on control,or on the fact that the unfair abuse of control results in damage,to subordinate the contractual creditor’s rights of the company’s controllers.Based on the analysis of the original text of the landmark cases of American equitable subordination,this paper analyses its rules,elements and boundaries.Compared with automatic subordination,equitable subordination has obvious advantages in protecting the interests of creditors,regulating corporate governance and maintaining limited liability.It is in line with the inherent requirements of our legal system and should be adopted.However,the "Shagang case" exposes the tendency of some people’s courts to automatic subordination in the name of equitable subordination.In view of the abolition of the minimum capital limit in the Company Law,China should introduce the rule of equitable subordination as soon as possible to complement the rule of piercing the veil and jointly curb the abuse of control by corporate controllers.The expression and contribution of Chinese law to the rule of equitable subordination can be realized based on the provisions of Articles 20 and 21 of the Company Law.Fourthly,the liquidation responsibility originally belongs to the liquidator responsibility,but the judicial interpretation of the Company Law creates the rules of liquidation obligor and forms the rules of liquidation responsibility based on shareholder identity.The company has three different situations: voluntary dissolution,administrative dissolution and judicial dissolution,which need to be dealt with by classification.Unified rules of liquidation obligor ignored the administrative dissolution of the company is often in the empty,illegal,criminal reality,ignoring some of the controlling shareholders,directors do not want,nor is it suitable for the actual obligations of liquidation,ignoring the passive shareholders,creditors cherish the right to liquidate but difficult to obtain the reality of the dissolution of information in a timely manner,which makes it difficult for some liquidation obligors to fulfil liquidation obligations.The system of responsibility for liquidation is confused and the effect of practice is worrying.We should improve the rules of commercial registration for dissolution,exclude unqualified liquidators,allocate liquidation powers to the most precious and qualified persons,abolish the rules of liquidation obligors,return to liquidator centralism and rebuild the company liquidation rules.On this basis,the liabilities related to liquidation can be divided into directors’ liabilities before liquidation and liquidators’ liabilities in liquidation,as well as tort liabilities with other persons,so as to solve the confusion of liquidation liability system.Fifthly,the principle of shareholder’s own responsibility is the bottom line of shareholder’s liability rules.As to whether shareholders can be required to be responsible for the company’s actions and debts on the basis of their identity,"Shagang case" and "Guidance Case No.9" have been involved,but no universal conclusion has yet been reached.The "Delixi case" in the Bulletin of the Supreme People’s Court provides an opportunity to solve the problem.The abbreviature of adjudication of the judgment of the "Delixi case" require shareholders to bear the duty of care for the notice of capital reduction which should be responsible by the board of directors,ignoring the differences between general shareholders and controlling shareholders and between controlling shareholders and directors,which is contrary to the provisions of the company law on shareholders’ rights and directors’ duties.It can not only not meet the diversified control needs of the company,but also stimulate shareholders’ absolute control of the company and induce morality risk,expelling passive shareholders,destroying the principle of limited liability of shareholders,dissipating the company’s most important capital agglomeration function,ultimately harming the interests of creditors.On the contrary,Jiangsu Provincial Higher People’s Court Reference Case "Thirteenth Smelter Case" requires shareholders to take care of their own behavior,which not only conforms to the law,but also protects the interests of creditors.It has been affirmed by the Supreme People’s Court,and has corrected the wrong jurisprudence of the "Delixi case" to a certain extent,which deserves praise.Based on the comparative analysis of civil law and company law,we can draw the general legal principle of shareholder’s own responsibility,that is,except for the responsibility of capital contribution,unless otherwise stipulated by law and articles of corporation,shareholders are not personally liable for the company’s behavior and debts,unless they are personally liable for their own actions.To sum up,we should safeguard the legislative system of the theory of entity law established in the Company Law,and the strong position of the Supreme People’s Court that the rule of piercing the veil must have the indispensable elements of personality abuse,and that the plaintiff should bear the burden of proof of the overwhelming advantage.On this basis,we should reconstruct the rules of shareholders’ liability: First,the system of shareholders’ obligations is improved.Defining the capital contribution obligation is the most important obligation of the shareholders,abolishing the subscription system,changing it to the paid-in system,removing the hidden dangers of the joint and several liability of the shareholders;establishing the fiduciary obligations and prevent bankruptcy obligations of controlling shareholders or actual controllers,and introducing the rule of undercapitalization into the test system of piercing the veil and equitable subordination,and effectively protecting the interests of the company and creditors.The second is to rebuild the system of imputation principle.Defend the principle of prohibiting the abuse of rights,reconstruct the rule of piercing the veil and equitable subordination based on the abuse of control by controlling shareholders or actual controllers rather than on the existence of control relationship;establish the principle of shareholders’ own responsibility,and abolish rules such as automatic subordination,liquidation obligor,and vicarious liability based on shareholder identity.The third is to clarify the legal result system.We should build a legal result system based on the principles of filling liability（violating the obligation of investment）and liability for damages（violating the fiduciary obligations）,with unlimited joint and several liability（leading to confusion of property and impossibility of liquidation）as an exception,eliminate the universally applicable rules of unlimited joint and several liability of shareholders,and correct the tendency of changing equitable relief into punishment.Finally,a shareholders’ liability rule system based on the theory of entity law is established,which adheres to the principle of shareholder’s own responsibility and prohibits abuse of rights,has clear direction,complete system and logical order.