Corporate Litigation Study... Liquidation liability disputes in the rules of corporate litigation adjudication.

Published:

2021-12-24

Foreword Liquidation liability disputes refer to disputes in which members of the liquidation group shall bear the liability for compensation due to intentional or gross negligence causing losses to the company and creditors during liquidation. During the liquidation of the company, the liquidation group is the company's organ that carries out liquidation affairs internally and handles claims and debts on behalf of the company externally. The Company Law stipulates that the members of the liquidation group shall be devoted to their duties and perform their liquidation obligations in accordance with the law. Members of the liquidation group shall not take advantage of their functions and powers to accept bribes or other illegal income, and shall not embezzle the property of the company. If a member of the liquidation group causes losses to the company or its creditors intentionally or through gross negligence, he shall be liable for compensation. This paper will analyze the liquidation liability disputes from the aspects of legal provisions, disputes and adjudication rules. 1. related regulations 1. Companies Act of the People's Republic of China Article 189 The members of the liquidation group shall be devoted to their duties and perform their liquidation obligations in accordance with the law. Members of the liquidation group shall not take advantage of their functions and powers to accept bribes or other illegal income, and shall not embezzle the property of the company. If a member of the liquidation group causes losses to the company or its creditors intentionally or through gross negligence, he shall be liable for compensation. 2. the People's Republic of China Civil Code Article 70 Where a legal person is dissolved, except in the case of merger or division, the liquidation obligor shall promptly form a liquidation group for liquidation. Members of the executive or decision-making bodies such as directors and directors of a legal person are the liquidation obligors. Where laws and administrative regulations provide otherwise, such provisions shall prevail. If the liquidation obligor fails to perform the liquidation obligation in time and causes damage, it shall bear civil liability; the competent authority or the interested party may apply to the people's court to designate relevant personnel to form a liquidation team to carry out liquidation. 3. (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 18 If the shareholders of a limited liability company, the directors and the controlling shareholders of a joint stock limited company fail to set up a liquidation group to start liquidation within the statutory time limit, resulting in the devaluation, loss, damage or loss of the company's property, and the creditors claim that they are liable for compensation for the company's debts within the scope of the losses caused, the people's court shall support it in accordance with the law. If the shareholders of a limited liability company, the directors and controlling shareholders of a joint stock limited company fail to perform their obligations, resulting in the loss of the company's main property, account books, important documents, etc., and cannot be liquidated, and the creditors claim that they are jointly and severally liable for the company's debts, the people's court shall support it in accordance with the law. If the above-mentioned situation is caused by the actual controller, and the creditor claims that the actual controller shall bear the corresponding civil liability for the company's debts, the people's court shall support it in accordance with the law. Article 19: After the company is dissolved, the shareholders of a limited liability company, the directors and controlling shareholders of a joint stock limited company, and the actual controller of the company maliciously dispose of the company's property and cause losses to creditors, or use false liquidation reports without liquidation according to law. If the company registration authority is deceived to cancel the registration of the legal person, the people's court shall support it in accordance with the law. Article 20 When a company is dissolved, it shall apply for cancellation of registration after the liquidation according to law is completed. The people's court shall support the claim that the shareholders of the limited liability company, the directors and controlling shareholders of the limited liability company, the directors and controlling shareholders of the limited liability company, and the actual controller of the company shall bear the responsibility for the settlement of the company's debts. If the company goes through the cancellation registration without liquidation according to law, the shareholders or a third party promises to be liable for the company's debts when the company registration authority goes through the cancellation registration, and the creditors claim that they bear the corresponding civil liability for the company's debts, the people's