Research On The Effect Of Limited Liability Institution

Limited liability regime, the core of modern corporate system, is an excellent windscreen to isolate the company form its shareholders so as to keep the company's liable property within the range of the company's whole property. The regime also makes a significant contribution in protecting the shareholder from the direct recourse of creditors, in stimulating investors'enthusiasm, in developing the sizable economy, as well as in perfecting the company's legal system. However, with the worldwide popularity of modern company's legal system, the externally risky problems inherent in the limited liability regime have undergone great criticism. Those problems make it easy for shareholder to circumvent the law and tort liability, resulting in the danger of abusing the regime, which seriously damages the legitimate rights and interests of creditor.In terms of the negative problems concerning the limited liability regime, countries have undertaken extensive exploration and trial, theoretically and pragmatically. Currently, the priority lies in the creation of a theoretical basis, on which the limited liability regime could be limitedly applied. The limited application of limited liability regime derives from Piercing the Corporate Veil in the Common Law and Durchgriff in the Civil Law System. It refers to the legal measure(in response to the realization of equity and justice) that denies the limited liabilities of shareholders and holds shareholders responsible for creditors'interests and social and public interests concerning particular facts of a specific relationship in order to prevent the abuse of corporate personality and to protect creditors'interests and social and public interests. The newly-enacted state Company Law also introduces the measure. As a fine supplement to limited liability regime, the limited application of limited liability regime merely focuses on the judicial rules, namely afterward relief, and is difficult to operate and master in judicial practices.While perfecting the afterward compensation mechanism of limited liability regime, the prime way to fully exert the positive effects of limited liability regime consists in strengthening company's beforehand control,estimating and modifying the risk-preventing mechanism and complementary laws so as to nip illegal activities in the bud.