Limited Liability Or Unlimited Joint And Several Liability?

The case of partnership contract dispute against Mr. Wei and a car accessories limited liability company in Chongqing sued by Miss. Xin is a typical case in enterprise law. This limited liability company with a registered capital of 50,000 yuan called partners and invested in setting up an ordinary partnership originally with a planned registered capital of 6 million yuan but only 2.955 million yuan to have been raised. However, an individual business was established instead. This paper seeks to analyze the characteristics and liability forms of three business entities such as limited liability company, partnership, as well as individual business and to make the final conclusion that this car accessories limited liability company in Chongqing and its shareholder Mr. Wei assumed the unlimited joint and several liability. The paper is divided into five parts.The first part introduces the content of the case. The process of the case is presented firstly. The limited liability company with the registered capital of 50,000 yuan signed a "partnership agreement" with multiple sponsors, and agreed to set up a partnership enterprise with a total of 2.955 million yuan to be raised. But a self-employed enterprise was set up on the location clearly specified in the "partnership agreement". Less than a year, the partnership convener Mr. Wei claimed that the collected 2.955 million yuan was going to run out. And as the shareholder of the limited liability company, Mr. Wei terminated the partnership project on his own and compensated a third of the economic losses of the sponsors. Part of the investors refused and then initiated the arbitration in accordance with related terms to request the limited liability company and its shareholder Mr. Wei of the undertaking of the unlimited joint and several liability for their investment. The controversial points of this case can be summarized as: First, how the efficacy of the partnership agreement signed by the parties in this case is? And whether the partnership enterprise should be set up? Second, is a car-washing service part of the partnership? Third, whether Mr. Wei is the qualified respondent? And what responsibility should be assumed by a respondent?The second part deals with the related issues of the car accessories limited liability company in Chongqing in this case. This company is a lawfully established limited liability company with a registered capital of 50,000 yuan, including only two shareholders Mr. Wei and his mother. Since a limited liability company can invest in an ordinary partnership, this company raised 2.955 million yuan by calling partners to invest in it. Although the shareholders of a limited liability company should undertake the limited liability for the debts of the corporation, it is indeed unfair to ask the shareholder of this company Mr. Wei to bear debt the limited liability of 50,000 yuan for the 2.955 million yuan debt.The third part expounds that partners in a partnership assume the responsibility of “sharing risks, sharing losses and gains” for partnership property. Mr. Wei emphasized that the partnership agreement is effective in order to return products from the partnership for investors the way stipulated in the partnership agreement without having to return the full amount. However, due to the fact that the partnership agreement in this case is signed by Mr. Wei or the company with sponsors respectively, this agreement does not meet related requirements to be effective and is not a reflection of all the partners' will, either. Thus, this partnership agreement can not be effective.The fourth part involves the relevant theories of individual business in this case. A car-washing service department was a self-employed enterprise established in the name of Wu. It is in accordance with the characteristics and essential setting-up elements of individual business. Individual business and partnership shares a certain degree of similarity, but the car-washing service in this case does not meet the establishment requirements of partnership enterprise. Therefore, a car cleaning service is not a partnership.The fifth part explores the handling results of the case and its legal implications. It is concluded that Mr. Wei should undertake the unlimited joint and several liability rather than the limited liability. Mr. Wei's behaviors meet the necessary elements of a shareholder's abuse use of the limited liability of a company from both subjective and objective perspectives applicable for Disregard of the Corporate Personality. Hence, Mr. Wei is the appropriate respondent and should bear the unlimited joint and several liability with the car accessories limited liability company in Chongqing. With the partnership agreement as invalid, Mr. Wei should return all the amount of capital back to investors without having to repay the capital occupation losses. Mr. Wei registered a limited liability company with 50,000 yuan but raised 2.955 million yuan in the name of partnership investment, which apparently doesn't conform to his operation ability. Therefore, the behavior of a limited liability company investing in an ordinary partnership should be regulated.