Joint and several liability is a kind of civil liability in which two or more parties bear all or part of their joint debts in accordance with the provisions of the law or the agreement of the parties, and can thus give rise to their internal debt relations. When there are more than one person responsible, each person is responsible for paying off all debts, and there is a joint and several relationship between the responsible persons.
The Company Law revised in 2023 has adjusted and strengthened some of the "joint and several liability", and this article systematically sorts out 13 types of joint and several liability, in order to help us avoid detours in the company's operation.
1. Joint and several liability in the company's vertical personality denial
【New Law Provisions】
Paragraph 1 of Article 23 of the 2023 Company Law: If a shareholder of a company abuses the independent status of the company's legal person and the limited liability of shareholders to evade debts and seriously damage the interests of the company's creditors, he shall be jointly and severally liable for the company's debts.
【Provisions of the Old Law】
Paragraph 3 of Article 20 of the 2018 Company Law: If a shareholder of a company abuses the independent status of the company's legal person and the limited liability of shareholders to evade debts and seriously damage the interests of the company's creditors, he shall be jointly and severally liable for the company's debts.
【Related Provisions】
Paragraph 2 of Article 83 of the Civil Code: The investor of a for-profit legal person shall not abuse the independent status of the legal person and the limited liability of the investor to harm the interests of the creditors of the legal person; Where the independent status of a legal person and the limited liability of investors are abused to evade debts, seriously harming the interests of the legal person's creditors, they shall be jointly and severally liable for the debts of the legal person.
2. Joint and several liability in the company's horizontal personality denial
【New Law Provisions】
Paragraph 2 of Article 23 of the 2023 Company Law: Where a shareholder uses two or more companies under its control to carry out the acts specified in the preceding paragraph, each company shall be jointly and severally liable for the debts of either company.
【Related Provisions】
Paragraph 2 of Article 11 of the Minutes of the Ninth People's Procuratorate: Where a controlling shareholder or actual controller controls multiple subsidiaries or affiliated companies, abuses the right of control, makes the property boundaries of multiple subsidiaries or affiliated companies unclear, their finances are mixed, their interests are transferred to each other, they lose their personality independence, and they become a tool for controlling shareholders to evade debts, operate illegally, or even violate the law and commit crimes, they may be denied the legal personality of the subsidiary or affiliated company on the basis of the facts of the case, and ordered to bear joint and several liability.
3. Joint and several liability in the denial of the personality of a one-person company
【New Law Provisions】
Paragraph 3 of Article 23 of the 2023 Company Law: For a company with only one shareholder, if the shareholder cannot prove that the company's property is independent of the shareholder's own property, he shall be jointly and severally liable for the company's debts.
【Provisions of the Old Law】
Article 63 of the 2018 Company Law: If a shareholder of a one-person limited liability company cannot prove that the company's property is independent of the shareholder's own property, he shall be jointly and severally liable for the company's debts.
【Related Provisions】
Article 10 of the Interpretation of the Guarantee System of the Civil Code: If a one-person limited liability company provides a guarantee for its shareholders, and the company claims that it does not bear the guarantee liability on the grounds of violating the provisions of the Company Law on the resolution procedure for the company's external guarantee, the people's court shall not support it. Where the company is unable to pay off other debts due to the assumption of guarantee liability, and the shareholder at the time of providing the guarantee cannot prove that the company's property is independent of its own property, and other creditors request that the shareholder bear joint and several liability, the people's court shall support it.
4. Joint and several liability in pre-company transactions of limited liability companies
【New Law Provisions】
Paragraph 2 of Article 44 of the 2023 Company Law: If the company is not established, the legal consequences shall be borne by the shareholders at the time of the establishment of the company; If there are two or more shareholders at the time of establishment, they shall enjoy joint and several creditor's rights and bear joint and several debts.
【Provisions of the Old Law】
Paragraph 1 of Article 4 of Interpretation III of the Company Law: If a company is not established for any reason, and the creditor requests that all or some of the promoters bear joint and several liability for the expenses and debts incurred in the establishment of the company, the people's court shall support it.
Paragraph 1 of Article 5 of Interpretation III of the Company Law: If the promoter causes damage to others due to the performance of the duties of the establishment of the company, and the victim requests the company to bear the liability for tort compensation after the establishment of the company, the people's court shall support it; Where the company has not been established, and the victim requests that all the founders bear joint and several liability for compensation, the people's court shall support it.
【Related Provisions】
Paragraph 1 of Article 75 of the Civil Code: The legal consequences of civil activities engaged in by the founders for the purpose of establishing a legal person shall be borne by the legal person; Where a legal person is not established, the legal consequences shall be borne by the founder, and if there are two or more founders, they shall enjoy joint and several creditor's rights and bear joint and several debts.
