One-person limited liability company has both the characteristics of traditional companies and its own advantages, which can stimulate investors’ enthusiasm and enthusiasm for investment, encourage investment and promote the development and prosperity of the whole social economy. The appearance of one-person limited liability company has greatly inspired the investment enthusiasm of investors, and it has greatly facilitated investors in setting the threshold and the internal structure of the company. Because one-person limited liability company has only one shareholder, the shareholder becomes the absolute controller of one-person limited liability company. The uniqueness of shareholders in a one-person limited liability company determines the particularity of its authority. The Company Law clearly stipulates that a one-person limited liability company does not have a shareholders’ meeting, which excludes its application of the relevant provisions on the convening procedures of shareholders’ meetings and the voting procedures of shareholders. One-person shareholders should make corresponding decisions in writing when exercising their functions and powers at the shareholders’ meeting, which is an essential obligation set by the Company Law to prevent one-person shareholders from acting arbitrarily and abusing their corporate personality. Although one-person limited liability company’s system has played a great role in economic construction, its institutional setup and system also have great disadvantages. The author focuses on analyzing the improvement direction of one-person limited liability company shareholder system from the perspective of one-person limited liability company shareholder system, and puts forward more measures and legal perfection that are beneficial to the development of one-person limited liability company.
First, the understanding of one-person limited liability company
As an effective mode of enterprise development, one-person limited liability company has been recognized by many countries in the world. To explore the shareholder system in one-person limited liability company, we must first understand the relevant characteristics of China’s one-person limited liability company from the following aspects:
(1) Shareholders and corporate structure of a one-person limited liability company
1. One-person limited liability company has only one shareholder, which is the most remarkable feature of one-person limited liability company. According to the traditional company theory, a company is a corporate legal person, which consists of two or more shareholders, while a one-person limited liability company has a single shareholder, and this shareholder holds all the capital contribution of the company, which is different from the corporate nature of traditional companies.
2. A one-person limited liability company has a simple organization. In view of the fact that a one-person limited liability company has only one shareholder, it is not necessary and possible to set up a shareholders’ meeting. Moreover, most of the one-person limited liability companies wholly owned by natural persons do not set up a board of directors, but only set up the post of executive director, and the shareholders themselves concurrently hold the post of executive director. In addition, except for a few companies whose general managers are held by people other than shareholders, most shareholders hold the positions of executive director and general manager of the company at the same time, which makes the company in a state where all shareholders, executive director and general manager belong to the same person. The organization of a one-person limited liability company is relatively simple.
3. Independence of personality of one-person limited liability company. One-person limited liability company, as an independent enterprise legal person, has an independent legal personality, and independently undertakes external obligations and responsibilities. Compared with sole proprietorship enterprises, sole proprietorship enterprises belong to unincorporated organizations and do not have legal personality.
4. one-person limited liability company’s liability and shareholders’ liability. One-person limited liability company, as a type of company, also has the basic characteristics of ordinary companies, that is, it bears limited liability to the outside world. A one-person limited liability company shall bear civil liability only to the extent of its company property. Shareholders are only liable to the outside world to the extent of their contribution to a one-person limited liability company. Unlike a sole proprietorship. Article 31 of the sole proprietorship enterprise law clearly stipulates: "If the property of a sole proprietorship enterprise is insufficient to pay off the debts, the investor shall pay off the debts with his other personal property." Moreover, Article 18 of the Law on Sole Proprietary Enterprises stipulates: "If an investor of a sole proprietorship enterprise clearly uses his family’s common property as his personal contribution when applying for the registration of enterprise establishment, he shall bear unlimited liability for the debts of the enterprise with his family’s common property according to law." This is also the biggest difference between a one-person limited liability company and a sole proprietorship enterprise.
Two, the characteristics of China’s one-person limited liability company shareholder legal system
Considering that one-person limited liability company is prone to abuse of legal person status by shareholders and damage to creditors’ interests by shareholders’ limited liability, China’s company law clearly affirms the legal status of one-person limited liability company, and at the same time, it provides a set of particularly applicable and strict legal rules, which have the following characteristics:
(1) Minimum capital and capital contribution rules. Article 59 of China’s Company Law stipulates that the minimum registered capital is RMB 100,000. The capital contribution stipulated in the Articles of Association shall be paid in full at one time. It stipulates a higher minimum capital standard and stricter capital contribution requirements than ordinary companies.
