Research On Legal Liability Of Company Actual Controllers

In recent years, some of the company actual controllers often abuse the control power to damage the rights of company, shareholders and creditors in judicial practices. Meanwhile, because the research of company actual controller system in China is not mature enough and the relevant laws and regulations are not clear, the behaviors of abusing the control power are not regulated effectively. So strengthening the administration of company actual controller is necessary, especially for the regulation of legal responsibility.This article is divided into four parts. The first part introduces the basic theory of company actual controller from 3 aspects: clarifying the concept of company actual controller, contrastive analyzing the related concepts between company actual controller and company law, and deepening the understanding of nature and characteristic about the company actual controller by elaborating the relationship between company actual controller、the controlling shareholder、related parties and dormant investors.The second part simply describes the obligation and responsibility of company actual controller. Responsibility results from obligation, so in this part we start from the obligation of company actual controller, and then analyze the object to which the company actual controller’s duty lie on and the specific content of the obligations. This object includes the company、the shareholders of the company and the public. And the specific content includes fiduciary duties, prohibition of unfair related transactions and information disclosure obligations. Then we transmit the perspective from the obligations to the legal responsibility. This mainly includes the necessity、significance、theoretical basis、constitutive requirements and liability form.The third part introduces some relevant laws and regulations about the company actual controller’s legal responsibility and then gives simple evaluations about them. This part analyzes the current situation of those laws and regulations and points out some problems at the same time. At present, our country’s the provisions of the legal liability for the company actual controller mainly concentrated in the Company Law and its judicial interpretation, the Securities Law, the regulations of China Securities Regulatory Commission and the normative documents of Stock Exchange. These regulations contain the liability of the company actual controller in the activities of unfair related transactions, securities issuance and insider trading. Then we come to the introduction of the present situation of the responsibility of the company actual controllers in the LLC, Pre-IPO, and listed companies. There’re two reasons for this present situation: on one hand, the information bulletin and disclosure content of the LLC is not complete; on the other hand, due to the covert characteristic of the company actual controller, he can legalize the illegal activities or convert his own will into the company’s through the board of directors and the shareholder meeting. He can also escape the legal sanctions through the company’s independent personality system.The fourth part gives some suggestions for the third part’s problems. First, complete the identification of our company actual controller’s legal liability and related laws and regulations. For the identification, it depends on the different functions of company actual controllers: for decision-making, the identification will be similar to the company director; for decisive influence, it will be similar to controlling shareholder. The fact of damage will be the key point for the identification. It only needs to prove the company actual controller’s controlling relationship. There’s only one general defense: he can prove he has done the necessary duties of care and loyalty. For the completion of the relevant laws and regulations, because the current regulations are too principle, it shall be pay attention in legislation. At the same time, it is necessary to re-identify the concept and detailed right of company actual controller. Also, the Supreme People’s Court should give some guiding cases for reference for the public. Second, the information disclosure system shall be completed too, especially for the LLC and non-listed LLC. For this issue, the writer here suggests to stipulate the information disclosure in company actual controller’s sustainable related transactions on the legal level. Third, it’s necessary to strengthen the company actual controller’s force of bearing legal responsibility and rich the ways of bearing the legal responsibility, like using through civil responsibility, administrative responsibility and criminal responsibility. Besides, we can also bring in the relevant subject disciplinary system. In these ways the company’s actual control will consider about the high cost of illegal activities and will consciously regulate when using the controller’s power. The fourth and the fifth give a point that company personality denial system and creditor subrogation system can be applied to company actual controller. Company actual controllers will escape legal liability when the relevant rights have been damaged because he abused the controller power. Using company personality denial system can avoid this problem and will protect the rights. When it comes to creditor subrogation system, the writer thinks it suits the current situation. But there’re five conditions: one, the creditor has the company’s legal creditor rights; two, the company actual controller violate the company’s rights; three, the company doesn’t use its rights of claim; four, the creditors legal rights has been damaged because of the nonuser of claim rights; five, the creditor rights of the company actual controller is not only belong to himself. Therefore the creditor subrogation system can be used to investigate legal responsibility of abusing controlling power.