Dissertation
Dissertation > Political, legal > Legal > Chinese law > Economic Law > Corporate law, company law

Brief Analysis on the Doctrine of Piercing the Corporate Veil

Author LiZhiYun
Tutor ShiHuiRong
School Southwest University of Political Science
Course Legal
Keywords piercing the corporate veil corporate legal personality limited liability
CLC D922.291.91
Type Master's thesis
Year 2010
Downloads 175
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Independent legal personality and shareholders’limited liability are two cornerstones for construction of modern corporate legal system. And modern corporate system which is born on the combination of these two cornerstones, from the very beginning of its birth, becomes the powerful catalyst for social and economic development, driving social civilization towards a glorious present and future. Although limited liability system is conducive to stimulating the business initiative of the investors and reducing the investment risks, it also opens the way for investors abusing the limited liability right and contravening the system of independent legal personality, thus causing great loss to the creditors’interest or social public interest, as the corporate system itself is lacking in powerful measures to realize social ethics value of fairness and justice which should have been implemented. As an exception to independent legal personality and shareholders’limited liability, the doctrine of piercing the corporate veil originating from Anglo-American Law is exactly built to strive for fairness and justice, safeguard social interest and avoid the abuse of independent legal personality and shareholders’limited liability.In light of fairness and justice, this paper systematically deals with the connotation, name, applicable condition, applicable occasion and other relevant problems, using the value analysis, comparison and empirical research methods. And this paper is made up of the following four parts.The first part introduces the independent legal personality, comprised of its historical development and value objective. This part mainly elaborates historical developing track of legal system and therefore draws out basic concepts about legal person, legal personality and corporate legal personality. And it further sets forth the corporate legal personality’s economic efficiency objective and inherent value objective of fairness and justice. In doing so, it contributes to drawing out the doctrine of piercing the corporate veil to be discussed later in this paper.The second part tells about the general theories of the doctrine of piercing the corporate veil. After analyzing the reasons for corporate legal system’s variation in reality, this part sets forth the connotation, name, legal basis, features and applicable condition about the doctrine of piercing the corporate veil and illustrates in detail its contents. Then it gives a brief introduction of the occasions where this doctrine is widely applied, thus making this doctrine concrete other than abstract. At last, it studies such three topics as contractual and tort obligations’effect on this doctrine, reverse piercing and one-person company.The third part discusses how the doctrine of piercing the corporate veil is applied in China. It first points out it is extremely urgent to apply the doctrine of piercing the corporate veil to purify social and economic environment because independent legal personality and shareholders’limited liability are seriously abused in reality in China. Then it analyzes the similar legislation prior to the amendment of Company Law in 2005, which is materially different from the doctrine of piercing the veil. Such distinctions should be made, otherwise it will be detrimental to carrying out the doctrine of piercing the corporate veil. While commenting on the doctrine of piercing the corporate veil adopted in 2005 newly-amended Company Law, it indicates there are still some defects in this legislation. At last this part summarizes present judicial practice in applying the doctrine and points out three phenomena i.e. absolutization of the corporate legal personality, passive application, abuse of doctrine of piercing the corporate veil and the reasons for their existence.In the fourth part, based on current situation and existing problems in applying the doctrine of piercing the corporate veil in China, this paper puts forward suggestions on perfecting the doctrine of piercing the corporate veil itself and its application from the following seven aspects: legislation, judicial interpretation, burden of proof, personal credit, changing ideas, the guiding role of the Supreme People’s Court, enhancing the judges’theoretical and moral attainments.At the end of this paper, the spirits of this doctrine of piercing the corporate veil are summarized in response to this paper’s theme by citing a quote of Zheng Canheng, a South Korean scholar.

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