Viewpoint.........................................................................................................
Published:
2023-05-15
Foreword A one-person limited liability company is a limited liability company with only one natural person shareholder or one legal person shareholder. In the general corporate personality mixed litigation, according to the principle of who advocates who gives evidence, the creditor bears the burden of proof to prove that the company's property is not independent, which constitutes the mixing of personality. Since a one-person limited liability company has only one shareholder and cannot establish a shareholders' meeting, all important business decisions only need to be decided by one shareholder, there is no supervision and checks and balances between shareholders, and it is more likely to be manipulated by shareholders, which harms the interests of the company and creditors. It is difficult for creditors to understand the internal operation of a one-person company. Therefore, in order to balance the interests of creditors and shareholders, China's "Company Law" requires shareholders to prove their innocence, otherwise, they will be jointly and severally liable. The manner in which 1. creditors claim their rights In judicial practice, there are two main ways in which creditors require the shareholders of a one-person limited liability company to be jointly and severally liable to the company: 1. When the creditor sues the case, he directly lists the shareholders of a one-person limited liability company as the defendant and requires them to bear joint and several liability for the company's debts. Article 63 of the the People's Republic of China Company Law: If the shareholders of a one-person limited liability company cannot prove that the company's property is independent of the shareholders' own property, they shall be jointly and severally liable for the debts of the company. 2. In the execution stage of the case, the creditor applies for the addition of a shareholder of a one-person limited liability company as the person to be executed, and requires him to bear joint and several liability for the company's debts. Article 20 of the Provisions of the Supreme People's Court on Several Issues Concerning the Alteration and Addition of Parties in Civil Enforcement (Fa Shi [2016] No. 21): As a one-person limited liability company subject to enforcement, the property is insufficient to pay off the debts determined by the effective legal documents, and the shareholder cannot prove that the company's property is independent of his own property, the people's court should support it. 2. the standard of proof of property independence for shareholders of a one-person company Article 62 of the the People's Republic of China Company Law stipulates that a one-person limited liability company shall prepare financial and accounting reports at the end of each fiscal year and shall be audited by an accounting firm. In accordance with the above-mentioned legal provisions, in order to prove the independence of the property, the shareholders of a one-person company may be required to submit to the court evidence such as the annual audit report and ancillary documents of the one-person company, all bank transactions between them and the company, transaction documents, and even special audit reports on the independence of the property. In terms of proof power, the annual audit report and the special audit report have the strongest proof power, but it is not easy to submit the report. The content and quality of the report still need to withstand torture: first, the audit report provided by it should cover the whole period of one shareholder's tenure; Second, the content of the audit report should reflect the property trend between shareholders and the company. Third, it can completely reflect the company's financial status such as assets and liabilities, there is no audit failure. In addition, the shareholders of one-person company also applied to the court for a special appraisal of the company's financial transactions, creditor's rights and debts, assets, etc. to prove the independence of property. Several situations in which 3. are at risk 1, shareholders can not provide audit reports, financial and accounting statements; 2. constant mixing of shareholder accounts, related company accounts and company accounts, mixing of official seals, multiple use of shareholder or related company accounts to collect payments and the aforementioned fund discrepancies cannot be reasonably explained in the audit report; 3, although the audit report is provided, but can not provide the original bookkeeping vouchers or bank details as supporting evidence; 4, did not prepare the daily audit report or financial accounting report, but in the case of temporary entrustment issued after the lawsuit; 5,...... 