Research On Reverse Piercing Of The Corporate Veil For External Creditors

The independent legal entities system of company is regarded as the cornerstoneof modern company law, and it has an indelible historical significance to encourageinvestment and stimulate the development of the society and economy. However, theindependent legal entities system provides the shareholders with the opportunity toavoid some certain obligations. Taking the inherent defects of the company’sindependent legal entities, some shareholder deliberately do something so as toultimately achieve the goal of encroaching on the company’s assets and escape debts,which not only infringes the interests of creditors, but also seriously disturbs thesocial economic order,and moreover, which is against the legal value of justice.To adjust such abuses of independent legal entities and repair the defects ofcompany independent legal entities system, American company law scholars take thelead in designing the system of Piercing the company veil by denying it in some casesthat the company is independent to the shareholder’s personality, in order to achievethe balance of different interests, which is soon referred to by other nation’slegislation. Given system of piercing the company veil has only taken it inconsideration that shareholders’ taking use of the independent legal entities mayinfringe the company creditor s’ interest, the constitutive requirements has no use inthe other situation that the independent legal entities may infringe the other shareholders’ interests.However, as a matter of fact, there are a lot of different situations, such as,shareholders (especially the shareholder is also the legal person) fraudulently transferthe assets to his own controlled company, group companies controlled by the sameperson (i.e. between brother companies) take the use of correlation in transferringassets, or in unfair transactions, or in the confusion or personality, which eventuallyavoids external debt (usually they are the shareholders’ own debt). Therefore,expanding the scope of the explanation of Pierce the company veil system is essentialto introduce external reverse piercing the company veil system, thus the externalcreditors can protect their own interests by piercing the company veil system.This article describes the piercing the company veil system in three aspects.Firstly, it interprets the similarities and differences between the basic principle ofreverse piercing the company veil system and the traditional one. It emphasizes on theevolution and process of the two basic types of the reverse one in the theoreticalresearch and judicial practice. And it also makes a preliminary discussion aboutintroduce of these two theories. Secondly, by describing the solid theoretical basis, therequirements in the judicial practice, and irreplaceability, the article explains thelegitimacy of the theory. Finally, the article makes a preliminary design of theapplicable occasions constitutive requirements of the précising the company veilsystem, which is a brief reference for later research.