Criticism To The Theory Of Disregarding Corporate Legal Personality

Generally Speaking, Chinese academia supports the statute of disregarding corporate legal personality. A popular view is that this statute, which is constituted by The Company Law of the People's Republic of China (new edition of 2006), is a supplement to the Limited Liability Corporation. Academia believes that this statute can prevent the abuse of corporate legal personality by shareholders, so that protect the rights of creditors better. However, I have different views about this statute. The following paper will discuss it thoroughly in four parts.The first part focuses on the differences between the statute of disregarding corporate legal personality in Common Law and the statute in Continental Law. Because of the existence of different standards within this statute, many countries are cautious to treat it no matter from Legislation or the process of real applying.The second part analyzes some related rule of laws in Legislation and Judicature. The author figures out that there is not a substantiality statute about disregarding corporate legal personality. The twentieth clause and the sixty-fourth clause of The Company Law of the People's Republic of China (new edition of 2006) have discrepancy with the statute of disregarding corporate legal personality. Since The Company Law of the People's Republic of China (new edition of 2006) has some certain objections about this statute, it cannot perfectly protect the rights and interests of creditors.The third part discusses the relationship between Shareholder Limited Liability and the statute of disregarding corporate legal personality. This part also combines the current trend of Chinese economy development to prove that Shareholder Limited Liability is unshakeable. In general, the application of this statute merely temporary solves the issue of the abuse of corporate legal personality in a specific period of time.The fourth part addresses how to protect the interests of creditors by consummating corporate governance construction, the system of rescission right, and the system subrogation right. Furthermore, this part explains how to consummate the current statute of disregarding corporate legal personality during interim; so that it can be used in a cautious way and not damage to the shape of Limited Liability Corporation.