Study On Piercing The Corporate Veil Of The Holly Owned Subsidiary Company

The principle of limited liability of shareholders and the principle of the independence of corporate personality are the two cornerstones of the corporate system. Due to the dominant position of the shareholders of the Company within the institutional framework of corporate personality, as well as the corporate system potential moral risk factors, as well as corporate personality system itself on the shareholders’restraint mechanism defects, in order to protect creditors and stakeholders rights, company law introduces a system of legal personality denied.Plays a very important role in today’s world, the parent company and its wholly owned subsidiary of Enterprise Group in the world economy, a wholly owned subsidiary of the Personality Denial System, there are a lot of particularity, on the one hand, the parent company and its wholly owned subsidiary of better able to promote economic development, in line with the relevant confidentiality requirements of the enterprise; on the other hand, caused by the parent company and a wholly-owned subsidiary of the special control relations prone to lead to his personality to be confused with the phenomenon. There is not specific regulation on wholly-owned subsidiary personality denied in China; the20th term of the Companies Act and the provisions of section64is too general and unreasonable, without taking into account the special circumstances of a wholly owned subsidiary. In terms of the capital, a wholly owned subsidiary of the financial statements and the parent company merger; in terms of the organization, a wholly owned subsidiary of major policy decisions is made by the parent company. These facts can easily generate property confuse and organizations to confuse the situation, disregard of corporate personality system can certainly protect the interests of creditors, but in practice rashly disregard of corporate personality system will damage the social and economic development.Therefore, to reach equilibrium, it is necessary to made a detailed regulatory on personality deny system on a wholly-owned subsidiary. For the hotchpot, to provide security for assets with the principle of "Deep Rock"; for the confused with organizational, can use financial regulation, while the use of "shadow director theory"; for the accountability, distinguishing the breach of contract and tort liability can effectively balance companies and the interests of the creditors. In judicial practice, particular emphasis on the allocation of the burden of proof, you can use the inversion system of the burden of proof, require the parent company put the proof for a wholly owned subsidiary independently, and the burden of proof should have a detailed requirement for the contents and the method of proof.