On Legal Problems Caused By Veiled Physical Contribution

Veiled physical contribution refers to a way of evading strict regulation on physical contribution from law by asking the company to purchase the property originally contributed to the company from the initiators after registry of corporate, while initiators contribute money at the time of establishment. As this is no longer the physical contribution but the transactions, the founders are likely to overvalue the property by taking advantage of their authority over the company, resulting in endangering the capital abundance and the creditors'interests. The current Company Law of People's Republic of China does not adopt the concept of veiled physical contribution. However, as one of the ways of evasion of physical contribution, veiled physical contribution does exist in the practice of the establishment of company.This paper focuses on several legal issues about veiled physical contribution. This paper covers three parts , which try to handle problems as follows:The first part brings in the problem of the veiled physical contribution by introducing the legislation of physical contribution in different countries. It also intensively discussses the theoretical points of the veiled physical contribution as to its concepts, roots, types, composing elements and influence thereof. It indicates that veiled physical contribution is a way of evading physical contribution stipulation. And defines the study scope of the present paper at the same time: according to our company law, it is only allowed to use the way of physical contribution in the stage of a company's establishment. Therefore, the paper mainly explores the problems of veiled physical contribution in the stage of a company's establishment.In the second part, the paper compares different regulations of veiled physical contribution from two legal families. It points out that there exists big differerces in structure, appearance and legal effect between two legal families. Then it provides reasonable basis for regulating veiled property contribution by comparing merits and demerits of different provisions from two different legal families.In the third part, on the strength of discussion about some areas involving the relevant regulation of veiled physical contribution and the existing problems in our current company law, the paper gives some advice on improving the legislation of...