4. Supreme Court Cases and Judgment Views Judgment Rule 1: The special audit report commissioned by the people's court and the "Company Director Resolution Certificate" and "Independent Auditor Report" are mutually corroborated, which can prove that the personal property of the shareholders of a one-person company is independent of the company's property. Case 1: The Supreme People's Court held in the Civil Ruling Letter of Retrial Review and Trial Supervision of Objection between Fujian Gaode Engineering Construction Co., Ltd. and Hengfeng Property Management Co., Ltd. [(2020) Supreme Famin Shen No. 356] that "During the trial of this case, the court of first instance entrusted Changzhou Huabing Accounting Firm to conduct a special audit of Fengda Company according to the application of Hengfeng Company. After the audit, the accounting firm issued [2017] No. 51 special audit report to the court of first instance. After Gaode Company put forward relevant cross-examination opinions on [2017] No. 51 special audit report, the court of first instance requested Changzhou Huabang Accounting Firm to conduct a supplementary audit. After that, Changzhou Huachang Certified Public Accountants issued [2018] No. 073 special audit report to the People's Court. After Gaud Company put forward opinions on [2018] No. 073 special audit report that the financial account books on which the special audit report is based are incomplete and the financial account books have not been cross-examined, the court of first instance inquired with Changzhou Huabang Certified Public Accountants, and the auditors of Changzhou Huabang Certified Public Accountants responded to the cross-examination opinions put forward by Gaud Company. Gaud Company claims that the financial data on which the special audit report is based have not been cross-examined by the parties concerned, the relevant accounts are incomplete, and the audit signers have not participated in the audit work. However, the special audit report and the" Company Director Resolution Certificate "and" Independent Auditor Report "confirm each other, and the above objections raised by Gaud Company have not been proved by relevant evidence. Therefore, Gaud Company shall bear the legal consequences of failure to provide evidence. It is not improper for the original judgment to use the special audit report as the basis for determining the facts of the case." Rule 2: An audit report in which there is an audit failure does not prove the independence of a one-person company's property. Case 2: The Supreme People's Court held in the second-instance civil judgment [(2020) Supreme People's Court No. 1240] of Pang Hua and Shandong Dasheng Group Construction Engineering Co., Ltd. for the execution of objection, "In this case, although Pang Hua submitted the audit report of Huayang Company issued by the accounting firm and other evidence materials to prove the independence of the company's property, according to the facts found out in the second-instance of this court, the above audit report is not included in the balance sheet of Huayang Company for the execution of the debt that can be obtained through public inquiry, and there are obvious audit failures, which cannot be accepted according to law. After becoming a one-person limited company, Huayang Company, in violation of the provisions of Article 62 of the Company Law, failed to prepare financial and accounting reports at the end of each fiscal year and audited by an accounting firm. The occurrence of the above audit failure is sufficient to indicate that the company's financial management is chaotic and that Pang Hua, as the sole shareholder of the company, should bear the adverse consequences of the mixing of the company's property." Referee Rule 3: The annual audit report of a one-person limited liability company needs to be formed strictly at the end of each year, and the audit report formed during the litigation period rather than the normal year is not an objective and true reflection of the company's financial situation, and cannot prove that the company's property and shareholders' property are independent of each other. Case 3: Jiaozuo Wanhe Real Estate Co., Ltd. and Henan Baoyang Aluminum Co., Ltd. held in the civil ruling on retrial review and trial supervision of the execution objection ((2021) Supreme Famin Shen No. 1539) that "the court believes that: (2) the issue of whether the properties of Wanhe Real Estate Co., Ltd. and Zhongzhou Laurel Company are independent, and the annual report audit report submitted by Wanhe Real Estate Co., Ltd. in the original trial was formed during the litigation in this case, it is not a normal annual audit conducted by Wanhe Real Estate Company in accordance with Article 62 of the the People's Republic of China Company Law that" a one-person limited liability company shall prepare a financial and accounting report at the end of each fiscal year and shall be audited by an accounting firm. "it cannot objectively and truly reflect the financial situation of the company, and cannot prove that the properties of Wanhe Real Estate Company and Zhongzhou Laurel Company are independent of each other." Summary of 5. views Based on the above legal provisions and the case judgment point of view, we can know that the current judicial practice of our country to one-person limited liability company shareholders of the burden of proof of the distribution of heavy, and for one-person limited liability company shareholders to prove property independence, not only from the form to find out whether to prepare the financial audit report in line with the time requirements, but also from the substance to judge whether the content of the financial audit report is comprehensive, objective and true.
