On The Identification And Civil Liabilities Of Withdrawing Capital

Capital is the most basic liability of shareholders. Withdrawing capital meansthat the properties contributed by shareholders shall be taken back after the companywas founded, which seriously erodes the company’s assets and causes the company’sfalse registered capital. If shareholders withdraw their capital and escape, they stillenjoy shareholders’ rights, in accordance with the original ratio of contribution, suchas corporate management, profit distribution, new shares subscription, residualdistribution of properties and other rights. The company still presents an illusion thatit has abundant capital. This not only harms the rights and interests of the company,adequately paid-in shareholders and corporate creditors, but also severely damagesthe healthy survival and stable development of the market economy. The CompanyLaw of the People’s Republic of China only specifies the prohibition of shareholders’withdrawing capital. There are no specific provisions about the consequences ofliabilities. The Company Law stipulates the common examples of withdrawingcapital behaviors in details, as well as the withdrawing capital shareholders’ civilliabilities, etc. to the company, adequately paid-in shareholders and creditors andimproves the previous imbalance in corporate legislation, namely,“emphasizingcriminal and administrative liabilities, while neglecting civil liabilities”. AlthoughExplanation (III) to Company Law of the People’s Republic of China expresslystipulates the withdrawing capital of shareholders, but it doesn’t mean that a perfectinterpretation has been given on relevant legal issues about withdrawing capital. Westill need to conduct a comprehensive analysis into the identification of withdrawingcapital and resulting civil liabilities, etc.This paper is divided into four parts:Part One, the concept of withdrawing capital. From the concept of withdrawingcapital, this part analyzes the definitions of “withdraw” and “contribution”respectively. To further clarify withdrawing capital behaviors, this part distinguisheswithdrawing capital and legal capital reduction, legal share withdrawal, legitimate share buybacks, legal borrowing, feigned capital contribution, duty encroachment,embezzlement and other situations that are easily confused. This part serves as a basicintroduction and analysis of necessity in the rest of this paper.Part Two, the identification of withdrawing capital. This part analyzes thestarting time, subject, object and manifestation of withdrawing capital. When settingforth withdrawing capital, this author combines specific examples about theshareholders’ withdrawing capital in legal practice and conducts detailed analysis intothe judicially recognized standards for withdrawing capital behaviors.Part Three, the civil liabilities of withdrawing capital shareholders. First of all,the means by which withdrawing capital shareholders undertake a civil liability is toreturn the contribution and compensate for the losses. After that, methods toinvestigate the civil liabilities of withdrawing capital shareholders are discussed. Onthe one hand, the company delists withdrawing capital shareholders. On the otherhand, shareholders can file a lawsuit. The company and other shareholders canrequire withdrawing capital shareholders to return the contributed principal andinterests. Creditors can file a lawsuit to withdrawing capital shareholders, too, torequire them to undertake supplementary compensation liabilities to the creditor’srights. Even when the company is insolvent and seriously harms the interests ofcreditors, creditors can propose disregarding of corporate personality and order thewithdrawing capital shareholders to undertake joint liabilities.Part Four, other civil liabilities of withdrawing capital. In this part, the civilliabilities to assist withdrawing capital, the civil liabilities to advance capital forwithdrawing capital and the civil liabilities after stock right transfer are discussed.Through the discussion above, this author sets out the theoretical system ofwithdrawing capital and expounds the civil liabilities that withdrawing capitalstakeholders should bear and the remedies for shareholders. This paper has greattheoretical and realistic significance.