Research on the Reverse Denial System of Corporate Personality

Abstract

The reverse denial of corporate personality is a judicial system in which, when a shareholder abuses the company‘s independent status and limited liability to evade personal debts, the company’s independent liability is denied， and the company is held jointly and severally liable for the shareholder‘s debts. China’s Company Law provides for forward denial, but reverse denial remains a legislative vacuum, leading to inconsistent judicial standards in practice. This paper adopts case analysis and comparative research to review domestic practical cases, revealing problems such as a lack of legal basis, unclear boundaries, and difficulties in proof. Drawing on the experiences of the United States, Germany, and Japan, this paper proposes suggestions for constructing China‘s reverse denial system: exceptional application, interest balance, and case-specific application; clarifying the subject element—bringing controllers into the scope of liable parties; focusing the conduct element on asset commingling; adopting the subjective element as bad faith presumption; the result element as comprehensive assessment of solvency; and the causation element as five-part test. It also suggests improving litigation subjects, burden of proof, and judicial interpretation, as well as introducing a capital exemption mechanism to protect bona fide shareholders.