Analysis of Hot Issues in China’s Company Law (2023 Revision)

Abstract

Following the Company Law (2023 Revision), substantial changes have been made to many important legal regimes, necessitating clarification through interpretative analysis. In the field of corporate litigation, the Company Law (2023 Revision) has taken a clear stance in strengthening the protection of minority shareholders’ rights, reflecting a broader shift in litigation philosophy from “creditor primacy” to “investor primacy.” This shift underscores an adjustment in the balancing of interests among various stakeholders under the Company Law (2023 Revision). On the validity of accelerated shareholder capital contribution, there is significant debate between the pooling rule theory and the direct repayment theory. In this context, the nature of the accelerated mechanism should be interpreted as a special case of creditors’ subrogation rights, favoring the application of direct repayment. With regard to the liability of directors, the Company Law (2023 Revision) has established a systematic framework for director liability, including liabilities related to shareholder capital contributions, capital operations and outflows, liquidation obligations, liability to third parties, and general liability for breaches of fiduciary duties. This framework further clarified director liability at the capital inflow stage. Although the issue of reverse piercing of the corporate veil is not explicitly codified in the Company Law (2023 Revision), the Supreme People’s Court, in the selected Q&A on its legal consultation portal, has acknowledged its applicability in scenarios of corporate personality confusion. However, this Q&A should not serve as a basis for expanding the scope of application of the reverse piercing through analogical reasoning. In Chinese laws, reverse piercing of the corporate veil is merely an effect rather than an independent behavioral norm.

Keywords

the Company Law (2023 Revision) / investor primacy / accelerated shareholder capital contribution / reverse piercing of the corporate veil / director liability

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