(2) The number of establishments and the regulation of subjects. Article 59 of China’s Company Law stipulates that a natural person can only set up a one-person limited liability company, and the one-person limited liability company cannot invest to set up a new one-person limited liability company. In this provision, the restrictions on the establishment of one-person limited liability companies in China are clearly defined, so as to prevent natural persons from using one-person limited liability company to evade debts and other legal responsibilities. A natural person can only set up a one-person limited liability company, and the one-person limited liability company can’t set up a one-person limited liability company again, which not only prevents natural persons from using the limited liability of the company to transfer and evade their responsibilities, but also protects the rights of creditors of the one-person limited liability company.
(3) Rules for company registration and publicity. Article 60 of China’s Company Law stipulates that the sole proprietorship of a natural person or a legal person shall be indicated in the company registration and stated in the company business license. The purpose is to make the third party have a clear understanding of the nature of one-person limited liability company, and to remind the third party of the credit of one-person limited liability company and the potential risks of trading with it.
(4) Special accounting and auditing rules. Article 63 of China’s Company Law stipulates: "A one-person limited liability company shall prepare financial and accounting reports at the end of each fiscal year and be audited by an accounting firm." Compared with the non-one-person limited liability company, the requirement that financial and accounting reports need to be audited by accounting firms is added, and the accounting audit requirements for one-person limited liability companies are further emphasized.
(5) Rules for the inversion of independent burden of proof of property. In view of the fact that a one-person limited liability company is completely controlled by one shareholder, it is prone to improper possession and domination of the company’s property, shareholder hotchpot and the company’s property by shareholders. Article 64 of China’s Company Law stipulates a special rule, that is, "if the shareholders of a one-person limited liability company cannot prove that the company’s property is independent of their own property, they shall be jointly and severally liable for the company’s debts". This paragraph is a typical inversion of the burden of proof, that is, someone else should be responsible for proving that the company’s property is not independent, but here the burden of proof is transferred to shareholders, who are required to prove that the company’s property is independent, otherwise the law will presume that the company’s property is not independent and severely criticize shareholders for taking joint liability for the company’s debts.
Third, the author thinks that the main problems in the shareholder system of one-person limited liability company in China.
(1) Shareholder setting
1. The new "Company Law" does not specify the governance structure of a one-person limited liability company in detail, except that it is stipulated in Article 62: "A one-person limited liability company does not have a shareholders’ meeting. When a shareholder makes a decision listed in the first paragraph of Article 38 of this Law, it shall be made in writing, signed by the shareholder and placed in the company. " Because one-person limited liability company is different from the traditional limited liability company, the traditional corporate governance mechanism should be revised through the legislative design of the governance structure of one-person limited liability company. However, in the new Company Law, this important issue has not been given due attention. Major European countries regulate the business executors, accounting supervisors, the convening procedures of shareholders’ general meetings, the exercise of the authority of the general meetings by individual shareholders, the effectiveness of resolutions made by individual shareholders, and self-dealing through legislation, so as to better safeguard the transaction security. Compared with this, the governance structure of one-person limited liability company in China is too simple, which is not conducive to the operation of the company, the protection of creditors’ interests and the maintenance of transaction security.
2. The new "Company Law" only stipulates that when shareholders make the decisions listed in the first paragraph of Article 38 of this Law, they shall be in written form, signed by shareholders and kept in the company. At the same time, there is no special provision for the board of directors and the board of supervisors of a one-person limited liability company, but according to the general provisions of a limited liability company, the board of directors and the board of supervisors may be established, and an executive director or one or two supervisors may also be established. Because the risks of a one-person limited liability company are mainly manifested in the confusion of shareholders and the company’s personality, hotchpot, improper operation of the company by shareholders, etc., we should make up for the lack of internal checks and balances mechanism by formulating a special governance structure model, amend the traditional corporate governance mechanism, and build a balance system of interests between shareholders and stakeholders in a one-person limited liability company. Many countries in the world have passed legislation to regulate the shareholders, accounting supervisors and shareholders’ decision-making procedures, the effectiveness of making resolutions, self-trading, etc. of a one-person limited liability company, in order to better safeguard the transaction security.
