Perspective | Can a "spouse-owned company" be considered a single-member limited company?
Published:
2025-11-13
Article 23, Paragraph 3 of the "Company Law of the People's Republic of China" stipulates: "For a company with only one shareholder, if the shareholder cannot prove that the company's assets are separate from the shareholder's own personal assets, the shareholder shall bear joint and several liability for the company's debts." In practice, to avoid shareholders of single-shareholder companies being held jointly liable for the company's debts, it has become increasingly common for couples—acting as shareholders—to establish companies where they hold 100% of the shares. Given that the shareholders in such cases are married to each other, can these companies be regarded as single-shareholder limited liability companies?
Introduction
Article 23, Paragraph 3 of the "Company Law of the People's Republic of China" stipulates: "For a company with only one shareholder, if the shareholder cannot prove that the company's assets are separate from the shareholder's own personal assets, the shareholder shall bear joint and several liability for the company's debts." In practice, to avoid shareholders of a single-person company being held jointly liable for the company's debts, it has become increasingly common for couples—acting as shareholders—to establish companies in which they hold 100% ownership. Given that the shareholders are married to each other, can such companies be regarded as single-shareholder limited liability companies?
1. Can a "spouse-owned company" be regarded as a single-member limited company? Differing views in judicial practice
Viewpoint 1: All equity in a夫妻公司 fundamentally originates from the same property right, making it, in essence, a one-person limited company.
In Case No. 372 of the Supreme People's Court Min Re No. 2019, the court held: "In this case, although Company X was established with capital contributions from Mr. A and Ms. B, who are spouses, the company was set up during the duration of their marriage. Moreover, there is no written proof or agreement regarding the division of property between Mr. A and Ms. B in the company’s industrial and commercial registration documents—nor have they subsequently submitted any such documentation. According to Article 17 of the Marriage Law of the People's Republic of China, all property acquired by spouses during the marriage, except for those specified in Article 18 (i.e., personal property) and those agreed upon under Article 19, shall be jointly owned by the couple. Therefore, it can be determined that the registered capital of Company X originates from the joint marital assets of Mr. A and Ms. B, and all equity interests in the company were acquired after their marriage, thus belonging jointly to both parties. In essence, the entire equity of Company X stems from a single source of property rights, which are jointly enjoyed and controlled by one common ownership entity. This structural arrangement inherently ensures alignment of interests and maintains a unified, singular identity among the equity holders… Given that Company X was established by Mr. A and Ms. B during their marital relationship, the company’s assets are jointly owned by the two spouses, reflecting a high degree of alignment in their respective interests. At the same time, effective internal oversight within the company has proven difficult to achieve. Both Mr. A and Ms. B actively participate in the management and operation of the company, and their other shared marital assets tend to become intertwined with Company X’s resources, potentially jeopardizing the interests of creditors. Under these circumstances, the burden of proving that the company’s assets remain separate from the shareholders’ personal properties should be placed on Mr. A and Ms. B, as stipulated in Article 63 of the Company Law. In conclusion, Company X exhibits a high degree of similarity to a sole-proprietorship limited liability company in terms of its organizational structure and applicable legal framework. Consequently, the second-instance court’s determination that Company X effectively functions as a de facto sole-proprietorship limited liability company is entirely justified."
Viewpoint 2: A one-person company should be determined by the number of natural person shareholders or corporate shareholders, rather than by the source of the company’s registered capital or the ownership of its equity. "Spousal companies" are not considered single-member limited liability companies.
(In 2020), the Supreme People's Court, in Case No. 6688 of the Min Shen series, held: "A one-person limited liability company refers to a limited liability company with only one natural person shareholder or one corporate shareholder. In this case, although the company, as a limited liability company, was established with joint marital property contributed by shareholders ** and **—as stated by **—characterizing it as a 'one-person limited liability company' still lacks legal basis."
(2018) Supreme People's Court Min Zhong No. 1184: The Supreme Court held: "The company was established with capital contributions from **Company Si** and his wife. The company has more than one shareholder, all of whom have fully fulfilled their capital contribution obligations. Furthermore, there is no evidence to show that the personal assets of **Company Si** have been commingled with the company's assets. Therefore, the company's claim to hold **Company Si** jointly and severally liable for repayment, based on relevant legal provisions applicable to single-shareholder companies, lacks sufficient legal grounds."
