The Negation Of Judicial Application Of The Significant Insufficiency Of Capital In The Denial Of Corporate Personality

In the theoretical research at home and abroad,the significant shortage of capital is considered as an important reason for the application of the system of disregard of legal personality.Whether in the United States,Britain or China,the denial of legal personality has been widely used in judicial practice on the grounds of significant insufficiency of capital.However,firstly,the empirical study finds that there are great differences in the standpoint and understanding of the provisions on significant capital shortage in the local judicial normative documents of our country.In judicial practice,the judgment criteria and reasoning logic of the local courts on the significant capital shortage are also very confused.Secondly,the domestic courts used to take registered capital below the statutory minimum capital limit as the judgment criterion of significant capital shortage.Qualitative,but after the removal of the statutory minimum capital limit in China’s Company Law in 2013,how to accurately identify the significant shortage of capital,how to recognize the nature of the significant shortage of capital in the system of disregard of legal personality,and follow the change of legislative concepts to change the concept of judicial adjudication and reasoning logic has become a difficult problem in practice.This paper holds that,first of all,the causes of the above chaos and difficulties lie in the different judgment concepts of the courts in cases involving significant insufficiency of capital.It is the two different judgment concepts of "judgment based on behavior"(that is,based on the abuse of shareholders’ rights leading to significant capital shortage)and "judgment based on results"(that is,based on the actual results of significant capital shortage)that affect the fairness and rationality of the court’s judgment reasoning.Secondly,the concept of "act-based judgment" is worth adopting.The legitimacy of the application of disregard of corporate personality lies in the abuse of shareholders’ rights.Theapplication of disregard of corporate personality should return to the origin of disregard of corporate personality.In cases involving significant insufficiency of corporate capital,the court should base itself on the abuse of shareholders rather than the amount of corporate capital to judge whether the application of disregard of corporate personality is applicable.We should accurately understand and grasp the relationship between the shareholder’s abuse of rights caused by significant capital shortage,which is the relationship between phenomena and essence.The obvious insufficiency of capital is only the result of the abuse of shareholders’ rights,and the abuse of rights is the essence of the application of denial of legal personality.It is difficult and unnecessary to judge the adequacy of corporate capital.Thirdly,in cases of significant capital shortage,what kind of behavior of shareholders will constitute abuse of rights? This paper argues that we should distinguish between abuse in the sense of fact and abuse in the sense of law.The behavior of shareholders violating the obligation of capital contribution generally does not constitute abuse,while the improper property distribution between the company and shareholders and the behavior of shareholders damaging the company’s credit base constitute abuse.Finally,we should stick to the principle of prudent use of the legal personality denial system,and give priority to the alternative system in company law and contract law to solve the problem of creditor protection in cases involving significant insufficiency of capital,so as to avoid the abuse of the legal personality denial system..