The Research On Reverse Lifting Corporation Veil

As the most dynamic form of economic organization among the market economyactivities of globalization nowadays, the corporation has magnificently been stimulatingpeople’s investment desire and encouraging them to create wealth under the help of theindependence of corporate personality and shareholders’ limited liability system. However,with the prosperity and development of China’s market economy, the phenomenon of abusingthe corporate entity and the shareholders’limited liability is frequently occurring. In2005, thearticle20th of Chinese revised Corporation Law made a response about it by introducing thetheory of the lifting corporation veil, which someone call it the denial of the corporationpersonality. This is the first country in the world to make that system，which is widely used inthe developed countries in Europe and America，in its written law. The system of the liftingcorporation veil can be explained as followings: when the shareholder tries to shirk thecorporation debts by abusing the independence of corporate personality and shareholders’limited liability by which leads to damnify the interests of the corporation creditor, thereforethe damnified company’s creditor can appeal to disregard the independence of corporatepersonality and shareholders’ limited liability, then make a claim to ask the shareholders totake responsibility for the corporation’s debts. It is the traditional theory in the name of thelifting corporation veil. The article20th of Chinese revised Corporation Law makes animportant role to rule the corporate governance mechanism, but there are some defects in theregulation itself when faces the intricacy of economic activities. Thus, to make a deepexploration to the article20th of the Corporation Law in the name of the reverse liftingcorporate veil should be necessary. The key point is to better conquer some new difficultiesduring juridical practice nowadays by the exploration of the article20th of the CorporationLaw.Today, the mainstream understanding of the Corporation Law article20th is that thedamnified corporate creditors can file a lawsuit to ask the shareholders to undertake their ownresponsibility when some shareholders were found using the independence of corporatepersonality and shareholders’limited liability to make harm to the corporate creditors’interest. But in many juridical practices nowadays, the responsibility frequently flows to the contrary inwhich the shareholders abuse the independence of corporate personality and shareholders’limited liability to evade their own debts by transferring their private properties to thecorporation in a lower price or non-price. Meanwhile, there is such a form that the shareholderuse his own privilege to transfer and embezzle corporation’s propertyamong sister companies,parent-subsidiary corporations and relative companies to evade his personal debts. Under thiscircumstance, the shareholder’s creditor’s interests are deduced and the healthy marketeconomic order is ruined. These burning issues to be solved should largely be dependent onthe theoryofreverse lifting corporation veil, which this paper will make a deep research.The theory of reverse lifting corporation veil can be divided into insider and outsiderlifting styles. The insider lifting refers to the situation that the shareholder files an applicationto disregard the independent legal entity of the corporation for some reasons. The result is thatthe company can feast a certain remission and protection which could only be enjoy by theshareholder. The outsider lifting refers to the case that the shareholders’ creditor asks thecompany to undertake the related responsibility in which the shareholders abuse theindependence of corporate personality and shareholders’ limited liability to evade their owndebts. In China, most of the juridical practices belong to the later one, so the liftingcorporation veil by the outsider (shareholders’creditor) will be made a further discussion andthe relative meaning and regulation will be excavated from the article20of the CorporationLaw.