What Is Shareholder Liability?

Limited shareholder liability is a type of company. Its essence is that shareholders take responsibility for the company with investment limits. The principle is to follow the principle of complete separation between the company and shareholders.

Limited liability of shareholders

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Limited shareholder liability is a type of company. Its essence is

Shareholders' limited liability refers to the fact that shareholders are responsible for the company within the limits of investment (capital contribution or shares) and externally through the company as an intermediate. The limited liability of shareholders is the cornerstone of modern corporate law. It can be said that the formation and establishment of the modern company legal system and the improvement of various specific systems are closely related to the limited liability of shareholders. Without the limited liability system of shareholders, the building of modern corporate law will be difficult to support, and the legal system of modern companies will inevitably lose its focus. The limited liability of shareholders is not a principle that has existed since the establishment of the company system, but a product of the company's development to a certain historical stage. We regard shareholders' limited liability as a basic principle, which is in line with the development direction of modern company law and the reality of China's company legislation. The principle of limited liability for shareholders has two meanings:

First, shareholders are liable to the company within the limits of their capital contributions or the shares they hold, and this responsibility is a statutory limited liability;

Second, the company's independent responsibility, shareholder responsibility and corporate responsibility are separated from each other.

Shareholders are responsible to the company and not to the company's creditors; the company's responsibility belongs to the company, and in principle, no recourse can be made from shareholders. The principle of limited liability of shareholders has greatly promoted the development of the company.

The applicable conditions of limited liability of shareholders should be based on the premise that shareholders and the company's personality are independent and separated from each other. Specifically:

First, the corporate personality must exist independently of shareholders. Companies should enjoy independent property ownership, have full capacity for civil rights and capacity for civil conduct, be able to engage in civil activities in their own name, and be able to independently assume civil liability.

Second, the application of shareholders' limited liability must follow the principle of complete separation between the company and shareholders. This separation is first manifested in the complete separation of the company's property and the shareholder's property, and secondly in the shareholder's separation from the company's management, and the shareholder's property right and the company's management right are completely separated. We believe that the latter applicable condition is more important because it is the basis and concrete embodiment of the former applicable condition. The purpose is to assure the company's creditors that the counterparty with whom the transaction is made is the company, not the shareholders in the company, in order to ensure the security of the transaction. If there is no principle of complete separation between the company and the shareholders, an entity that has the company's property still under the control of the shareholders and organized and operated in a partnership or unlimited company manner is registered as a company limited by shares or a limited liability company, so that the shareholders bear only limited liability It does not bear any responsibility except for capital contribution or payment of shares), which is contrary to the law's fairness and justice theory, and it is difficult for the company's creditors to accept it. Therefore, the application of shareholders' limited liability must implement the independence and separation of the personality of shareholders and the personality of the company, and must not allow the personality of the two to be mixed.

The Origin of the Shareholders Limited Liability System

Since the limited inheritance in the inheritance law originated from Roman law and developed into an important limited liability system that has been used by future generations, the earliest establishment of the limited liability system in history is of course traced back to Roman law period. But I think

In Roman law, the family is regarded as a body corporate, and the male parents in the family are the agents of the family members. "With appropriate formal permission, it can be composed of three or more persons, hold property, be litigated by, or be sued by, agents of its members", "Traditionally this Roman Empire group was seen Be the ancestor of the modern company. "But at the time, this original company was in partnership content,

Comida is actually an organization form between partnership and lending. It comes from

The limited liability system of shareholders, which was gradually established during the long development of the commodity economy, is conducive to reducing risks and encouraging investment. It has played an important role in improving the corporate system and social and economic development. "It can be said that without the peculiar legal system of limited liability created by the customary law of merchants, it is impossible to have a company limited by shares and a limited liability company later." Specifically, the value orientation of the limited liability system of shareholders is mainly expressed as :

Reduce and transfer risk

Market competition is full of risks, and the magnitude of risk is usually proportional to the magnitude of returns, because compensation for the magnitude of risks is the level of returns. If an unlimited liability system is implemented, the risks may be unpredictable. For example, when a company owes a large amount of debt, creditors can directly pursue the shareholders of the company, and even if the company declares bankruptcy, the shareholders must bear unlimited liability with their personal property. On the contrary, the shareholder limited liability system limits the shareholders' liability risk to a certain range, which is undoubtedly reduced compared with unpredictable risks.

