On Denial System

The corporation's independent entity and the limited liability of the shareholders are the basic principles of the contemporary corporation system. They have made marvelous contribution to the promotion of investment and the development of economy. However, in the business practices, the phenomena that the shareholders abuse the principles of the corporation's independent entity and their limited liabilities to invade other parties'benefits happen all the time, which has badly damaged the healthy development of the corporation's entity system. In order to regular such behaviors of abusing rights, the theory of disregard of the corporation's entity emerged as the times require. This paper introduced the provenance and development of the disregard of the corporation's entity, and analyzed its essence and characters. On the basis of that, this paper further expounded the applicable extension of the disregard of corporation's entity, demonstrated the two main situations of applying this theory—objective confusion and subjective elusion, and oppugned several other situations that were commonly misunderstood as the situations of applying the disregard of corporation's entity. Finally, this paper made some suggestions on the further development and perfection of the disregard of corporation's entity in China's legislative system, in the hope that this theory would be applied legally and properly so that it could make sufficient influence on balancing legal relations, regulating shareholder's behaviors of abusing rights, and promoting the healthy development of the corporation's entity system.