5. Joint and several liability in the transaction of a company limited by shares
【New Law Provisions】
Paragraph 2 of Article 44 of the 2023 Company Law: If the company is not established, the legal consequences shall be borne by the shareholders at the time of the establishment of the company; If there are two or more shareholders at the time of establishment, they shall enjoy joint and several creditor's rights and bear joint and several debts.
Article 107 of the 2023 Company Law: The provisions of Article 44, Article 49, Paragraph 3, Article 51, Article 52 and Article 53 of this Law shall apply to companies limited by shares.
【Provisions of the Old Law】
Paragraph 1 of Article 4 of Interpretation III of the Company Law: If a company is not established for any reason, and the creditor requests that all or some of the promoters bear joint and several liability for the expenses and debts incurred in the establishment of the company, the people's court shall support it.
Paragraph 1 of Article 5 of Interpretation III of the Company Law: If the promoter causes damage to others due to the performance of the duties of the establishment of the company, and the victim requests the company to bear the liability for tort compensation after the establishment of the company, the people's court shall support it; Where the company has not been established, and the victim requests that all the founders bear joint and several liability for compensation, the people's court shall support it.
【Related Provisions】
Paragraph 1 of Article 75 of the Civil Code: The legal consequences of civil activities engaged in by the founders for the purpose of establishing a legal person shall be borne by the legal person; Where a legal person is not established, the legal consequences shall be borne by the founder, and if there are two or more founders, they shall enjoy joint and several creditor's rights and bear joint and several debts.
6. Joint and several liability of shareholders of a limited liability company for insufficient capital contribution
【New Law Provisions】
Article 50 of the 2023 Company Law: When a limited liability company is established, if a shareholder fails to actually pay the capital contribution in accordance with the provisions of the articles of association, or the actual value of the non-monetary property actually contributed is significantly lower than the subscribed capital contribution, the other shareholders at the time of establishment shall be jointly and severally liable with the shareholder to the extent of the insufficient capital contribution.
【Provisions of the Old Law】
Article 30 of the Company Law of 2018: After the establishment of a limited liability company, if it is found that the actual value of the non-monetary property contributed as capital contribution for the establishment of the company is significantly lower than the amount set by the articles of association, the shareholder who delivered the capital contribution shall make up the difference; The other shareholders at the time of the establishment of the company are jointly and severally liable.
【Related Provisions】
Article 13 of Interpretation III of the Company Law: Where a shareholder fails to perform or fails to fully perform its obligation to make capital contributions, and the company or other shareholders request that they fully perform their obligations to the company in accordance with the law, the people's court shall support it. Where the company's creditors request that the shareholders who have not performed or have not fully performed their capital contribution obligations bear supplementary liability for the part of the company's debts that cannot be paid off within the scope of the unpaid capital and interest, the people's court shall support it; Where shareholders who have not fulfilled or have not fully performed their capital contribution obligations have already borne the above-mentioned liabilities, and other creditors make the same request, the people's court will not support it. Where a shareholder fails to perform or fails to fully perform its obligation to make capital contributions at the time of the establishment of the company, and the plaintiff initiates a lawsuit in accordance with the first or second paragraph of this article, and requests that the company's founders and the defendant shareholders bear joint and several liability, the people's court shall support it; After the promoter of the company bears responsibility, he can recover from the defendant shareholder. ……
7. Joint and several liability of the promoter of a company limited by shares for insufficient capital contribution
【New Law Provisions】
Article 99 of the 2023 Company Law: If the promoter fails to pay the share payment according to the shares subscribed for, or the actual value of the non-monetary property as capital contribution is significantly lower than the subscribed shares, the other promoters and the promoter shall be jointly and severally liable to the extent of insufficient capital contribution.
【Provisions of the Old Law】
Article 93 of the 2018 Company Law: After the establishment of a company limited by shares, if the promoter fails to pay up the capital contribution in full in accordance with the provisions of the articles of association, it shall make up the payment; The other promoters shall be jointly and severally liable. After the establishment of a company limited by shares, if it is found that the actual value of the non-monetary property contributed as capital contribution for the establishment of the company is significantly lower than the amount set forth in the articles of association, the promoter who delivered the capital contribution shall make up the difference; The other promoters shall be jointly and severally liable.
