Previous Review: Legal Practice of company dissolution and liquidation (Part 1) | Lawyer Guo Ling

Third, due to negligence in liquidation, the company's main property, account books, important documents and other loss, can not be liquidated, minority shareholders should unconditionally bear joint and several liabilities for the company's debts?

According to the relevant provisions of Chapter 10 of the Company Law, at the time of dissolution of the company, in order to terminate the existing property and other legal relations, the company's property and creditor's debt relationship shall be cleaned up, disposed of and distributed in accordance with legal procedures, so as to settle its creditor's debt relationship, and thus deprive the company of legal person status. Except for the dissolution of the company due to merger or division, the dissolution caused by other reasons shall go through liquidation procedures.

The liquidation organization, also known as the liquidation institution, refers to the executor who is engaged in liquidation affairs after the dissolution of the company and deals with the property, claims and debts of the company. The liquidation group is the representative and executive body of the company in liquidation and takes over all the powers of the board of directors.

Organization time: within 15 days from the date of dissolution, if the liquidation group is not established within the time limit, it will be appointed by the court.

Subject of liquidation: Where dissolution is stipulated in items (1), (2), (4) and (5) of Article 180 of the Company Law, a liquidation group shall be established within 15 days. The liquidation group of a limited liability company shall be composed of shareholders, and the liquidation group of a joint stock limited company shall be selected by the board of directors or the general meeting of shareholders; If a liquidation group is not established within the time limit, the creditor may apply to the people's court to appoint relevant personnel to form a liquidation group to carry out liquidation.

Article 18 of the Judicial Interpretation of the Company Law (II) : Where the shareholders, directors and controlling shareholders of a limited liability company fail to set up a liquidation group to start liquidation within the statutory time limit, resulting in the depreciation, loss, damage or loss of the company's property, and creditors claim that they are liable for compensation for the company's debts within the scope of the losses caused, the people's court shall support it according to law. Where the shareholders, directors and controlling shareholders of a limited liability company, or of a joint stock limited company, fail to perform their obligations, resulting in the loss of the company's main property, account books and important documents, etc., and the liquidation is impossible, and the creditors claim that they bear joint and several liabilities for the repayment of the company's debts, the people's court shall provide support according to law.

Thus, the liquidation obligation of a limited liability company is for all shareholders, regardless of the proportion of shares they are entitled to.

Then, when the creditor claims that the company's main property, account books and important documents are lost due to the negligence of the liquidation obligation, and the liquidation cannot be carried out, and all the shareholders of the company are required to bear the joint and several liabilities, do the minority shareholders have no defense? We can first look at the guiding cases published by the Supreme People's Court.

Case: The plaintiff Shanghai Cengliang Trading Co., LTD. (Cengliang Company for short) sued that it supplied steel to the defendant Changzhou Tuoheng Machinery Equipment Co., LTD. (Tuoheng Company for short), and Tuoheng Company still owed 1395228.6 yuan. The defendant room, Jiang Mou and Wang Mou are the shareholders of Tuoheng Company, Tuoheng company has not been inspected annually, has been revoked by the business license of the industry and Commerce Department, and has not organized liquidation. Due to its failure to fulfill the liquidation obligations, the company's property is lost and the company's claims are not paid off. According to the company law and relevant judicial interpretation, Fang Mou, Jiang Mou and Wang Mou shall bear joint and several liability for the debts of Tuoheng Company. Therefore, it is requested to order the Tuoheng company to repay the loan of Cunliang Company 1395228.6 yuan and liquidated damages, and Room, Jiang and Wang shall bear joint and several liability for the debt of Tuoheng Company. The defendants Jiang Zhidong and Wang Weiming argued that: 1. They had never participated in the operation and management of Tuoheng Company; 2. Tuoheng Company is actually controlled by Fang Hengfu, the major shareholder, and the two cannot liquidate it; 3. Due to poor management, Tuoheng Company was already burdened with a large amount of debts before its business license was revoked, which was not due to the loss of property of Tuoheng Company caused by Jiang Zhidong and Wang Weiming's negligence in fulfilling their liquidation obligations; 4. Jiang Zhidong and Wang Weiming have also entrusted lawyers to liquidate Tuoheng Company, but because Tuoheng Company's property has been robbed by creditors for many times, it is impossible to liquidate, so Jiang Zhidong and Wang Weiming have not been idle in fulfilling their liquidation obligations. Therefore, the request to reject the depositary Liang company to Jiang Zhidong, Wang Weiming litigation request.

