A Study On The Application Of Joint And Several Liability Of Limited Company Shareholders For Illness In Liquidation

The Provision on the Obligations of Liquidation Entities set out in Article18(2)of the Interpretation II to the Company Law of China stipulates the joint and several liability(JSL)of shareholders who fail to perform their liquidation obligations,which is not only a punishment for their failure to perform their obligations but also a protection for creditors.However,the content of JSL rules for failure to perform liquidation obligations is meager and ambiguous,resulting in different interpretations by adjudicators that improperly expand the shareholders’ liquidation liabilities.This paper mainly studies the applicable conditions of JSL for shareholders who fail to perform their liquidation obligations in order to find a unified standard that can truly balance the interests of creditors and shareholders.Apart from the introduction and conclusion,this paper is divided into four parts:The first part elaborates the legitimacy of shareholders of limited liability companies as the main body of JSL for failure to perform their liquidation obligations from three perspectives,namely legal basis,legal rationale,and historical origin.In the second part,by conducting an empirical study,this paper examines the judicial decisions related to "limited liability companies" and "failure to perform liquidation obligations" on Peking University Law Information website from 2009 to 2022.The findings show that the promulgation of General Provisions of Civil Law and Civil Code of China has not affected the adjudicators’ application of JSL for shareholders who fail to perform their liquidation obligations,but different judicial officers have significant differences in their recognition of the nature of JSL,and there is no completely unified judgment on the establishment elements,such as "failure to perform obligations," "impossibility of liquidation," and "causal relationship."The third part focuses on the legislative and theoretical status quo in China and analyzes in detail the specific applicability of JSL for failure to perform liquidation obligations in combination with judicial judgments.It proposes that the liability should be based on tort liability for infringement of creditor’s rights and then discusses the fault and illegality of "failure to perform obligations," the determination of "impossibility of liquidation," and the "dual causal relationship" in terms of the establishment elements of tort.The fourth part looks at the issue from the perspective of the distribution of rights and proposes that all shareholders should be regarded as liquidation entities of limited liability companies,but small shareholders should be granted defenses to prevent an imbalance of rights and liabilities.It also discusses the form of liability and suggests that caution should be exercised in the application of JSL.In terms of burden of proof,it proposes to invert the burden of proof so that shareholders are required to prove the absence of causal relationship.