Encourage investment

Socio-economic development needs to be promoted by investment, and limited liability of shareholders can most effectively encourage investment, because the biggest advantage of limited liability of shareholders is that it enables investors to determine their investment risk in advance, that is, the risk is limited to the loss of their investment. This prediction of the maximum investment risk is also a guarantee of investor interests from another perspective, and it can play a positive role in encouraging investment. A typical example is: American Chrysler Automobile Co., Ltd.

Just as everything has two sides, the limited liability system of shareholders has great limitations while promoting socio-economic development. Its shortcomings are mainly as follows:

Ignoring the protection of creditors

Under the limited liability system, shareholders only

Due to the above-mentioned shortcomings of the limited liability system, some scholars have advocated changing the company's liability form. There are three main views:

The first view is that the company should introduce an unlimited liability mechanism and adopt a "proportionate responsibility sharing" system, that is, shareholders are directly responsible to creditors according to their respective capital contributions;

The second point of view is that a dual liability coexistence model should be adopted, that is, a limited liability shareholder and an unlimited liability shareholder coexist in a company, the limited liability shareholder does not participate in management, and the unlimited liability shareholder directly manages the company;

The third point of view is that by adopting the model of a limited liability company, the company's shareholders can assume limited guarantee liability to make up for the lack of protection of creditors by pure limited liability.

In order to achieve a balance between the interests of shareholders, companies, and corporate creditors, many countries have adopted the theory of corporate personality denial in corporate legislation and judicial practice to make up for the limitation of limited liability. This theory is called "unveiling the corporate veil" in common law systems, and "direct liability" in civil law systems. The so-called corporate personality denial refers to the fact that in a specific legal relationship, judicial judges do not consider the company if the company's shareholders, especially directors, engage in various improper acts in the management of company affairs and cause damage to the company's creditors. The independent personality of the company requires shareholders of the company to be directly liable to creditors.

Because the establishment of a legal person system is to meet the needs of social life, in order to achieve the convenience of the public and the disposal of public interests, theoretically, if the establishment of a legal person is for the purpose of illegality, or the establishment of a legal person has an anti-social tendency and In other cases that are not allowed by the public interest, then the state has the right to deprive the company of its independent personality and deny the existence of a legal person, and practice has also proven that this system can effectively prevent shareholders from using limited liability to abuse their rights, which can To the extent that the shortcomings of limited liability are overcome. As some scholars have said, "Company personality is independent and

Judging from the judicial practice of various countries, corporate personality denial is mainly applicable to the following situations: (1) personality confusion, that is, the personality of the company is not strictly different from the personality of the company members; (2) property confusion, that is, the company's property and the shareholder's property Can not be clearly distinguished; (3) Improper control, that is, a company has improperly or even illegally affected another company through control; (4) Engaging in fraud in the name of the company, such as a shareholder signing in the name of the company The contract was used to defraud the advance payment.

In China, it is not uncommon for shareholders to abuse corporate personality and use the "veil" of limited liability to infringe on the interests of the company and its creditors. For example, in the case of the company's heavy debts, the company's shareholders or other people transfer property, evade debt, and use the property to set up a new company to make the original company empty; shareholders arbitrarily interfere in the company's affairs and make the company's business autonomy Existing in name; entering into a false contract to evade statutory or contractual obligations; using the company as a means of engaging in illegal transactions or engaging in acts that it cannot perform by itself prohibited by law; shareholders embezzling the company's interests, etc.

These abuses of corporate personality and limited liability system have seriously harmed the interests of corporate creditors and other external parties of the company, disrupted the normal economic order, hindered the establishment and improvement of the socialist market economic system, and urgently needed to be adjusted by law. However, China's current "Company Law" has no clear provisions on this. Therefore, we should learn from foreign legislative experience, apply the "unveil the company" theory, establish a limited liability exception system, and specify the scope of application of the limited liability exception or Only in this way can the company's creditor protection be better realized.