Foreword
A one-person limited liability company is a limited liability company with only one natural person shareholder or one legal person shareholder.
In the general corporate personality mixed litigation, according to the principle of who advocates who gives evidence, the creditor bears the burden of proof to prove that the company's property is not independent, which constitutes the mixing of personality. Since a one-person limited liability company has only one shareholder and cannot establish a shareholders' meeting, all important business decisions only need to be decided by one shareholder, there is no supervision and checks and balances between shareholders, and it is more likely to be manipulated by shareholders, which harms the interests of the company and creditors. It is difficult for creditors to understand the internal operation of a one-person company. Therefore, in order to balance the interests of creditors and shareholders, China's "Company Law" requires shareholders to prove their innocence, otherwise, they will be jointly and severally liable.
The manner in which 1. creditors claim their rights
In judicial practice, there are two main ways in which creditors require the shareholders of a one-person limited liability company to be jointly and severally liable to the company:
1. When the creditor sues the case, he directly lists the shareholders of a one-person limited liability company as the defendant and requires them to bear joint and several liability for the company's debts.
Article 63 of the the People's Republic of China Company Law: If the shareholders of a one-person limited liability company cannot prove that the company's property is independent of the shareholders' own property, they shall be jointly and severally liable for the debts of the company.
2. In the execution stage of the case, the creditor applies for the addition of a shareholder of a one-person limited liability company as the person to be executed, and requires him to bear joint and several liability for the company's debts.
Article 20 of the Provisions of the Supreme People's Court on Several Issues Concerning the Alteration and Addition of Parties in Civil Enforcement (Fa Shi [2016] No. 21): As a one-person limited liability company subject to enforcement, the property is insufficient to pay off the debts determined by the effective legal documents, and the shareholder cannot prove that the company's property is independent of his own property, the people's court should support it.
2. the standard of proof of property independence for shareholders of a one-person company
Article 62 of the the People's Republic of China Company Law stipulates that a one-person limited liability company shall prepare financial and accounting reports at the end of each fiscal year and shall be audited by an accounting firm.
In accordance with the above-mentioned legal provisions, in order to prove the independence of the property, the shareholders of a one-person company may be required to submit to the court evidence such as the annual audit report and ancillary documents of the one-person company, all bank transactions between them and the company, transaction documents, and even special audit reports on the independence of the property.
In terms of proof power, the annual audit report and the special audit report have the strongest proof power, but it is not easy to submit the report. The content and quality of the report still need to withstand torture: first, the audit report provided by it should cover the whole period of one shareholder's tenure; Second, the content of the audit report should reflect the property trend between shareholders and the company. Third, it can completely reflect the company's financial status such as assets and liabilities, there is no audit failure.
In addition, the shareholders of one-person company also applied to the court for a special appraisal of the company's financial transactions, creditor's rights and debts, assets, etc. to prove the independence of property.
Several situations in which 3. are at risk
1, shareholders can not provide audit reports, financial and accounting statements;
2. constant mixing of shareholder accounts, related company accounts and company accounts, mixing of official seals, multiple use of shareholder or related company accounts to collect payments and the aforementioned fund discrepancies cannot be reasonably explained in the audit report;
3, although the audit report is provided, but can not provide the original bookkeeping vouchers or bank details as supporting evidence;
4, did not prepare the daily audit report or financial accounting report, but in the case of temporary entrustment issued after the lawsuit;
5、……
4. Supreme Court Cases and Judgment Views
Judgment Rule 1: The special audit report commissioned by the people's court and the "Company Director Resolution Certificate" and "Independent Auditor Report" are mutually corroborated, which can prove that the personal property of the shareholders of a one-person company is independent of the company's property.
