Brief Analysis On The Doctrine Of "Reverse Piercing The Corporate Veil"

The corporate independent personality system brings endless possibilities inattracting investment and stimulating the development of economy. It also brings theabuse of the independent personality and the expansion of the shareholders’ rights.Using the defect of corporate independent personality system, some shareholderscarefully design to occupy the wealth of corporation. Such acts not only violate theinterests of corporate creditors, and disrupt the market economic order, but alsoviolate the fair justice value of law. In order to make the corporate independentpersonality system to better play its system value,“piercing the corporate veil”system emerged, which pays more attention to substantial justice.Chinese new company law has introduced the theory of “piercing the corporateveil” in the name of “denial of the corporate personality”, which is the first countryexpressly written the system in its law. This introduction not only has greatlystimulated the enthusiasm of investors, but also cleared the road for the healthydevelopment of the market. However, our present “denial of the corporatepersonality” system is not mature. Our mainstream application is confined to the“traditional piercing” which is the right of corporate creditors who bring an actionthat requires the corporate shareholders abusing corporate independent personalityand the limited liability to assume the debts of the corporation in a certain range bypiercing the veil of corporation. However, in the market exists too many manners to evade shareholders’ own personal debts, such as transferring personal properties tothe corporation for free or in low price, using the convenient relationship betweenparent-subsidiary or sister companies to transfer properties, or the personality highlyconfused. The “traditional piercing” system has been unable to solve these problems.The “reverse piercing” system originating from American cases can well solve theseproblems. It is the creditors of the shareholders’ that bring actions asking thecorporation to bear certain shareholder’s personal debts by piercing the corporateveil. China as the civil law country, whether or not to implant “reverse piercing”coming from the case law countries is facing a lot of controversies. This paperanswers the followed three questions—“what”,“why”,“how to do” by four parts.“What” means what the “reverse piercing” system is. In order to indicate theirreplaceable and applicable value of “reverse piercing” compared with “traditionalpiercing”, the first chapter of this paper firstly gives definitions to “traditionalpiercing” and “reverse piercing”, and then analysis the similarities and differencesbetween them. By referring and summarizing the domestic and foreign scholars’main ideas and typical cases of “reverse piercing”, the second chapter summarizes theconstitutive requirements and the main applicable occasions of “reverse piercing”.“Why” means the necessity and feasibility of the application of “reverse piercing”in our country. Using SWOT analysis method, the third chapter analyses the meritsand demerits of “reverse piercing” system itself and advantages and disadvantages ofexternal pplicable environment including our current market enviroment and legalsystem resources. Weighing the pros and cons, we can conclude the necessity andfeasibility of the application of “reverse piercing” in our country.“How to do” means how to introduce “reverse piercing” in our country. Fromsubstantive construction and procedural construction two aspects, the fourth chaptergives some legislative suggestions. Hope the chapter will do some benefit to theintroduction of “reverse piercing” system in our country.