ON JUDICIAL PRACTICE AND LEGAL PERFECTION WITH SIGNIFICANT INSUFFICIENCY OF CAPITAL

Abstract

The revision of the Company Law in 2013 changed the capital system of Chinese companies from a paid-in system to a subscription-based system, realizing a major legislative adjustment, which provided a way out for many urban entrepreneurs who lacked funds, and promoted the development of the market economy. However, from a theoretical point of view, the oversimplification of the conditions for the establishment of a company poses a threat to transaction security. When the company's capital is insufficient to repay its debts, it lacks corresponding protection for the interests of creditors. From the aspect of the judicial practice of company law, there is a certain conflict between encouraging entrepreneurship and protecting the interests of company creditors. Aiming at dealing with challenges of theory and practice, this paper uses empirical analysis to discuss how to effectively protect the interests of corporate creditors from the perspective of corporate legal personality protection, especially the application and improvement of "significant insufficient capital". This article is based on the fifty cases, including judgment of the lower courts and high court, and analytical methods of these cases. This article points out that, first of all, the legal meaning of capital should be clarified, and capital should be a corporate asset in a broad sense. Secondly, it is necessary to redistribute the burden of proof and strengthen the legal protection of creditors. Finally, when applying the corporate personality denial system, it is necessary to clarify the bottom line function of the system.