Reconstruction Of One-man Limited Company System

At present, countries all over the world have revised their company laws to recognize one-man company. The newly revised Company law of the PRC (the new Company Law) also recognizes the legal personality of one-man limited company, nailing down a set of rules of law. While, the rationality of these provisions on one-man limited company is worth discussing. On the basis of judicial practice, this author studies the nature, characteristics, historical evolution of one-man limited company, current legislation and problems as well.This author is of the opinion that major defects with new Company law provisions on one-man limited company cause the one-man limited company system cease to exist except in name. First of all, inheriting the "capital credit mythology" embraced in the old Company Law, the new Company Law raises the minimum registered capital requirement for one-man limited company, while neglecting the maintenance of capital after establishment and the fact that higher registered capital cannot guarantee the creditor's interests. Secondly, it's quite easy for natural persons to evade the prohibition that natural persons aren't allowed to establish one-man company repeatedly, for the same prohibition does not apply to legal persons. Consequently, such provision of law falls through. Thirdly, although auditing of accounting report of one-man company by certified public accountant can strengthen supervision over one-man company, it adds burden to one-man limited company and aggravates evasions of law by establishing de facto one-man company. Finally, Article 64 of the new Company Law on Burden of proof in reverse nearly brings the limited liability of sole shareholder to ruin, while does not mention the regulation of de facto one-man company at all. Establishing a de facto one-man company by means of circumvention of law becomes the first choice. Ultimately, the provisions of new Company Law on one-man limited company come to nothing. Therefore, the legal system on one-man limited company should be reconstructed. Firstly, the threshold of registered capital for one-man limited company should be lowered to the same level as ordinary limited companies, or even repeal the minimum registered capital requirement. Secondly, the organization (structure of governance) should suit the special circumstance of one-man limited company. Small-scale one-man company may not set up supervisor (board of supervisors). Thirdly, the system of disregard of corporate personality should be improved, for instance, lifting the shareholder's burden of proof and listing the specific circumstances qualified for disregarding the one-man company's corporate personality.