Lifting the Corporate Veil in China: Statutory Vagueness, Shareholder Ignorance, and Case Precedents in a Civil Law System

Publisher:
Routledge
Publication Type:
Journal Article
Citation:
Journal of Corporate Law Studies, 2015, 15 (2), pp. 341 - 376
Issue Date:
2015-06-20
Full metadata record
This paper surveys almost 300 court judgments in which shareholders have been sued for corporate debts under Article 20 of the PRC Company Law. The frequency of “veil lifting” can indicate how much weight is ascribed in China to fundamental corporate law principles like limited liability and the separate legal identity of the corporation. Our survey finds that shareholders were found liable for corporate debts in over 75% of cases, a significantly higher rate of veil-lifting than in jurisdictions elsewhere in the world. We challenge previous scholars’ explanations of this phenomenon. We also argue that statutory vagueness has led to unfair and inconsistent veil-lifting judgments in a number of cases. The current interpretative system of Supreme People’s Court Regulations and Guiding Cases needs modification to ensure that inconsistencies in adjudication are ironed out in a more timely manner.
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