First, the stage of strict limited liability theory
On a sign on the new york Stock Exchange, there is a line that reads: The establishment of the limited liability system can be said to be as epoch-making as Watt's invention of the steam engine. Limited liability makes shareholders have no obligation to pay more than the value of their shares to their company or its creditors, so it has become the "traditional cornerstone" of company law.
1at the end of the 8th century1at the beginning of the 9th century, the industrial revolution entered a period of full swing, and new wealth concepts and new opportunities for making money stimulated people's investment enthusiasm. However, the concepts of franchising legal person and company and the principle of universal unlimited liability have greatly hindered the realization of people's investment enthusiasm, thus hindering the growth of social wealth. With the growing voice of the concept of social freedom and equality, the principle of freedom and universality of enterprise establishment and the system of shareholders' liability limited to capital contribution have been confirmed by law. Since the beginning of19th century, the modern company form characterized by free establishment, especially the limited liability of shareholders, has laid the foundation and framework of modern company law.
In the early days of the establishment of limited liability, people pursued strict limited liability, which was considered as the cornerstone of the company system and must be strictly followed. The most representative is 1855, the first British law named Limited Liability Act, in which the relationship between the limited liability of shareholders and the independence of corporate responsibility is most clearly defined.
According to the current world economic development and international investment, the limited liability system still plays a great role in multinational corporations. (1) Limited liability can still play an important role in encouraging investment by limiting investors' risks. Investors can foresee their own risks when investing, that is, their biggest loss is limited to their own investment, so limited liability has become the most effective legal form to encourage investment. (2) Limited liability can encourage multinational companies to decentralize decision-making procedures. Independent legal entities and the principle of limited liability can enable subsidiaries of multinational companies to engage in business activities independently and encourage parent companies to decentralize their decision-making procedures. Subsidiaries with decentralized decision-making enjoy the autonomy to make decisions on their own affairs and interests. If the interests of subsidiaries are protected, the interests of their external creditors will also be indirectly protected. As Dr. Yu Jinsong, a famous international economist in China, said: As long as the subsidiaries of multinational companies have the necessary autonomy to decide their own affairs, limited liability is still the best choice. (3) Limited liability can promote the capital flow of multinational corporations. The finiteness of venture capital enhances the transferability of shares and the liquidity of capital, thus realizing the optimal allocation of resources and maximizing the interests of multinational companies.
Although limited liability is a very important principle for multinational companies, it is incomplete to solve the legal liability problems of parent companies and subsidiaries only with limited liability. In the multinational corporation system, the parent company becomes the sole or controlling shareholder of the subsidiary, and the parent company has other commercial interests in the subsidiary besides interests, which may conflict with the interests of the subsidiary. Therefore, the parent company may use its subsidiaries to realize its own interests and ignore the interests of its subsidiaries. At this time, if the strict principle of limited liability system is implemented, the legal responsibility of the parent company of multinational corporations to its subsidiaries will be divorced from its economic ties, and limited liability is likely to become the umbrella of the parent company. Therefore, strict limited liability is unrealistic for modern multinational companies. Only a few countries in the contemporary international community strictly abide by this rule, and Britain is one of them.
The second is the supplementary theory of limited liability, that is, the stage of "unveiling the corporate veil"
With the increasing complexity of modern business society, people realize the huge gap between the traditional view that every company is regarded as an independent legal person and the economic reality that multinational companies complete unified business tasks through complex organizational structures. This situation will inevitably lead to the development of new legal theory to meet the needs of changing business reality, and the theory of unveiling the corporate veil came into being. This theory finds a relative balance between the principle of limited liability and the economic organization reality of multinational corporations, and provides a new idea for limiting the limited liability between parent and subsidiary companies in legislative and judicial practice. Its appearance aims to break through the strict limitation of the principle of limited liability and solve the legal problems arising from multinational corporations with a realistic attitude.