Shanghai Songjiang District People's Court made a (2009) Songmin II (Shang) Chu Zi No. 1052 civil judgment on December 8, 2009:1. Tuoheng Company paid Cunliang Company 1395228.6 yuan and the corresponding liquidated damages; 2. Fang Hengfu, Jiang Zhidong and Wang Weiming shall be jointly and severally liable for the above debts of Tuoheng Company. After the verdict, Jiang Zhidong and Wang Weiming appealed. On September 1, 2010, Shanghai No.1 Intermediate People's Court issued (2010) Huyi ZhongMinsi (Shang) Final Zi No. 1302 Civil judgment: The appeal was rejected and the original judgment was upheld.

Case source: Supreme People's Court Guiding Case No. 9

Key points of the referee:

The effective decision of the court held that:

1. If Tuoheng Company fails to pay off the payment in accordance with the contract after Cunliang Company supplies the goods according to the contract, it shall bear the corresponding payment liability and breach of contract.

2. Fang Mou, Jiang Mou and Wang Mou, as shareholders of Tuoheng Company, shall organize liquidation in time after Tuoheng Company's business license is revoked. Due to the negligence of Fang, Jiang and Wang in fulfilling the liquidation obligations, the main property and account books of Tuoheng Company have been lost and cannot be liquidated. Fang, Jiang and Wang's negligence in fulfilling the liquidation obligations violates the relevant provisions of the Company law and its judicial interpretation, and shall bear joint and several liabilities for the debts of Tuoheng Company.

3. As a limited liability company, all shareholders of Tuoheng Company shall legally become the liquidation obligors of the company. The Company Law and its relevant judicial interpretations do not provide for the exception clauses argued by Jiang and Wang, so no matter how many shares Jiang and Wang occupy in Tuoheng Company, whether they actually participate in the operation and management of the company, they are obligated to liquidate Tuoheng Company according to law within the legal period after Tuoheng Company is revoked.

4. Jiang and Wang argued that Tuoheng had taken on a large amount of debt before their business license was revoked, and even if they were lazy in fulfilling their liquidation obligations, there was no correlation between them and the loss of Tuoheng's property. According to the ascertained facts, the suspension of the execution of Tuoheng Company in other cases because there is no property available for execution can only prove that the people's court did not find the property of Tuoheng Company in the execution, and cannot prove that the property of Tuoheng Company was all lost before the business license was revoked. There is a causal connection between the three shareholders of Tuoheng Company and the loss of Tuoheng Company's property and account books, and the defense of Jiang and Wang is not valid. The agent contract and the lawyer's certificate that Jiang Mou and Wang mou entrust lawyers to liquidate can only prove that Jiang Mou and Wang mou want to liquidate Tuoheng Company, but in fact the liquidation of Tuoheng Company has not been carried out. According to this, it cannot be determined that Jiang Mou and Wang mou have fulfilled their liquidation obligations according to law, so the defense of Jiang Mou and Wang Mou is not accepted.

From this case, it can be seen that the view of the Supreme Court in 2010 held that all shareholders of a company have the obligation to perform liquidation. If the company cannot be liquidated due to the failure of individual shareholders to keep the financial books and important documents, creditors may Sue all shareholders of the company to bear joint and several liabilities for the company's debts.

However, on July 3, 2019, Liu Guixiang, the special Committee of the Supreme Court, pointed out in his Speech at the Civil and Commercial Trial Work Conference of the National Court: "Article 18, paragraph 2, of the Judicial Interpretation of the Company Law (II) stipulates that: Where the shareholders of a limited liability company, the directors or the controlling shareholders of a joint stock limited company are negligent in performing their obligations, resulting in the loss of the company's main property, account books, important documents, etc., and the inability to liquidate the company, and the creditors claim that they bear joint and several liabilities for the repayment of the company's debts, the people's court shall provide support according to law. Because the understanding of this article is not accurate enough, it has led to the improper expansion of shareholders' liquidation liability in some cases." He believes that it is necessary to accurately identify the elements of "failing to fulfill liquidation obligations". The so-called "slack" in the performance of liquidation obligations refers to the ability to perform liquidation obligations but not to perform them. If a shareholder of a limited liability company can prove that it has made active efforts to fulfill its liquidation obligations, or that its failure to perform its liquidation obligations was caused by objective reasons such as deliberate delay or refusal to liquidate by the shareholder who actually controls the company's major assets, books and documents, or that it has not participated in the operation or managed the account books and documents, Neither shall constitute a failure to perform the liquidation obligations. Therefore, this is different from the view held in previous judicial practice that "the liquidation obligation of shareholders to the company is the legal obligation based on the identity of shareholders", and the speech of the special committee Liu obviously puts more emphasis on "objective conditions", instead of strictly adhering to the "identity obligation" of shareholders. At the same time, the speech clearly confirms that the following circumstances do not constitute negligence in fulfilling the liquidation obligation: (1) if the shareholders of the limited liability company can prove that they have made active efforts to fulfill the liquidation obligation; (2) The failure to perform the liquidation obligation is caused by objective reasons such as deliberate delay or refusal to liquidate by the shareholders who actually control the company's major assets, books and documents; (3) can prove that they did not participate in the operation, nor did they manage the account books.