court shall support it in accordance with the law. Article 23 If a member of a liquidation group violates laws, administrative regulations or the articles of association of the company while engaging in liquidation affairs and causes losses to the company or creditors, and the company or creditors claim that it is liable for compensation, the people's court shall support it in accordance with the law. If a shareholder of a limited liability company or a shareholder of a joint stock limited company who individually or collectively holds more than 1% shares of the company for more than 180 consecutive days, in accordance with the provisions of the third paragraph of Article 151 of the Company Law, if a member of the liquidation group has any act mentioned in the preceding paragraph, the people's court shall accept the case. If the company has been liquidated and canceled, and the above-mentioned shareholders directly file a lawsuit in the people's court with the members of the liquidation group as the defendants and other shareholders as the third party with reference to the provisions of paragraph 3 of Article 151 of the Company Law, the people's court shall accept it. 4. Minutes of the National Court Conference on Civil and Commercial Trials Article 14 The "failure to perform obligations" as stipulated in Article 18, paragraph 2 of the (II) of Judicial Interpretation of the Company Law refers to the shareholders of a limited liability company who deliberately delay or refuse to perform their liquidation obligations after the legal liquidation cause has arisen, or the negative behavior of failing to carry out liquidation due to negligence. If a shareholder proves that he has taken active measures to fulfill his liquidation obligations, or a minority shareholder proves that he is neither a member of the board of directors or the board of supervisors of the company, nor has he selected personnel to serve as a member of the organ, and has never participated in the operation and management of the company, the people's court shall support it in accordance with the law. Article 15 If a shareholder of a limited liability company proves that there is no causal relationship between his negative omission of "neglecting to perform his obligations" and the result of "the loss of the company's main property, account books, important documents, etc. and the inability to liquidate", the people's court shall support it in accordance with the law. Article 16 If the creditors of the company request the shareholders to bear joint and several liability for the repayment of the company's debts, and the shareholders defend on the grounds that the claims of the company's creditors against the company have exceeded the limitation period of action, which is verified to be true, the people's court shall support it in accordance with the law. If the creditors of the company request the shareholders of a limited liability company to bear joint and several liability for the debts of the company on the basis of article 18, paragraph 2, of the (II) of the judicial interpretation of the company law, the limitation period shall be calculated from the date on which the creditors of the company know or should know that the company cannot be liquidated. 2. Disputes and Judgment Rules (I) Controversial Issue 1: The determination of shareholders' liability in the case of fraudulent cancellation of the company. Case: Xia Moumou refused to accept the civil judgment No. 813 of the People's Court of Dongtai City, Jiangsu Province (2017) Su 0981 Minchu due to a dispute over liquidation liability with Chen Mou and others, and appealed to the Intermediate People's Court of Yancheng City, Jiangsu Province. The Intermediate People's Court made a civil judgment (2017) Su 09 Minzong No. 4142, and then applied to the Intermediate People's Court of Yancheng City, Jiangsu Province for a retrial, the Intermediate People's Court of Yancheng City, Jiangsu Province made a civil ruling (2018) Su 09 Min Shen No. 109. referee rules] If a shareholder of a limited liability company, without liquidation in accordance with the law, defrauds the company's registration authority to cancel the registration of a legal person with a false liquidation report, which harms the interests of creditors, the shareholders of the company, as liquidation obligors, shall bear the corresponding liability for compensation. The scope of such liability is limited to the amount due to the creditor under legal liquidation. The amount due to creditors under legal liquidation, according to the principle of good faith and the dominant position of shareholders to know the company's situation, should be the shareholders as the liquidation obligor to bear the burden of proof. If the shareholders of the company cannot prove the true amount of the company's remaining property in the case of liquidation in accordance with the law, they shall bear the adverse legal consequences. (II) Dispute Issue II: Liability for Company Liquidation Harm the Interests of Creditors Case: Zhuzhou Binjiang Furniture Co., Ltd. refused to accept the civil judgment No. 930 of the people's