On The Civil Liability Of Shareholders Of Limited Liability Company For Failure To Duly Perform Liquidation Obligation

When a stipulated dissolution event occurs,the company shall settle its credits and debts,and then cancel its legal person status and exit the market in an orderly way.The company liquidation is an indispensable legal procedure during the aforementioned process.Due to lack of stipulations in the shareholders’ liquidation compensation liability in the early stage of Chinese law,the shareholders of limited liability companies fail to duly perform their liquidation obligations deliberately or negligently when a liquidation event occurs to the company,resulting in a large number of "zombie companies".In response to the problem,the Company Law Judicial Interpretations(II)promulgated in 2008 stipulate the liquidation obligations for the shareholders of limited liability companies and corresponding liquidation liabilities in the event of improper performance of such obligations.However,due to the unclear and even unreasonable stipulations under the Judicial Interpretations in respect of the persons assuming and the determination and undertaking of liquidation compensation liability,a large number of“professional creditors” show up and acquire the claims to the unliquidated limited liability companies at a low price,and then file lawsuits against all the shareholders of these companies to require them to undertake the joint liabilities for the companies’ debts.Some people’s courts have rigidly applied legal provisions out of the consideration of protecting the interests of creditors,causing “small shareholders to bear the company’s debts well beyond the amount of their capital contributions and leading to a phenomenon of obvious imbalance of interests."Recently,according to the provisions of the Civil Code and the spirit of the Ninth Minutes of the Supreme People’s Court,it intends to avoid the above-mentioned imbalance of interests.However,these stipulations are either too principled or incomplete.Based on these latest stipulations,this article discusses the civil liabilities that the shareholders of a limited liability company shall bear for their failure to duly perform their liquidation obligations from the aspects of the subject,behavior and undertaking of liability.First of all,based on the concept of liquidation obligor,it is justified for the shareholders of a limited liability company acting as liquidation obligors from the perspectives of the principle of shareholder limited liability,balancing the interests of all related parties and the consistency of rights and obligations.Based on such theory of justification,the scope of the subject of liquidation liability in a limited liability company shall be limited to the controlling shareholders,rather than all the shareholders.Secondly,this article discusses the legal nature of shareholders’ failure to duly perform liquidation obligations.After analyzing the three mainstream views in academia one by one,it is believed that the theory of creditor’s rights infringement is more reasonable.Then,on the basis of confirming that the nature of liquidation liability belongs to tort liability,the standards for determining the four elements of liquidation liability,i.e.the action of shareholder’s failure to duly perform the liquidation obligation,the damage result,the causality and the subjective fault are put forward.Finally,regarding the undertaking of liability for shareholders’ failure to duly perform the liquidation obligation,the company and its shareholders who are not liquidation obligors can directly become the subject of the claim in accordance with Article 70 of the Civil Code to require the shareholders acting as liquidation obligors to bear the liquidation liability in the manner of supplementary compensation liability or joint liability.The distribution rule of inverted burden of proof is more conducive to protecting the interests of the claimant,and the shareholders acting as liquidation obligors can also be exempted from assuming part or all of the liquidation liabilities based on the clear exemption reasons set out in the Ninth Meeting Minutes.