A Study Of Significant Undercapitalization In Corporate Personality Denial

Our country's legal personality denial system was established relatively late,and the legal personality denial system was established in Article 20,paragraph 3,after the revision of the Company Law of the People's Republic of China(hereinafter referred to as the Company Law)in 2005.Significant insufficiency of capital,as the most important condition in the denial of legal personality,is still in the fog since it was first put forward.The definition,the burden of proof and the applicable object of the significant insufficient capital are unclear,which seriously affects the implementation of the legal personality denial system.As a breakthrough to the company's independent personality and the limited liability of shareholders,the legal personality denial system should not be given priority in ordinary companies.The independence of corporate legal personality and the limited liability system of shareholders are still the cornerstones of company law,and a significant lack of capital should be strictly applied as one of the elements in the denial of legal personality.Under the background of the comprehensive subscription system and the cancellation of the minimum registered capital,the issues related to the identification and application of significant capital deficiency have become more ambiguous,and it is urgent to establish provisions related to significant capital deficiency in the legislation.This paper starts by studying what is corporate capital and what is significant capital shortage.Significant insufficiency of capital is not a concept in the full legal sense,but an interdisciplinary concept of economics,financial accounting and law.For non-listed companies,the company's capital should be judged by the standard of registered capital + short-term borrowings(accounts payable);for listed companies,it should be judged by net assets.The judgment of significant lack of capital shall be compared with the business operated by the company.When the capital of the company is less than 50% of the business it operates,it can be determined that the capital is significantly insufficient;when it is greater than 50%,it is not appropriate to determine that the capital is significantly insufficient.When the applicable capital is significantly insufficient in the denial of corporate personality,there are the following issues that need to be paid attention to.For the duration of significant capital shortage,the objective criterion of duration should be transformed into the subjective criterion of whether shareholders maliciously use the significant shortage of capital to avoid limited liability.For the applicable objects of significant capital deficiency,voluntary creditors can claim legal personality denial with significant capital deficiency just like involuntary creditors.Moreover,for involuntary creditors,relief can be provided by setting up a company insurance system and other methods,not necessarily by means of legal personality denial.With regard to the burden of proof of significant lack of capital,the burden of proof of voluntary creditors and involuntary creditors should be the same,and when the plaintiff files a lawsuit for a significant lack of capital and denial of legal personality,the rules of proof should not be the same as the “whoever claims,who will provide evidence” in general civil cases.The rules are the same.Under the principle of balance of interests,the "Company Law" should balance the interests of the company's shareholders and creditors.Although the legal personality denial system is the last line of defense to protect the interests of creditors,it should also effectively protect shareholders' rights to invest smoothly and prevent and control risks,and not allow shareholders to bear excessive investment responsibilities.On this basis,it puts forward legal suggestions on the significant shortage of capital in our country.First,the terms related to the period of shareholder capital contribution and significant capital deficiency should be added;secondly,the judicial status quo should be changed in which only the plaintiff bears the burden of proof of significant capital deficiency;thirdly,the boundaries between liability for significant capital deficiency,bankruptcy liability,and liability for defective capital contribution should be clarified;finally,Whether a significant lack of capital is sufficient to carry out a denial of legal personality needs to be analyzed on a case-by-case basis.