Therefore, recalling the above Supreme People's Court guiding Case No. 9 "Shanghai Cunliang Trading Co., Ltd. v. Jiang Zhidong and Wang Weiming and other sales contract Disputes", in response to Jiang Zhidong and Wang Weiming's argument that "they have never participated in the operation and management of Tuoheng Company, Tuoheng Company is actually controlled by Fang Hengfu, the major shareholder, and they cannot liquidate it", The effective judgment finally concluded that "Tuoheng Company as a limited liability company, all its shareholders should legally become the liquidation obligation of the company." The Company Law and its relevant judicial interpretation do not provide for the exception clause argued by Jiang Zhidong and Wang Weiming, so no matter how many shares Jiang Zhidong and Wang Weiming occupy in Tuoheng Company, whether they actually participate in the operation and management of the company, they are obligated to liquidate Tuoheng Company according to law within the legal period after Tuoheng Company's business license is revoked." Although the liquidation obligation is not equivalent to the liquidation responsibility, if Jiang Zhidong and Wang Weiming are indeed "able to prove that they did not participate in the operation and did not manage the account books and documents", in accordance with the spirit of the latest speech, it clearly constitutes the exemption of liquidation liability.

Therefore, I think that the liability stipulated in Article 18, paragraph 2, of the Judicial Interpretation of the Company Law is that the shareholders bear "joint and several liability", which should be strictly grasped. However, if the shareholder actively performs the liquidation obligation after the liquidation of the company, there is no abuse of shareholder rights or abuse of legal person status, the identification of shareholder liquidation liability is the lack of legal basis, and the shareholder can constitute a liability exemption according to law. The joint and several liability for settlement herein refers to the joint liability for settlement based on the shareholder's failure to perform his obligations and the creditor's rights and interests are damaged. When a company has several shareholders, the shareholders who fail to liquidate are not liable for the wrongful acts of the other shareholders.

In the future, in cases where creditors require shareholders to bear "joint and several liability" according to the provisions of Article 18, paragraph 2, of the Judicial Interpretation of the Company Law, shareholders, especially minority shareholders or shareholders who do not actually control the operation, obviously have the "confidence" to defend. However, how to "prove that active efforts have been made to fulfill liquidation obligations" seems to be a difficult problem for shareholders and judges. For the non-controlling shareholder, the future notice and urging letter to the controlling shareholder will obviously be an important basis for exoneration.

At the same time, through this case, we can also see that the liquidation liability is a kind of tort liability, but does the creditor as the plaintiff need to prove that the omission to liquidate has a causal relationship with the loss of the creditor? In fact, the burden of proof here cannot simply follow the requirements of the burden of proof of tort liability, but should apply the reversal of the burden of proof and the presumption of causation. Because compared with the liquidation obligor, it is impossible to effectively intervene in the company, it is difficult to grasp the company's assets, and it is impossible to obtain the company's account books, and it is obviously at a disadvantage in obtaining evidence. In order to implement the liquidation liability and make the proof rules more consistent with the principle of fairness and the actual situation of the parties' ability to prove evidence, in the trial of the case, it is presumed in principle that as long as the company carries out liquidation according to law, creditors can get full repayment. The part that the creditor still cannot pay off after applying for enforcement of the debtor's company property is presumed to be the part of the company property impairment caused by the liquidation obligation. However, if the shareholder can prove that there is no causal relationship between its negative inaction and the inability to liquidate and the result, such as the company's account books due to fire damage and loss of other circumstances, it should be considered that the causal relationship does not exist. If the shareholder cannot prove it, the causal relationship shall be presumed to be established.

This paper discusses several common practical problems in company dissolution and liquidation. In my opinion, the shareholders of the company should stand the best position in the stage of dissolution and liquidation of the company, strictly grasp the liquidation procedures, and actively fulfill the liquidation obligations, so as to prevent their own legal risks. At the same time, it also reminds the majority of small shareholders that in the case of not actually participating in the company's operation, after the company's dissolution causes, it should actively urge the controlling shareholders or other shareholders to actively perform the liquidation obligation, and close the risk of the late life of the company, otherwise it will fall short.