On The Rule Of Outsiders Reverse Piercing The Corporate Veils

The reverse piercing of the corporate veil by outsiders originated in American judicial jurisprudence.Different from the traditional positive piercing of the corporate veil,the reverse piercing of the corporate veil by outsiders pierces the corporate veil at the request of shareholders’ creditors,making the company jointly and severally liable for the personal debts of shareholders.Article 20 of China’s Company Law only provides for the traditional positive piercing of the corporate veil,but does not provide for the reverse piercing of the corporate veil.The lack of legislation has caused confusion in the application of law by judges in adjudicating such cases,and even led to "different judgments in the same case",which greatly undermines the authority of the law.There is no consensus in the theoretical circles on the legal basis for the reverse piercing of the corporate veil.By disagreeing on the current legal provisions,existing judicial adjudication and alternative systems,it is believed that China should introduce the rule of reverse piercing of the corporate veil by outsiders,which can not only provide sufficient relief for shareholders and creditors,but also put an end to the phenomenon of inconsistent judicial adjudication standards.Specifically,the rule can be considered from several aspects,such as the applicable elements,the applicable results,and the balance of interests.Reverse piercing the corporate veil is essentially a logical extension of the positive piercing of the corporate veil in the other direction,although the direction is different,the ultimate purpose is the same,that is,the shareholders and the company are regarded as one.Therefore,the constituent elements of reverse piercing the corporate veil can refer to the rules of positive piercing of the corporate veil,pointing to the main elements,behavioral elements,subjective elements and result elements.There are generally two types of application situations for reverse piercing the corporate veil: On the one hand,excessive domination and control of the company by shareholders;On the other hand,shareholders and companies are completely mixed,that is the personality of the company’s legal person is deformed.Regarding the liability of the company for the debts of the shareholders after the reverse piercing of the corporate veil,it is suggested to adopt the "supplementary joint and several liability theory" in the sense of execution,whereby the company bears joint and several liability for the personal debts of the shareholders.In the order of liability,the shareholders should bear the responsibility first,and the company shall only bear the responsibility for repayment for the part that the shareholders cannot pay.On the specific path of implementation,it is realized in the process of the court’s enforcement of the effective document,the shareholders’ assets are executed first,and the company’s assets are executed when the shareholders’ assets are insufficient to pay off all the debts.The ultimate goal of establishing and realizing the rules is to pursue a balance of interests,and because the application of the reverse piercing corporate veil rule should balance the interests of shareholders’ creditors,the company’s bona fide shareholders and the company’s creditors,the trade-off factors should be richer.The corporate veil can be pierced in reverse only if the need to realize the public interest and correct misconduct is greater than the reasonable expectations of the company’s bona fide shareholders and creditors.