From the perspective of the "Minutes of the Nine People", the judicial determination of "significant lack of capital" is made
01. Dismantling of the concept of "significant lack of capital"
Article 12 of the Minutes stipulates that a significant lack of capital refers to a significant mismatch between the amount of capital actually invested by shareholders in the company after the establishment of the company and the risks implied by the company's operation. Shareholders use less capital to engage in operations beyond their means, indicating that they do not have the sincerity to engage in company operations, and the essence is to maliciously use the company's independent personality and shareholders' limited liability to transfer investment risks to creditors. Since the criterion for determining the significant lack of capital is very ambiguous, especially to distinguish it from the company's normal business mode of "small and broad", it is necessary to be very cautious in its application and should be judged comprehensively in combination with other factors.
By dismantling the concept of "significant undercapitalization", the following points are important to understand and identify "significant undercapitalization":
1. The "significant lack of capital" under the Minutes of the Nine People's Republic of China is located in the section of "denial of corporate personality", and judging from trial practice, the determination of "significant insufficient capital" occurs in the course of the company's operation, not in the process of establishing the company.
2. The understanding of "capital". According to the fact that "the amount of capital actually invested by shareholders in the company does not match the risks implied by the company's operation", "capital" here should not be dogmatically understood as "registered capital", but should be understood as "actual investment amount", but the implied meaning seems to be "solvency".
3. "Significant deficiencies". What constitutes a "significant" deficiency really cannot be achieved through quantitative standards, and is highly subjective and requires specific analysis of specific cases by the court. To be sure, however, it is not a lack of capital that constitutes "significant".
4. The company's subjective malice. If a company maliciously uses the company's independent personality and shareholders' limited liability to transfer investment risks to creditors, it constitutes one of the conditions for "significant deficiency", otherwise, it is easy to be used and easily deny the company's personality, which is easy to have a fatal impact on the normal business activities of the enterprise.
5. In practice, the difference between the significant lack of capital and "small and broad" has great ambiguity, and it is necessary to be very cautious in its application, and should be combined with other factors to make a comprehensive judgment.
02. Judicial practice
As mentioned above, the "significant lack of capital" under the Minutes of the Nine Peoples is located in the section "Denial of corporate personality", in addition, according to Article 20 of the Company Law, the significant lack of capital must meet two criteria: first, "abuse"; Second, "serious" damage to creditors. Under this premise, shareholders can be required to bear joint and several liability for the company's debts.
Article 83 of the Civil Code also clearly stipulates that the investor of a for-profit legal person shall not abuse the rights of the investor to harm the interests of the legal person or other investors. Where the rights of investors are abused and cause losses to legal persons or other investors, they shall bear civil liability in accordance with law. The investors of a profit-making legal person shall not abuse the independent status of the legal person and the limited liability of the investor to harm the interests of the creditors of the legal person. Where the independent status of a legal person and the limited liability of the investor are abused to evade debts and seriously harm the interests of the creditors of the legal person, they shall bear joint and several liability for the debts of the legal person.
There is a case and there is a truth
Trial court: Yibin Intermediate People's Court of Sichuan Province
Case No.: (2020) Chuan 15 Min Zhong No. 856
The main point of the judgment: whether Hengxu Group should be liable for the acts of Hengxu Management Company. First of all, Hengxu Group is seriously at fault for the significant insufficient registered capital of Hengxu Management Company. Hengxu Group holds 60% of the shares of Hengxu Management Company and is the controlling shareholder. The registered capital of Hengxu Management Company is 500,000 yuan, which does not meet the requirements of not less than 10 million yuan in the "Sichuan Interim Measures for the Administration of Identification and Registration of Construction Project Enterprises". The actual capital invested by shareholders in the company is only 500,000 yuan, and this registered capital is obviously not matched with the risks implied by the company's operation. Secondly, the letter of entrustment issued by Hengxu Group to Yangchun Investment Company indicates that Hengxu Management Company collected all project prices on behalf of Hengxu Group, and its finances were mixed, performing the functions of Hengxu Group as the owner's contractor, and the businesses involved were mixed, forming a personality mix. According to the third paragraph of Article 20 of the Company Law of the People's Republic of China, "if a shareholder of a company abuses the independent status of the company as a legal person and the limited liability of the shareholders to evade debts and seriously damage the interests of the company's creditors, he shall bear joint and several liability for the company's debts." Paragraph 2 of Article 83 of the General Provisions of the Civil Law of the People's Republic of China: "The investor of a profit-making legal person shall not abuse the independent status of the legal person and the limited liability of the investor to harm the interests of the creditors of the legal person." Where the independent status of a legal person and the limited liability of the investor are abused to evade debts and seriously harm the interests of the creditors of the legal person, they shall bear joint and several liability for the debts of the legal person. Hengxu Group shall be jointly and severally liable for the debts of Hengxu Management Company.
03. Revelation
1. "Significant lack of capital" is often discussed at the same time as "personality mixing" and "excessive dominance and control" (for example, in the aforementioned case, the shareholders' behavior constitutes both "significant insufficient capital" and "personality mixing"), the court will not take the initiative to invoke the "significant lack of capital" provision, creditors should take the initiative to apply the company's significant lack of capital, and try to use it in conjunction with other bases denying the company's independent personality.
2. As mentioned above, the capital is significantly insufficient, and two criteria must be met: first, "abuse"; Second, "serious" damage to creditors. Therefore, it is important to consider whether it is sufficient to bear the operational risk in the case of "significant lack of capital" – the determination of "abuse". If the company's capital is too small, which is not commensurate with the risk of the business activities it engages in, it is a typical "abuse" behavior (for example, the registered capital of the unit involved in the Wenling tank truck explosion accident is only 595,000 yuan, although the concept of "capital" cannot be confused with "registered capital", but under the premise that the unit involved cannot compensate for the personal and property losses of innocent people, it can consider using "significant lack of capital" as the entry point to claim that shareholders bear joint and several liability).
3. In the case of significant insufficient capital, shareholders who bear joint and several liability for the company's debts are not responsible for the company's operation and management, excluding shareholders who do not participate in the company's operation.
4. Shareholders should have subjective "bad faith", that is, using the company's independent personality and shareholders' limited liability to transfer investment risks to creditors. The main situations include: higher registered capital, longer subscription period, and zero paid-up capital; The company places high-risk projects in an independent company, which sets a low registered capital, etc.
(This article is translated by software translator for reference only.)
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