Court of Tianyuan District, Zhuzhou City, Hunan Province (2016) because of a dispute over liquidation liability with Liu Mouhua and Xu Mouhong, and appealed to the Intermediate people's Court of Zhuzhou City, Hunan Province. Zhuzhou City Intermediate people's Court of Hunan Province issued a civil judgment No. 1233 of (2017) Xiang 02 Min Zhong. referee rules] When the company is liquidated, the liquidation group knowingly fails to perform the obligation of notice because the company has outstanding claims, and after the company is canceled, the corresponding losses of the creditors shall be compensated by the members of the liquidation group. There are two kinds of liability for the liquidation of a company to harm the interests of creditors, one is the liability of the liquidation group for failing to fulfill the obligation of notice announcement, and the other is the liability of the liquidation obligor for maliciously disposing of the company's assets and false liquidation. The former belongs to the infringement of omission, and the latter belongs to the infringement of act. There are some differences between the two in the subject of tort liability and the scope of liability, which should be strictly distinguished and identified in judicial practice. (III) Dispute Issue 3: Determination of Liability for Liquidation of Shareholders of Limited Companies and Starting of Limitation of Action Case: Shanghai Wensheng Investment Management Co., Ltd. refused to accept the civil judgment of Beijing Haidian District People's Court (2014) Haimin Chuzi No. 4323 due to a dispute over liquidation liability with Zhongke Industrial Group (Holdings) Co., Ltd., and filed an appeal with Beijing No. 1 Intermediate People's Court, and Beijing No. 1 Intermediate People's Court issued (2015) Zhongyi Min (Shang) Zhongzi No. 2997 civil judgment. referee rules] 1. The liquidation obligor of a limited company shall be liable for liquidation and shall meet the conditions of negligence in fulfilling the liquidation obligation, the company cannot be liquidated, and there is a causal relationship. Among them, for the determination of "indifference" and causality, it is necessary to take the way of inversion of the burden of proof and presumption of causality. The shareholders of a limited company, as the liquidation obligor of the company, the size of their shareholding and whether they actually participate in the operation of the company are not valid exonerations. 2. In terms of the statute of limitations, it shall be calculated from the date on which the creditors know or should have known that the shareholders of the company have neglected to perform their liquidation obligations, resulting in the derogation, loss or inability to liquidate the company's property. (IV) Dispute Question 4: The allocation of the burden of proof and the standard of proof of the joint and several liability of the shareholders based on the liquidation obligation. Case: Dingshi Law Firm refused to accept the civil judgment of Beijing Chaoyang District People's Court (2015) Chaomin (Shang) Chuzi No. 67115 for a dispute over liability for damaging the interests of the company's creditors with the shareholders of Beijing Kexin Investment Co., Ltd., and filed an appeal with Beijing No. 3 Intermediate People's Court, and Beijing No. 3 Intermediate People's Court issued a civil judgment (2017) Beijing 03 Minzong No. 5302. referee rules] 1. The compulsory liquidation procedure is not a pre-procedure in the litigation that "cannot be liquidated. 2. In the allocation of the burden of proof for "non-liquidation", the burden of proof shall be borne by the creditor. Creditors are required to provide preliminary evidence of the "inability to liquidate" the company. When the liquidation obligor claims not to be jointly and severally liable for liquidation, the liquidation obligor shall adduce disproof that the company's "inability to liquidate" is not due to its negligence in fulfilling its liquidation obligations. If there is no evidence to the contrary, the liquidation obligor shall bear the corresponding liability. 3. When the liquidation obligor claims that it can be liquidated and provides preliminary evidence that meets the conditions for liquidation, the liquidation procedure shall be carried out first. In this case, the seizure of the company's account books by the court due to the execution procedure does not constitute "the loss of the company's main property, account books, important documents, etc." and "cannot be liquidated", and the creditor cannot directly request the shareholders of the limited liability company to bear joint and several liability for settlement. 4. When the liquidation obligor claims that the company can still be liquidated and provides preliminary evidence, the litigation should examine whether the company can be liquidated. The liquidation obligor only needs to prove that it can still be "liquidated" rather than "fully liquidated", and whether the company can be "fully liquidated" is not something that should be examined in the proceedings.

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