(2) abuse of shareholders’ rights
In the case that there is only one shareholder in a company, one shareholder can "do whatever he wants" to confuse the company’s property with the shareholders’ personal property, misappropriate the company’s property for private use, pay huge rewards to himself, conduct self-dealing with the company and so on, which makes it difficult for the company’s counterpart to know whether the object of the transaction is the company or the individual shareholder. Under the protection of limited liability, even if the company’s property is nominal, the one-person shareholder can still hide behind the company veil without being investigated by the company’s creditors or other counterparts. This makes the company’s creditors and other relative parties bear excessive risks.
Judging from the provisions, although Articles 20 and 60 of the new Company Law have stipulated this, they all have some shortcomings. Article 20 Although it is stipulated in principle that shareholders of a company who abuse the independent status of a company as a legal person and the limited liability of shareholders to evade debts and seriously damage the interests of creditors of the company shall be jointly and severally liable for the debts of the company. However, the requirement of this provision on the extent of serious damage to creditors’ interests is unclear, and the maneuverability in judicial practice is not strong. At the same time, it is stipulated that the purpose is to avoid debts, which obviously limits the application scope of the theory of disregard of corporate personality. Article 60 only stipulates that the shareholders of a one-person limited liability company shall be jointly and severally liable for the debts of the company when they cannot prove that the company property is independent of the shareholders’ own property. This means that the corporate personality of one-person limited liability company can be denied only when the property of one-person company is mixed with the personal property of shareholders. It is still difficult to determine how to apply it when one-person limited liability company abuses the corporate personality and uses the company limited liability system to evade legal obligations or avoid tort liability. Therefore, we should make more detailed provisions on how to apply the theory of disregard of corporate personality in legislation.
In a one-person limited liability company, all the power of the company is in the hands of a single shareholder, and due to insufficient internal and external supervision, it is easy for one-person shareholders to confuse the company’s property with shareholders’ property at will, or use the company’s property for private use, conduct self-transactions, guarantee or lend for themselves in the name of the company, or even use the legal personality of the one-person limited liability company to evade legal obligations or tort liabilities. In this way, the legitimate rights and interests of creditors will not be protected in time, and it will also have an adverse impact on China’s economic development, which will easily lead to a vicious circle and affect economic development.
Four, the author puts forward the following suggestions on the development direction of perfecting the shareholder system of one-person limited liability company in China.
1. The original intention of establishing a one-person limited liability company is to adapt to the current trend of economic development and promote economic development. However, the new company law prohibits natural persons from setting up multiple one-person limited liability companies and one-person limited liability companies set up by natural persons, which greatly weakens the motivation of natural persons to set up one-person limited liability companies and does not meet the proper meaning of the system of setting up one-person limited liability companies. The threshold for the establishment of one-person limited liability company in China is too high, which is not conducive to the regulation of one-person limited liability company by law, nor to the improvement of related systems of one-person limited liability company. For example, (1) The threshold for the establishment of a one-person limited liability company is too high. For the sake of efficiency, investors would rather make up a quorum to set up a general limited liability company instead of setting up a one-person limited liability company with extremely harsh conditions. As a result, there will still be a large number of one-person companies in the real sense in society, and the economic problems caused by the one-person limited liability company will still exist. Then the legislative purpose of the company law to recognize the legitimacy of one-person limited liability company is difficult to achieve. (2) One-man limited liability companies should not be blindly prohibited from investing in the establishment of new one-man companies, but allowed to set up new one-man limited liability companies conditionally, which is more conducive to standardizing one-man limited liability companies, perfecting the system of one-man limited liability companies and promoting economic development better. Therefore, I think the conditions for the establishment of a one-person company should be stipulated realistically.Natural persons can be appropriately allowed to set up multiple one-person limited liability companies, and one-person limited liability companies set up by natural persons can set up one-person limited liability companies.