In the judicial practice of various countries, the basis or reasons for unveiling the veil of transnational corporations are as follows:
1, agent or tool
If the parent company controls all kinds of affairs of the subsidiary and arbitrarily interferes with the operation of the subsidiary, the subsidiary has essentially lost its legal personality. In this case, the court can think that the subsidiary is only the incarnation or tool of the parent company and only acts as the puppet or department of the parent company. Due to the excessive control of the parent company, the subsidiary has completely become the agent of the parent company, and there has been personality confusion between the parent company and the subsidiary company (also known as corporate personality degradation). Kazuo, a famous American judge, pointed out that if excessive control makes "the parent company become the principal and the subsidiary company become the agent", it should "unveil the veil of the company". ①
However, under what circumstances is a very complicated issue, and different countries have different provisions in judicial practice. Traditional English law holds that the fact that only one company is a subsidiary of another company (even a wholly-owned subsidiary) is not enough to identify the subsidiary as the agent of the parent company, so two companies can be regarded as one entity. When reviewing the case, the court will consider the following factors: whether the profit of the subsidiary is the profit of the parent company, whether the management personnel of the subsidiary are appointed by the parent company, whether the parent company is the decision-making headquarters of the whole enterprise, whether the parent company dominates the business of the subsidiary company, and determines the investment of funds and other major issues. ②
In fact, it is also difficult for the court to identify the subsidiary as the agent of the parent company and let the parent company bear the responsibility. Because there is usually no real agency relationship between parent and subsidiary companies, there are two kinds of agency: express and implied. In the case of multinational companies, if the parent company regards the subsidiary as its own agent and the subsidiary does not object, it is regarded as an agency relationship, then the parent company will be responsible for the behavior of the subsidiary at any time, which completely excludes the limited liability system, so it is unrealistic. It is essentially the relationship between control and autonomy that a subsidiary becomes the agent of the parent company. When the parent company controls the subsidiary company excessively, and the subsidiary company loses its autonomy and causes damage to the subsidiary company, the parent company shall bear the legal responsibility of the subsidiary company. Therefore, excessive control has become an important factor for the parent company to bear the debts of its subsidiaries. There is no uniform international standard on how to identify excessive control, but it is generally believed that the following three conditions should be met: (1) The parent company has complete control over the operation of its subsidiaries, and this control has the characteristics of continuity, continuity and universality; (2) The parent company's control over the sales of subsidiaries is illegitimate interests, that is, the control is exercised for the benefit of the parent company and harms the interests of subsidiaries; (3) The parent company's control over the subsidiary causes damage to the creditors or minority shareholders of the subsidiary. ③
2. Abuse of corporate form
Abuse of corporate form is abuse of corporate legal personality. In this case, the court will deny the company's legal personality, thus unveiling the company's veil. There are two main types of abuse of subsidiary legal person qualification by parent company:
(1) Use corporate personality to evade the law. Using corporate legal person qualification to evade the law refers to the subject adjusted by specific legal norms, which originally has positive duty of action (obligation) or negative duty of omission (prohibition obligation), but uses the existing company, newly established company or plural company under its control as another independent legal subject that does not undertake such obligations, so as to achieve the purpose of evading legal obligations by using legal person qualification. (4) In this case, the unveiling of the subsidiary is to safeguard the dignity of the law, and only in this way can the law truly achieve its effectiveness.
(2) Use corporate personality to avoid debts. The parent company engages in illegal activities under the guise of subsidiaries, thus achieving the purpose of avoiding debts. Take a simple example: the parent company of a multinational company has set up a subsidiary overseas. When a subsidiary is heavily in debt, the parent company declares the subsidiary bankrupt, and the creditors of the subsidiary can only be repaid by the bankruptcy of the subsidiary, and the parent company is only responsible for its capital contribution. At the same time, the parent company uses the original employers and employees to set up another subsidiary with the same business purpose. Obviously, if the parent company uses the same trick again and again, it only needs to bear a small part of the responsibility at a time, and it will achieve the purpose of avoiding debts. The result is even worse when the parent company secretly transfers the property before declaring the subsidiary bankrupt. In this case, in order to protect the interests of creditors, the court usually lifts the veil of the company accordingly, and the parent company is responsible for the creditors of its subsidiaries.
3. Insufficient capital
In the field of "unveiling the company's veil", "capital shortage" is a relative concept, which usually means that its capital is very small compared with the nature of the company's business and the risks inevitably involved in its operation. If the parent company invested enough capital at the beginning of the subsidiary's operation, even if losses occurred in the course of operation later, resulting in a serious shortage of capital, the court usually would not let the parent company bear joint and several liability for the debts of the subsidiary on the grounds of insufficient capital.
When the court unveils the company's veil on the grounds of insufficient capital, it usually distinguishes the nature of debt, that is, contractual debt or tort debt.
