Civil Liability Of Shareholders Illicitly Withdrawing Capitals

The case that, in the limited liability company of Yuxi Department Store one shareholderKe Weifeng illicitly withdraws capitals, is a typical case in the Chinese Corporation Law.This article, based on cases, makes an analysis on the relevant issues with civil liability ofshareholders illicitly withdrawing capitals. The article is divided into four sections.The first section introduces the civil liability of shareholders illicitly withdrawingcapitals towards the company. The behavior of shareholders illicitly withdrawing capitalsseriously invades the company’s interests. Therefore, the company has the right to require theshareholder fully pays his capital contributions. Meanwhile, the shareholder should pay theinterest at the Bank’s rate for the same term when illicitly withdrawing capitals. Besides, theshareholder should bear civil liability towards the company’s loss, which is caused by illicitlywithdrawing capitals.The second section introduces the civil liability, which the shareholder illicitlywithdrawing capitals should take towards the other shareholders who have fully paid theircapital contributions. In this part, the author provides the law ground and makes an analysison the responsibility of breach of contract which the shareholder should take towards theother shareholders who have fully paid their capital contributions. The other shareholders canenquire civil liability of the shareholder illicitly withdrawing capitals by restricting his equityownership in the company, and also the company’s Shareholder Representatives can sue theshareholder in court to enquire his civil liability.The third section introduces the civil liability, which the shareholder illicitly withdrawingcapitals should take towards company creditors. The behavior of the shareholder illicitlywithdrawing capitals undermines the integrity of the corporate property, and in seriouscondition creditors’ rights can not be achieved. Therefore, the creditors can enquire theshareholder’s civil liability through action of subrogation and personality denial proceedingsof corporate juridical person.In the last section, the author puts forward suggestions for the concerning issues. Basedon discussing and summarizing China provisions on civil liability of shareholders illicitlywithdrawing capitals, the author puts forward some effective suggestions to improve theinvestigated system and the procedures system for more specifically enquiring the civil liability of shareholders illicitly withdrawing capitals.