II. Latest Judicial Trends
In the publicized case No. (2022) Supreme People's Court Min Zhong No. 312, issued by the Supreme People's Court on July 27, 2023, the court held: "The first-instance judgment’s finding that Gong Yinqui and Wang Qiong are spouses, and thus Qishuai Company should be treated as a one-person company—implying that Gong Yinqui and Wang Qiong should jointly and severally bear liability with Qishuai Company—is not sufficiently supported by factual or legal grounds." Meanwhile, the October 2024 edition of "Understanding and Application of Corporate Law," compiled by the Second Civil Adjudication Division of the Supreme People's Court (p. 89), notes that "in judicial practice, when applying this provision, it is important to clarify the scope of a one-person company, which includes both limited liability companies with a single shareholder and joint-stock companies with only one shareholder—but the shareholder must remain singular. Some argue that if a company has two shareholders who are spouses, it should be regarded as an *de facto* one-person company, and therefore the doctrine of disregarding the corporate personality applicable to one-person companies should also apply in such cases." Reversal of the burden of proof We believe this viewpoint deserves further discussion. A company with two shareholders who are spouses is not a one-person company." Furthermore, Article 7, Paragraph 3 of the "Interpretation by the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (Draft for Soliciting Opinions)," released by the Supreme People's Court in September 2025, explicitly states: "When the shareholders are a married couple, the provisions regarding one-person companies under Article 23, Paragraph 3 of the Company Law shall not apply." Although this document is currently only a draft for public comments, it already reflects the Supreme People's Court's leaning toward the view that "a marital company is not a one-person company." Consequently, the notion that "a marital company cannot be regarded as a one-person limited liability company" is increasingly becoming the latest judicial trend.
III. How to Assert Joint and Several Liability of Shareholders in a "Spousal Company" During Litigation?
In cases where judicial opinions tend to disqualify "spousal companies" from being recognized as single-member limited liability companies, the likelihood of successfully arguing that a "spousal company" qualifies as such—and thus holding its shareholder jointly liable—has been steadily declining. Therefore, under Article 23, Paragraph 1 of the Company Law of the People's Republic of China, which states, "If a company's shareholders abuse the company's legal personality and their limited liability to evade debts, thereby seriously harming the interests of the company's creditors, they shall bear joint and several liability for the company's debts," it is more appropriate to assert that the shareholders of the spousal company should be held jointly and severally responsible. In such cases, the plaintiff must provide evidence demonstrating that the shareholders have indeed abused the company's legal personality and limited liability—for instance, by requesting access to the company’s bank statements and analyzing whether the company’s funds are commingled with those of the shareholders, thereby determining whether their personal and corporate assets have become indistinguishable.
Relevant cases: In Case No. 1106 of the Supreme People's Court Min Shen (2020), the court held: "The transaction records submitted for two bank accounts of the landscaping company, along with transaction details from multiple personal bank accounts, reveal that several funds transferred into the landscaping company's accounts by the Luyi County Fiscal Treasury Payment Center were subsequently diverted into personal accounts. This indicates frequent and substantial financial transactions occurring between the personal accounts and both the landscaping company's accounts and those of [unspecified parties]. Notably, neither the landscaping company nor [unspecified party] provided any evidence or reasonable explanation to clarify these transactions during the original trial. Given that the landscaping company has yet to settle its debts to [unspecified party], the second-instance court, relying on Article 20, Paragraph 3, of the Company Law of the People's Republic of China—which stipulates that 'if company shareholders abuse the company's legal personality and limited liability to evade debts, thereby seriously harming the interests of the company's creditors, they shall bear joint and several liability for the company's debts'—correctly ruled that Zhang* and Zhang* should assume joint and several liability for the landscaping company's debts. The decision is supported by sufficient evidence, and the application of the law is entirely appropriate."
The Supreme People's Court, in Guiding Case No. 215 from the 38th batch of guiding cases released recently, held: "Since its establishment, Min Company has maintained extensive and frequent financial transactions with its shareholders Huang Mouhai, Huang Moufen, and Huang Moulung, and all three individuals have been found to have gratuitously appropriated company assets, thereby establishing a situation where Min Company has already become intertwined with these shareholders." Highly Confused Personality , it can be determined as an act of shareholders abusing the company's legal person status and their limited liability, as stipulated in Paragraph 3 of Article 20 of the Company Law of the People's Republic of China.
IV. Summary
Against the backdrop of judicial perspectives increasingly leaning toward not recognizing spousal companies as single-member limited liability companies, under Article 23, Paragraph 1 of the Company Law of the People's Republic of China, piercing the corporate veil to hold shareholders of spousal companies jointly and severally liable becomes a critical strategy for plaintiffs. To successfully obtain relevant evidence—such as bank statements from the company’s account—to demonstrate the commingling of shareholder and corporate assets is essential in these cases.
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