2, the establishment of shareholders’ personal property and one-person limited liability company debt publicity system. In order to prevent the confusion between the operation of a one-person limited liability company and the business of a single shareholder, such as the complete consistency of business operations, the cross-use of company funds and shareholders’ living expenses, and the lending of company assets to oneself or for other purposes, it is necessary to establish a publicity system for shareholders’ personal property, and shareholders regularly publicize their personal property status to the company registration authority or the public to promote the complete separation of shareholders’ personal property from that of a one-person limited liability company. It can also make the information of one-person limited liability company’s self-transaction, related party transactions and so on public, ensure the independence of one-person limited liability company and shareholders, and thus promote the standardized operation of one-person limited liability company.
3. A one-person limited liability company does not have a shareholders’ meeting. One-person shareholders mean the shareholders’ meeting of the company, and the shareholders’ meeting of the company means one-person shareholders. Article 62 of China’s Company Law stipulates: "A one-person limited liability company does not have a shareholders’ meeting." Because the one-person shareholder of a one-person limited liability company grasps and exercises the power of the company, in order to avoid the confusion of the personal meaning of the one-person shareholder with the meaning of the company legal person, the company law also stipulates that when making the decision on the authority of the company, the one-person shareholder "should be in written form, and there are shareholders in the company". However, there is only one shareholder of a one-person limited liability company, and everything is decided by one person, and any idea of the shareholder can become his decision without a meeting. At the same time, it stipulates the right of revocation of interested parties. For a resolution that is not in written form and is kept in the company, interested parties may apply to the court for revocation of the resolution. This is to urge the shareholders of a one-person limited liability company to strictly abide by the legal procedures for making resolutions, punish the consequences of their illegal acts, and avoid the damage to the interests of interested parties.
4. A one-person company shall set up a board of supervisors by force, and shall make clear provisions on the appointment of supervisors. In the traditional sense, because the shareholders of a company are plural, even if there is no supervisory organ in it, its internal supervision can be supervised through the checks and balances formed by the conflict of interests between shareholders. However, if a one-man company does not set up a board of supervisors, the economic problems that may be caused by the government are by no means completely under the control of the government because of the lack of internal supervision mechanism. Therefore, the legislation can not fully apply the arbitrary provisions of the limited liability company on the establishment of the board of supervisors, but should take compulsory establishment measures. Another point is that in the appointment of supervisors, we must adhere to the principle that one-person shareholders who fully control the company do not serve as supervisors. Paragraph 2 of Article 52 of the Company Law stipulates that the board of supervisors shall include shareholders’ representatives and employees’ representatives in an appropriate proportion, of which the proportion of employees’ representatives shall not be less than one third. In a one-person company, where the shareholders are also directors or managers, it can be clearly stipulated that employees are natural candidates for the board of supervisors. Because employees are important stakeholders of the company, and their relationship with the company is relatively stable. The elected employee supervisors have the conditions to correct the company’s misconduct and protect the interests of employees and creditors through their understanding of the company’s operating conditions in their work. They should enjoy the right not to be dismissed or have their salaries reduced without a reason.
5. In judicial practice, the application of the system of disregard of corporate personality is very complicated, and it is difficult to enumerate this situation in both theory and law. Therefore, the future judicial interpretation should adopt the traditional judicial interpretation mode of civil law system which combines enumeration and generalization. To clarify the abuse of corporate personality and the degradation of corporate personality, we can consider making provisions in the form of enumeration to make up for the poor operability of the above legislation. In addition, the applicable elements of the disregard of legal personality of one-person company should be: first, the behavior of the actor abusing legal personality. This requirement emphasizes that the user of the corporate personality of a one-person company must abuse the corporate personality. The second is to damage the objective existence of facts. This requirement means that the abuse of corporate personality by the user of corporate personality of one-person company must cause harm to others or society. If the corporate personality user of a one-person company does not cause harm to others or society, even if there are abuses, such as setting up a "shell company", confusing the company’s property with shareholders’ hotchpot, confusing the company’s business with shareholders’ business, self-trading, etc., it does not constitute the applicable elements of denying the corporate personality of a one-person company. Third, there is a direct causal relationship between the abuse of corporate personality and the damage caused. This requirement requires that the injured party must be able to prove that there is a causal relationship between the damage and the improper behavior of abusing the corporate personality. Fourth, the actor is at fault. This requirement means that the actor has the subjective fault of infringing on the independent personality of a one-person company, abusing the corporate form and seeking illegitimate interests.
(Author: People’s Court of Fengxin County, Jiangxi Province)
