Corporate Litigation Study... Corporate litigation rules of the company promoter liability dispute.

Published:

2021-12-26

Foreword The company law person is the main subject engaged in commercial activities, when the company is still in the initiation stage, at this time the company is not established, does not have the ability to independently assume civil liability. The promoter is the representative organ and executive organ of the established company, and conducts civil activities on behalf of the established company. Through the relevant legal provisions and supplemented by cases, this paper briefly combs the judicial practice of the liability disputes of the company's sponsors. 1. related regulations 1. Company Law of the People's Republic of China Article 94 the promoters of a joint stock limited company shall bear the following responsibilities: (1) when the company cannot be established, they shall be jointly and severally liable for the debts and expenses arising from the establishment; when the (II) company cannot be established, they shall be jointly and severally liable for the return of the shares paid by the subscribers and the interest on the bank deposits for the same period; (III) in the process of the establishment of the company, the interests of the company are damaged due to the fault of the promoters, the company shall be liable for compensation. 2. (II) of the Provisions of the Supreme People's Court on Several Issues concerning the Application of the the People's Republic of China Company Law Article 22 When a company is dissolved, any capital contribution that has not been paid by the shareholders shall be treated as liquidation property. The outstanding contributions of shareholders, including the outstanding contributions due and payable, as well as the contributions that have not yet expired in instalments in accordance with the provisions of Articles 26 and 80 of the Company Law. When the company's property is not sufficient to pay off the debts, the people's court shall support the creditor's claim that the shareholders who have not paid their capital contributions, as well as other shareholders or promoters at the time of the establishment of the company, shall bear joint and several liability for the debts of the company within the scope of the unpaid capital contributions. 3. (III) of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law Article 1 The persons who, for the purpose of establishing a company, sign the articles of association, subscribe for capital contributions or shares from the company and perform the duties of establishing the company shall be recognized as the promoters of the company, including the shareholders of the limited liability company at the time of its establishment. Article 2 If the promoter signs a contract in its own name for the establishment of the company, and the counterparty to the contract requests the promoter to bear the contract liability, the people's court shall support it; if the counterparty to the contract requests the company to bear the contract liability after the establishment of the company, the people's court shall support it. Article 3 If the promoter signs a contract in the name of the established company, and the contract counterpart requests the company to bear the contract liability after the establishment of the company, the people's court shall support it. After the establishment of the company, there is evidence to prove that the promoter used the name of the company in the establishment to sign a contract with the counterparty for its own benefit, and the company claims not to bear the contract liability on this ground, the people's court shall support it, except for the relative person's good faith. Article 4 If a company is not established for some reason, the people's court shall support the creditor's request that all or part of the promoters bear joint and several liability for the expenses and debts arising from the establishment of the company. If some of the promoters, after assuming the responsibility in accordance with the provisions of the preceding paragraph, request the other promoters to share the responsibility, the people's court shall order the other promoters to share the responsibility in proportion to the agreed responsibility; if there is no agreement on the proportion of responsibility, the responsibility shall be shared in accordance with the agreed proportion of capital contribution; if there is no agreement on the proportion of capital contribution, the responsibility shall be shared in accordance with equal shares. If the company is not established due to the fault of some of the promoters, and the other promoters claim that they bear the expenses and debts arising from the act of establishment, the people's court shall determine the scope of liability of the party at fault according to the circumstances of the fault. Article 5 If the promoter causes damage to others due to the performance of the company's establishment duties, and the victim requests the company to bear the liability for tort compensation after the company is established, the people's court shall support it; if the company is not established and the victim requests all the promoters to bear joint and several liability, the people The court shall support it. After the company or the promoter without fault has assumed the liability for compensation, it may recover the compensation from the promoter at fault. Article 13 If a shareholder fails to perform or fails to fully perform its capital contribution obligations, and the company or other shareholders request it to fully perform its capital contribution obligations to the company in accordance with the law, the people's court shall support it. If the creditors of the company request that the shareholders who have not fulfilled or fully fulfilled their capital contribution obligations shall bear supplementary compensation liability for the part of the company's debts that cannot be paid off within the scope of the principal and interest of the unfunded capital contribution, the people's court shall support it; the shareholders who have not fulfilled or fully fulfilled their capital contribution obligations have already undertaken the above-mentioned responsibilities, and other creditors make the same request, the people's court shall not support it. If a shareholder fails to perform or fails to fully perform the obligation of capital contribution at the time of the establishment of the company, and the plaintiff who files a lawsuit in accordance with the first or second paragraph of this article requests the promoter of the company and the defendant shareholder to bear joint and several liability, the people's court shall support it; after the promoter of the company assumes responsibility, it