【Related Provisions】
Article 13 of Interpretation III of the Company Law: Where a shareholder fails to perform or fails to fully perform its obligation to make capital contributions, and the company or other shareholders request that they fully perform their obligations to the company in accordance with the law, the people's court shall support it. Where the company's creditors request that the shareholders who have not performed or have not fully performed their capital contribution obligations bear supplementary liability for the part of the company's debts that cannot be paid off within the scope of the unpaid capital and interest, the people's court shall support it; Where shareholders who have not fulfilled or have not fully performed their capital contribution obligations have already borne the above-mentioned liabilities, and other creditors make the same request, the people's court will not support it. Where a shareholder fails to perform or fails to fully perform its obligation to make capital contributions at the time of the establishment of the company, and the plaintiff initiates a lawsuit in accordance with the first or second paragraph of this article, and requests that the company's founders and the defendant shareholders bear joint and several liability, the people's court shall support it; After the promoter of the company bears responsibility, he can recover from the defendant shareholder. ……
8. Joint and several liability of shareholders of a limited liability company for withdrawing capital contributions
【New Law Provisions】
Article 53 of the 2023 Company Law: After the establishment of a company, shareholders shall not withdraw their capital contributions. In case of violation of the provisions of the preceding paragraph, the shareholders shall return the capital contributions withdrawn; If losses are caused to the company, the responsible directors, supervisors and senior managers shall be jointly and severally liable for compensation with the shareholders.
【Provisions of the Old Law】
Article 35 of the 2018 Company Law: After the establishment of a company, shareholders shall not withdraw their capital contributions.
【Related Provisions】
Article 14 of Interpretation III of the Company Law: Where a shareholder withdraws his or her capital contribution, and the company or other shareholders request that the company or other shareholders return the capital interest to the company or assist in the withdrawal of capital contributions, the people's court shall support it. Where a creditor of the company requests that the shareholder who withdraws the capital contribution bear supplementary liability for the part of the company's debts that cannot be paid off within the scope of the interest on the withdrawn capital, and that other shareholders, directors, senior managers or actual controllers who assist in withdrawing the capital contribution bear joint and several liability for this, the people's court shall support it; If the shareholder who withdraws the capital contribution has already borne the above-mentioned liabilities, and other creditors make the same request, the people's court will not support it.
9. Joint and several liability of shareholders of a company limited by shares for withdrawal of capital contributions
【New Law Provisions】
Article 53 of the 2023 Company Law: After the establishment of a company, shareholders shall not withdraw their capital contributions. In case of violation of the provisions of the preceding paragraph, the shareholders shall return the capital contributions withdrawn; If losses are caused to the company, the responsible directors, supervisors and senior managers shall be jointly and severally liable for compensation with the shareholders.
Article 107 of the 2023 Company Law: The provisions of Article 44, Article 49, Paragraph 3, Article 51, Article 52 and Article 53 of this Law shall apply to companies limited by shares.
【Provisions of the Old Law】
Article 35 of the 2018 Company Law: After the establishment of a company, shareholders shall not withdraw their capital contributions.
【Related Provisions】
Article 14 of Interpretation III of the Company Law: Where a shareholder withdraws his or her capital contribution, and the company or other shareholders request that the company or other shareholders return the capital interest to the company or assist in the withdrawal of capital contributions, the people's court shall support it. Where a creditor of the company requests that the shareholder who withdraws the capital contribution bear supplementary liability for the part of the company's debts that cannot be paid off within the scope of the interest on the withdrawn capital, and that other shareholders, directors, senior managers or actual controllers who assist in withdrawing the capital contribution bear joint and several liability for this, the people's court shall support it; If the shareholder who withdraws the capital contribution has already borne the above-mentioned liabilities, and other creditors make the same request, the people's court will not support it.
10. Joint and several liability in the transfer of defective equity of a limited liability company
【New Law Provisions】
Paragraph 2 of Article 88 of the 2023 Company Law: If a shareholder fails to pay the capital contribution on the date of capital contribution specified in the articles of association of the company or the actual value of the non-monetary property used as capital contribution is significantly lower than the subscribed capital contribution amount transfers equity, the transferor and the transferee shall be jointly and severally liable within the scope of insufficient capital contribution; If the assignee does not know and should not have known of the existence of the above-mentioned circumstances, the assignor shall be liable.
【Provisions of the Old Law】
Article 18 of Interpretation III of the Company Law: If a shareholder of a limited liability company transfers equity without performing or fully performing its capital contribution obligations, and the transferee knows or should know about it, and the company requests the shareholder to perform the capital contribution obligation and the transferee bears joint and several liability for this, the people's court shall support it; Where a creditor of the company initiates a lawsuit against the shareholder in accordance with the second paragraph of Article 13 of these Provisions, and at the same time requests that the aforesaid transferee bear joint and several liability for this, the people's court shall support it. Where, after the transferee assumes responsibility in accordance with the provisions of the preceding paragraph, recovers compensation from the shareholder who has not performed or has not fully performed its obligation to make capital contributions, the people's court shall support it. However, unless otherwise agreed by the parties.