Looking at American cases, it is not difficult to draw a conclusion that judges generally refuse to let the parent company bear the contract debts on the grounds of insufficient capital, although many judges think this is indeed a related factor. In business communication, for their own benefit, both parties will try to know each other's credit status in advance. In the process of concluding a contract, the two parties share the risk through bargaining, and usually determine the risk bearing according to the terms of the contract. Once there is a problem in the process of performance, the court can solve the rights and obligations according to the terms of the contract. In this case, the claims of creditors (voluntary creditors) of contractual debts will not be supported by the court, because the court will think that there is no reason to interfere with this established risk sharing scheme. Of course, in some contract cases, insufficient capital will also be the reason for the parent company to bear legal responsibility. If the parent company, as a shareholder of a subsidiary, conceals or misrepresents the financial status of the subsidiary in the process of concluding the contract, which leads a third party to mistakenly think that the subsidiary has sufficient capital, then the premise of the risk sharing clause is untrue, so in this case, the parent company will be ordered to bear the responsibility for the subsidiary. In the field of infringement, it is quite different from the above situation, and insufficient capital will become an important factor for judges to determine. If the parent company doesn't invest enough in the subsidiary company, and the operating risk of the subsidiary company is high, it is very unfair to the object of infringement damage, that is, involuntary creditors, because the parent company transfers its own risk to the innocent public. At this time, the court usually makes the parent company bear the liability for tort damages on the grounds of insufficient capital. Of course, the capital of the subsidiary is not enough to compensate for any possible accidents. The rationality of capital mainly depends on the operating nature and risk of subsidiaries.
4. Violation of due process
There are many reasons for lifting the veil of multinational corporations. In addition to the above-mentioned main reasons, there are also parents and subsidiaries that violate due process of law. The terms of the transaction between the parent company and the subsidiary company are unfair, deliberately leaving the losses in the subsidiary company and giving the profits to the parent company, making the subsidiary company useless; Confusion or improper flow of assets between parent company and subsidiary company. ④
However, the theory of unveiling the corporate veil also has its own limitations.
(1) This theory is still based on the premise that the principle of limited liability of shareholders is generally applicable, and the disregard of personality of subsidiaries can only be applied in some exceptional cases. However, because the theory of unveiling the company veil has broken through the principle of limited liability, which plays an important role in company law, its application in concrete practice still has very strict requirements. When creditors try to make the parent company liable for the debts of its subsidiaries on the basis of unveiling the veil, the court often needs to consider many factors to determine whether the case can be regarded as an exception to limited liability, so it is not a satisfactory jurisprudence to deal with the legal liability of the parent company of a multinational company to its subsidiaries.
(2) This theory does not provide a clear standard for the judgment of specific cases. Courts often need to study case by case to decide under what circumstances it is appropriate to lift the veil, which inevitably leads to many contradictory cases, because each court often has different views on specific cases. The United States can be said to be a country that handles more such cases. However, state courts still lack uniform and clear standards when applying this principle, and often use some ambiguous argots, which leads to different needs in practice and often leads to great differences in their own judgments.
Everything is moving forward. The strict limited liability system and the theory of unveiling the company veil can no longer adapt to the reality of the increasingly integrated economy of multinational corporations, and it will eventually be replaced by new theories, which is an unquestionable development trend.
Third, the emergence of enterprise law view.
The viewpoint of enterprise law first appeared in solving the bankruptcy problem of multinational companies.
The author thinks that bankruptcy is only the most prominent problem in the legal liability of the parent company to its subsidiaries, and it is feasible to solve the complex legal liability of the parent company to its subsidiaries by borrowing the viewpoint of enterprise law.
At present, there are two ways to solve the bankruptcy of multinational corporations in the world, namely, substantive law and enterprise law. The so-called substantive law point of view means that the economically interrelated companies are regarded as independent entities in law, and the bankruptcy of multinational companies is handled according to the general relationship, regardless of the close economic ties between companies, only from the legal concept, as long as the companies are legally independent. The so-called enterprise law view refers to companies that are independent of each other in legal form. As long as they are closely related in the economic sense, they are treated as an enterprise as a whole, and when dealing with the bankruptcy cases of these companies, they are treated as special creditors.
In the era when the concept of substantive law is dominant, the functions of commercial enterprises are very different from today. At that time, the company was relatively small, and each company was regarded as an independent legal entity according to its independent rights and obligations. With the appearance of the limited liability principle of 19 in 1930s and the subsequent development of this principle in various countries, the concept that a company is an independent legal person has been emphasized. At that time, a company usually could not own shares in another company, which was also in line with the economic reality at that time. The concept of substantive law has played an important role in limiting shareholders' responsibility for their equity investment. Later, taking the company law promulgated by New Jersey as an opportunity, one company was allowed to own the shares of another company, which led to the emergence and development of group companies. The parent company, subsidiaries and subsidiaries have formed a complex commercial enterprise, and * * * completed commercial activities that can maximize the interests of the group. After the emergence of multinational corporations, the subsidiaries that form a group also become part of the enterprise. The traditional concept of substantive law automatically applies to the parent company, subsidiaries and affiliated companies, which are regarded as independent legal entities by law.