may recover compensation from the defendant shareholder. If a shareholder fails to perform or fully perform the obligation of capital contribution when the company increases its capital, the plaintiff who files a lawsuit in accordance with the first or second paragraph of this article requests that the directors and senior managers who have not paid their capital contribution bear the corresponding responsibilities for failing to fulfill the obligations stipulated in the first paragraph of Article 147 of the company law, The people's court shall support it; after the directors and senior managers bear the responsibility, they may recover compensation from the defendant shareholders. Four situations in which the 2. promoter is liable 1. Sponsor liability in the event of failure to establish a company Since the established company does not yet have an independent legal personality, it is legally considered a partnership between the promoters. If the company is successfully established, the creditor's rights and debts arising in the process of establishment shall be inherited by the company after the establishment; however, in the event of the failure of the establishment of the company, the relevant legal liabilities shall be jointly and severally borne by all promoters. In this regard, Article 4 of the "(III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law" clearly stipulates. 2. The liability of the promoter in the case of the establishment of infringement. The promoter is the legal authority of the established company, and the company shall generally be liable for the infringement caused by the performance of the establishment duties. Since the establishment of the company in the legal evaluation as a partnership between the promoters, if the company is not ultimately formed, the promoters should be jointly and severally liable for the tort. In this regard, Article 5 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law clearly stipulates. 3. Legal liability of the promoter in the event of a contract signed in its own name for the establishment of the company. According to the provisions of Article 23 of the the People's Republic of China Company Law, the establishment of a company must have a company domicile. Since the company has an independent legal personality only from the date of the issuance of the business license, the company is still in the establishment stage at the time of leasing the office space. At this time, it is common for the promoters to sign relevant lease agreements and decoration design contracts in their own name, especially when the company is in operational difficulties after its establishment, disputes will arise over how to perform the relevant contracts and how the promoters assume responsibility. In this regard, Article 2 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law gives the counterparty the right to choose, which stipulates that "if the promoter signs a contract in his own name for the establishment of a company, the people's court shall support the request of the counterparty to the promoter to bear the contractual liability. If the company confirms the contract stipulated in the preceding paragraph after its establishment, or has actually enjoyed the contractual rights or performed the contractual obligations, and the contract counterpart requests the company to assume the contractual liability, the people's court shall support it." From the perspective of judicial practice, the number of cases caused by the responsibility of the promoter in this case is relatively large, and the responsibility of the promoter is also more typical. 4. Liability for defects in capital contributions and joint and several liability for capital contributions According to the provisions of Articles 30 and 93 of the the People's Republic of China Company Law, after the establishment of the company, if the actual price of the non-monetary property contributed by the promoters as the establishment of the company is significantly lower than the price set in the articles of association, the difference shall be made up by the shareholder (promoter) who delivered the capital contribution; other shareholders (promoters) at the time of the establishment of the company shall bear joint and several liability. The third paragraph of Article 13 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law stipulates that "shareholders who fail to perform or fail to fully perform their capital contribution obligations when the company is established, in accordance with paragraph 1 or paragraph 2 of this article If the plaintiff in a lawsuit requests the company's promoter and the defendant shareholder to bear joint and several liability, the people's court shall support it; after the company's promoter assumes responsibility, it may recover compensation from the defendant shareholder." This provision extends the provision of joint and several liability between promoters in a joint stock company under article 93 of the the People's Republic of China Companies Act to a limited liability company for their respective capital contributions to the company. In addition, in accordance with the provisions of Article 13, paragraph 2 and Article 19 of the (III) of the Supreme people's Court on several issues concerning the Application of the the People's Republic of China Company Law, the creditors of the company may request shareholders who have not fulfilled their capital contribution obligations or have not fully fulfilled their capital contribution obligations to bear supplementary liability for the unpayable part of the company's debts within the scope of the principal and interest of the uncontributed capital, and such liability for repayment is not subject to the limitation of action. In the case of a limited liability company, the promoter's liability for false capital contributions in the process of establishing the company is transformed into the liability of the company's shareholders for false capital contributions after the company is established. Judicial Practice of 3. Sponsor Liability Dispute Internal legal liability of (I) promoters-company establishment disputes Case 1: Chen Yanping v. Han Kemin and the third party Liu Xiangquan and Liu Songyu Company Establishment Dispute [Henan Dengfeng Municipal People's Court (2007) Dengmin Yichu Zi No. 1437-2 Civil Judgment]] In this case, the company jointly funded by the four shareholders was not actually established. The court determines the proportion of each promoter's liability, taking into account the amount of funds that each promoter has not actually contributed and taking into account the conduct of each promoter in the course of the establishment of the company. Case 2: Li Haige v. Dong Daoming Sponsor Liability Dispute [Beijing Fangshan