Case 1: The Supreme People's Court held in the Civil Ruling Letter of Retrial Review and Trial Supervision of Objection between Fujian Gaode Engineering Construction Co., Ltd. and Hengfeng Property Management Co., Ltd. [(2020) Supreme Famin Shen No. 356] that "During the trial of this case, the court of first instance entrusted Changzhou Huabing Accounting Firm to conduct a special audit of Fengda Company according to the application of Hengfeng Company. After the audit, the accounting firm issued [2017] No. 51 special audit report to the court of first instance. After Gaode Company put forward relevant cross-examination opinions on [2017] No. 51 special audit report, the court of first instance requested Changzhou Huabang Accounting Firm to conduct a supplementary audit. After that, Changzhou Huachang Certified Public Accountants issued [2018] No. 073 special audit report to the People's Court. After Gaud Company put forward opinions on [2018] No. 073 special audit report that the financial account books on which the special audit report is based are incomplete and the financial account books have not been cross-examined, the court of first instance inquired with Changzhou Huabang Certified Public Accountants, and the auditors of Changzhou Huabang Certified Public Accountants responded to the cross-examination opinions put forward by Gaud Company. Gaud Company claims that the financial data on which the special audit report is based have not been cross-examined by the parties concerned, the relevant accounts are incomplete, and the audit signers have not participated in the audit work. However, the special audit report and the" Company Director Resolution Certificate "and" Independent Auditor Report "confirm each other, and the above objections raised by Gaud Company have not been proved by relevant evidence. Therefore, Gaud Company shall bear the legal consequences of failure to provide evidence. It is not improper for the original judgment to use the special audit report as the basis for determining the facts of the case."
Rule 2: An audit report in which there is an audit failure does not prove the independence of a one-person company's property.
Case 2: The Supreme People's Court held in the second-instance civil judgment [(2020) Supreme People's Court No. 1240] of Pang Hua and Shandong Dasheng Group Construction Engineering Co., Ltd. for the execution of objection, "In this case, although Pang Hua submitted the audit report of Huayang Company issued by the accounting firm and other evidence materials to prove the independence of the company's property, according to the facts found out in the second-instance of this court, the above audit report is not included in the balance sheet of Huayang Company for the execution of the debt that can be obtained through public inquiry, and there are obvious audit failures, which cannot be accepted according to law. After becoming a one-person limited company, Huayang Company, in violation of the provisions of Article 62 of the Company Law, failed to prepare financial and accounting reports at the end of each fiscal year and audited by an accounting firm. The occurrence of the above audit failure is sufficient to indicate that the company's financial management is chaotic and that Pang Hua, as the sole shareholder of the company, should bear the adverse consequences of the mixing of the company's property."
Referee Rule 3: The annual audit report of a one-person limited liability company needs to be formed strictly at the end of each year, and the audit report formed during the litigation period rather than the normal year is not an objective and true reflection of the company's financial situation, and cannot prove that the company's property and shareholders' property are independent of each other.
Case 3: Jiaozuo Wanhe Real Estate Co., Ltd. and Henan Baoyang Aluminum Co., Ltd. held in the civil ruling on retrial review and trial supervision of the execution objection ((2021) Supreme Famin Shen No. 1539) that "the court believes that: (2) the issue of whether the properties of Wanhe Real Estate Co., Ltd. and Zhongzhou Laurel Company are independent, and the annual report audit report submitted by Wanhe Real Estate Co., Ltd. in the original trial was formed during the litigation in this case, it is not a normal annual audit conducted by Wanhe Real Estate Company in accordance with Article 62 of the the People's Republic of China Company Law that" a one-person limited liability company shall prepare a financial and accounting report at the end of each fiscal year and shall be audited by an accounting firm. "it cannot objectively and truly reflect the financial situation of the company, and cannot prove that the properties of Wanhe Real Estate Company and Zhongzhou Laurel Company are independent of each other."
Summary of 5. views
Based on the above legal provisions and the case judgment point of view, we can know that the current judicial practice of our country to one-person limited liability company shareholders of the burden of proof of the distribution of heavy, and for one-person limited liability company shareholders to prove property independence, not only from the form to find out whether to prepare the financial audit report in line with the time requirements, but also from the substance to judge whether the content of the financial audit report is comprehensive, objective and true.
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