Shareholders Are Obsessed With The Practice Of Performing Liquidation Obligations

In real life,it's very common that a company shall be liquidated and dissolved because its business license is revoked due to its failure to participate in the annual inspection or due to the dissolution airsing from the expiration of its business term,however,it's very rare that shareholders actually take the initiative to organize liquidation by themselves.This may be connected with the attitude of shareholders towards the venture investment: shareholders are positive to capital contribution and other obligations at the beginning of venture investment as then they have entrepreneurial passion and dream of success;but none of them is willing to “clear up the mess” when the company gets into such troubles as the revocation of its business license,and moreover,the liquidation needs costs.After the dissolution of a company,its shareholders shall be responsible for liquidating the properties and settling claims and debtsagainst and of the company whether from the point of view of external creditors or from the point of view of termination of the rights and obligations between the shareholders and company;comparing with the shareholders' obligations for capital contribution at the beginning of the establishment of the company,the same attentions shall be paid to the shareholders' obligations for liquidation,which is related to the protection of creditors' interest from the micro level,and related to the social credit,and re-allocation and re-utilization of properties from the macro level.In fact,normally,the properties of a limited liability company are indeed allocated and possessed by its shareholders,and its external creditors neither participate in its any management activity nor hold its any internal operating information.When the liquidation of the company is completed by law,it is very likely that the rights of its creditors are fully or partially repaid.If the shareholders fail to perform their duties of liquidation and even put the company's properties in their own hands or for their own use in various manners,the rights of its creditors will not be protected.Section 18 of Provisions of the Supreme People's Courton Issues concerning the Application of Law of the People's Republic of China on Companies(Two)(hereinafter referred to as “Judicial Interpretations for Law on Companies(Two)”)strongly supports the protection of creditors' rights;if the shareholders are indolent in liquidation,the creditors may,via litigation,claim against the debtor for repaying the debts and also against the shareholders for indemnifying the losses incurred by the creditors due to the shareholders' indolence in liquidation or require the shareholders and debtor to jointly repay the debts;the provisions of Section 18 conform to such principle in legal theories that the rights shall be consistent with the obligations.Such provisions may be understood as the sword of Damocles hanging over the heads of shareholders of debts effectively binding upon and sanctioning the shareholders' nonperformance of obligations for liquidation.In judicial practices,the results judged by the courts of different places in the cases by applying such provisions are not consistent;such inconsistency mainly focuses on whether or not the shareholders' liabilities to the creditors for indemnity or joint liabilities to the creditors for repayment shall be subject to that whether or not the debtor has been compulsorily liquidated or compulsorily enforced,how to determine the inability to liquidate,the burden of proof for the shareholders' indolence in liquidationand the impairment of creditors' rights shall be distributed upon the creditors or shareholders,and etc..From the point of view of the shareholders' indolence in performing their obligations for liquidation,this article selects typical sample cases to make induction,analysis and research with the purpose to ascertain the standards for how to judge the shareholders' indolence in performing their obligations for liquidation in judicial practices by the analysis on facts of cases and application of laws,and finally returns to how to perfect the provisions for the shareholders' indolence in performing their obligations for liquidation,and how to balance the interests between creditors and shareholders in judicial practices.