District People's Court (2014) Fang Min Chu Zi No. 02587 Civil Judgment (First Instance), Beijing Second Intermediate People's Court (2014) Er Zhong Min Zhong Zi No. 06590 Civil Judgment (Second Instance)]] Li Haige, Dong Daoming and other four people plan to jointly establish a limited company operating cosmetics, and signed a "cooperation agreement" for this purpose. After paying the capital contribution by Li Haige and others, Dong Daoming registered a shareholder as his own one-person limited company, Beijing Tianzi Weiye Cosmetics Co., Ltd. After the trial, the court held that Dong Daoming registered the target company as a one-person limited liability company, and its behavior violated the agreement of the cooperation agreement, resulting in Li Haige unable to achieve the purpose of the contract, and ordered the termination of the cooperation agreement and the return of Li Haige's investment principal and interest by Dong Daoming. External legal liability of (II) promoters-signing contracts in their own name for the establishment of companies Case 1: Qingdao Haidu Group Co., Ltd. v. Qingdao Zhongshan Paris Spring Department Store Co., Ltd. and Qingdao Siji Spring Department Store Co., Ltd. [Qingdao Intermediate People's Court (2014) Qing Min Er Shang Zhong Zi No. 979 Civil Judgment (Second Instance)]] Four Seasons Department Store is a limited liability company jointly initiated by Paris Department Store, Four Seasons Commercial Company and Ji Qinghuan. In the process of establishing the Four Seasons Department Store, Paris Department Store and Four Seasons Commercial Company issued a "Letter of Commitment" to the lessor Haitong Group in order to decorate the mall, stating that it will be the sixth month and the twelfth month after the establishment of Four Seasons Department Store. The decoration payment will be paid twice in the month. After the establishment of Four Seasons Department Store, it did not manage well, but in order to deal with related claims and debts, it signed an agreement with Haitong Group, stating that Four Seasons Department Store will pay for the relevant decoration. Qingdao Intermediate People's Court held that the appellee (Haidu Group) confirmed the contents of the Letter of Commitment signed by the appellee (Haidu Group) and the appellant (Paris Department Store) before the establishment of the Four Seasons Department Store by signing an agreement with Four Seasons Department Store, and Four Seasons Department Store had fulfilled some obligations to the appellee (Haidu Group), that is, the appellee (Haidu Group) has chosen to claim rights to Four Seasons Department Store through its actions, and can no longer require the promoter to bear responsibility in accordance with Article 2, paragraph 1, of the (III) for Judicial Interpretation of the Company Law. Case 2: Dispute over Construction Contract between Guangdong Baosheng Air Conditioning Equipment Engineering Co., Ltd. and Xu Guicheng and Guangzhou Shangliyuan Restaurant Management Co., Ltd. [Guangdong Zengcheng City People's Court (2013) Sui Zengfa Min Er Chu Zi No. 701 Civil Judgment (First Instance), Guangzhou Intermediate People's Court (2015) Sui Fa Min Er Zhong Zi No. 593 Civil Judgment (Second Instance)]] The People's Court of Zengcheng City, Guangdong Province, held in the first instance that the behavior of the Appreciation Liyuan Hotel to pay the project cost of the contract involved in the case to Baosheng Air Conditioning Company and the behavior of Baosheng Air Conditioning Company to issue invoices to the Appreciation Liyuan Hotel, all showed that the Appreciation Liyuan Hotel confirmed the contract involved in the case, and it has actually enjoyed the contractual rights and fulfilled the contractual obligations ...... And Baosheng Air Conditioning Company also knew that the contract involved was signed for the establishment of the Appreciation Garden Hotel when the contract was signed, and now the Appreciation Garden Hotel has been established in accordance with the law, so the rights and obligations of the contract involved should be enjoyed and assumed by the Appreciation Garden Hotel in accordance with the law, and accordingly confirmed that the subject of the contractual obligations involved is the Appreciation Garden Hotel. The court of second instance changed the judgment that the promoter, not the company, should bear the responsibility on the grounds that the court of first instance "did not exercise the right of interpretation and Baosheng Company did not choose the subject of responsibility. It should be pointed out that the counterparty exercises the right of choice on the premise that the company has exercised the right of intervention after its establishment, and the counterparty may request the company to assume contractual liability only after the company has expressed or implied its willingness to inherit the contractual rights and obligations. The above-mentioned "(III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law" not only implements the principle of contract relativity, but also prevents the promoter and the promoter's creditors from abusing it by setting conditions for the relative to choose to request the company to assume responsibility Rights harm the company's interests in order to protect the company's legitimate property rights and interests from infringement. At the same time, it should also be noted that in the case of the promoter signing a contract in its own name for the establishment of the company, although the relative has the right to choose, but has no right to require the promoter and the company after the establishment of the contract. Case 3: Cai Boquan, Hubei Gedian Development Zone Chengxiang Clothing Co., Ltd. and Liu Hansen's Housing Lease Contract Dispute [Hubei Higher People's Court (2014) E Min Li Er Zaizong Zi No. 0008 Civil Ruling]] The Hubei Provincial higher people's Court held that Cai Boquan signed a house lease contract with Liu Hansen and, as a promoter, set up Yuchengxiang Company with the leased house as a factory building and registered it for industry and commerce. Chengxiang Company, as the actual lessee, uses the house and pays the rent. Cai Boquan and Liu Hansen signed a house lease contract behavior is the performance of duties, the actual subject of the contract is Yu Chengxiang Company, the contract rights and obligations should be borne by Yu Chengxiang Company. When the appellee Liu Hansen sued, he had clearly chosen Cai Boquan as the defendant in this case and asked him to bear contractual responsibility, which should be supported by the people's court. In the course of the lawsuit, Liu Hansen applied to pursue Yu Chengxiang Clothing Company as a co-defendant in the case to participate in the lawsuit, which is not in accordance with the law.

Key words: