Comment On The Disregard Of Corporate Personality To Zongheng Company In The Enforcement Procedure

Legally, the acknowledgement and adoption of Disregard of CorporatePersonality by the new Company Law in China is a major breakthrough. However, theprovisions on Disregard of Corporate Personality are too principled that there areshortcomings. By analyzing an enforcement case from different perspectives, thisarticle is mainly to consider the examination of Disregard of Corporate Personality injudicial, and especially, executive practices, in hope of making its theories specificand deficiencies clearly shown. The controversial focus of this case lies in whetherthe actions taken by shareholders of Zongheng Company are regarded as abuse ofcorporate personality, whether the direct application of Disregard of CorporatePersonality by the court in enforcement procedure is legally supported and against theprocedural justice. It could be seen from this case that the Disregard of CorporatePersonality system is imperfect. The provisions on Disregard of Corporate Personalityset in China’s new Company Law is over principled, which makes it less applicableand hard to reach consensus on recognition and judge accurately. These problemsincrease the complexities in dealing with this case. What’s more, the inappropriatedistribution of the burden of proof once gets the case’s ascertaining process into adeadlock. Bypassing the civil judicial procedures and directly applying to Disregardof Corporate Personality system, it remains controversial to identify the shareholdersas the people subjected to execution. To achieve the balance between the creditors andshareholders and safeguard procedural justice, the application conditions for theDisregard of Corporate Personality system should be set explicit and clear, whilerelevant civil hearing procedures in implementation should be perfected.