The concept of substantive law pays more attention to the form of company existence than its entity. It points out that the subsidiary is formally separated from the parent company, regardless of the close economic ties of the whole company group. Its concerns include: whether the subsidiary has independent account books and bank accounts, whether it operates through the resolutions of its own board of directors and shareholders' meeting, whether it makes its own daily decisions, whether it has minimum funds, etc. According to the concept of substantive law, as long as the company maintains this seemingly independent existence, other matters, such as whether the parent company owns most or all of the shares of its subsidiaries, whether it designates the directors or officials of its subsidiaries (in most cases, the directors or officials of the parent company), and whether the parent company and its subsidiaries have the same directors or officials or even telephone numbers and trademarks and engage in the same business, are irrelevant. Under the guidance of the concept of substantive law, the reality of enterprise management is ignored, especially the key factor that subsidiaries maximize the interests of the group according to the instructions of the parent company is not considered enough. Only under special circumstances, the court following the traditional concept will disregard the reality of independent entities and consider lifting the veil of the company and investigating the responsibility of the parent company. As mentioned above, the courts in different countries have different ways to lift the corporate veil, which leads to many contradictory judgments. Therefore, the theory of unveiling the corporate veil has also been criticized by many people.
From the historical development, the concept of enterprise law has gone through a long process. At first, it turned to the theory of unveiling the corporate veil, and then gradually abandoned the concept of substantive law. With the rapid development of multinational companies, except for some special fields, the limitations of applying the concept of substantive law are getting bigger and bigger, which is increasingly out of line with economic reality, and the concept of enterprise law appears and develops rapidly. The acceptance of the concept of enterprise law is a gradual process. Many bankruptcy cases are solved according to the economic integration of multinational companies, and the results are different from the concept of substantive law. However, this result is sometimes not the result of directly adopting the concept of enterprise law, but based on the theory of unveiling the corporate veil. In other words, the theory of unveiling the corporate veil is an important bridge from the concept of substantive law to the concept of enterprise law. Through the analysis of the economic consequences of multinational companies' business activities, people gradually accepted the concept of enterprise law.
Until today, the traditional concept of substantive law has not been completely abandoned, although its defects are well known. There are two main reasons for this: First, the principle of limited liability directly related to substantive law has played a unique and important role in the long-term historical development of the company. In the case of multinational companies, even if the status of shareholders and creditors has changed, this principle can still play an important role and continue to apply to multinational companies. The principle of limited liability is still clearly reflected in the company law and bankruptcy law of various countries, and there is little hope that all countries will give up this view completely in a short time. Secondly, on different issues, countries have different degrees of abandoning substantive law and accepting enterprise law. For example, in the field of bankruptcy law, countries have basically accepted the viewpoint of enterprise law on the issue of fair subordinate creditor's rights, but the viewpoint of enterprise law is still weak and the viewpoint of substantive law is still dominant on the issue of parent company's debt liability to bankrupt subsidiaries.
However, after all, many countries have realized the reality of economic integration of multinational corporations and that the principle of limited liability cannot be absolutely applied, which provides excessive protection for the parent company and harms the interests of creditors of subsidiaries. Therefore, they advocate changing the traditional legal point of view and adopting special methods to deal with the legal problems of multinational corporations, so they often pursue the responsibility of the parent company with the help of the theory of unveiling the corporate veil.
The economic integration of multinational companies considered in the concept of enterprise law itself does not represent the final answer, but provides a background for the court to judge whether intra-group transactions are harmful to external creditors. When solving the legal liability between the parent and subsidiary companies of multinational corporations, the concept of enterprise law does not necessarily completely overthrow the independence of corporate personality. When the enterprises in the group have only investment relationship with the group, or have little economic relationship with the group, or the image of the enterprise in the public mind is not a part of the enterprise group, and so on. In these cases, the application of enterprise law is not very urgent. In the famous case of Robin V. Rubin V. Hanover Manufacturers Trust Co., the court did not adopt any standard about the benefits of inter-group financing to the whole group. On the contrary, it considers the standard of substantive law, that is, the benefits of financing to the members of the group company. ①
The concept of substantive law is not an inevitable product of corporate personality, but a legal concept that serves certain goals in a specific historical period. However, as far as the development process is concerned, it is impossible to deal with the legal liability of the parent and subsidiary companies of multinational companies completely with the concept of enterprise law in the short term, and the concept of substantive law will still occupy a place, especially when considering the principle of limited liability. Even in some countries, substantive law is still the basic starting point for considering problems, and the concept of enterprise law is only adopted in individual cases, such as Britain. Even so, there are precedents that show signs of change in these countries. When dealing with the parent-subsidiary relationship of multinational companies, the general trend of adopting the concept of enterprise law will not change, and this development trend will be further accelerated with the further development of multinational companies.