11. Joint and several liability of controlling shareholders, actual controllers, directors and senior management
【New Law Provisions】
Article 192 of the 2023 Company Law: If the controlling shareholder or actual controller of the company instructs the directors or senior management personnel to engage in acts that harm the interests of the company or shareholders, they shall be jointly and severally liable with the directors and senior managers.
【Related Provisions】
Paragraph 1 of Article 1169 of the Civil Code: Whoever instigates or assists others in committing tortious acts shall bear joint and several liability with the perpetrator.
Article 18 of the Rules for Determining Administrative Liability for Information Disclosure Violations (Announcement [2011] No. 11 of the China Securities Regulatory Commission): If there is evidence to prove that the information disclosure obligor was instructed by the controlling shareholder or actual controller to fail to disclose information in accordance with the regulations, or that the information disclosed contains false records, misleading statements or material omissions, the liability of the controlling shareholder or actual controller of the information disclosure obligor shall be determined at the same time as the liability of the information disclosure obligor. Where the controlling shareholder or actual controller of the person obligated to disclose information is a legal person, its responsible person shall be designated as the directly responsible manager. Where the controlling shareholder or actual controller directly instigates or directs the engagement of illegal information disclosure, or conceals information that should be disclosed or fails to inform the information that should be disclosed, it shall be found that the controlling shareholder or actual controller instigated the illegal conduct of information disclosure.
12. Joint and several liability in the division of the company
【New Law Provisions】
Article 223 of the Company Law of 2023: The debts of the company before the division shall be jointly and severally liable by the company after the division. However, unless otherwise agreed in the written agreement between the company and the creditor on the repayment of debts before the division.
【Provisions of the Old Law】
Article 176 of the Company Law of 2018: The debts of the company before the division shall be jointly and severally liable by the company after the division. However, unless otherwise agreed in the written agreement between the company and the creditor on the repayment of debts before the division.
【Related Provisions】
Paragraph 2 of Article 67 of the Civil Code: Where a legal person is divided, its rights and obligations shall be enjoyed by the legal person after the division and bear joint and several debts, unless otherwise agreed by the creditor and the debtor.
Article 12 of the Provisions on Enterprise Restructuring Disputes: If a creditor claims creditor's rights against the enterprise after the division, and there is an agreement on the debts of the original enterprise at the time of the division, and the creditor agrees to do so, it shall be handled in accordance with the agreement of the parties; If there is no agreement on the assumption of debts of the original enterprise or the agreement is unclear at the time of the division, or if there is an agreement but the creditor does not recognize it, the enterprise after the division shall bear joint and several liability.
13. Joint and several liability in the simple deregistration of the company
【New Law Provisions】
Paragraph 1 of Article 240 of the 2023 Company Law: If the company has not incurred debts during its existence, or has paid off all its debts, it may cancel the company's registration through simplified procedures in accordance with the provisions with the commitment of all shareholders.
Paragraph 3 of Article 240 of the Company Law of 2023: If a company deregisters the company through a simplified procedure, and the shareholder undertakes the content specified in the first paragraph of this article untruthfully, it shall be jointly and severally liable for the debts before the deregistration.
【Related Provisions】
Paragraph 3 of Article 70 of the Civil Code: Where a liquidation obligor fails to perform its liquidation obligations in a timely manner and causes damages, it shall bear civil liability; The competent authority or interested parties may apply to the people's court to appoint relevant personnel to form a liquidation team to conduct liquidation.
Paragraph 2 of Article 20 of Interpretation II of the Company Law: If a company is deregistered without liquidation in accordance with law, and a shareholder or a third party undertakes to bear responsibility for the company's debts when the company registration authority goes through the deregistration, and the creditor claims that it bears the corresponding civil liability for the company's debts, the people's court shall support it in accordance with law.
Article 33 of the Regulations of the People's Republic of China on the Administration of Registration of Market Entities: Where a market entity has not incurred creditor's rights and debts or has paid off its creditor's rights and debts, has not incurred or has settled off its debts, employees' wages, social insurance premiums, statutory compensation, and taxes payable (late fees and fines), and all investors undertake in writing to bear legal responsibility for the authenticity of the above-mentioned circumstances, it may go through the cancellation of registration in accordance with the simplified procedures. Market entities shall publicize the pledge and application for cancellation of registration through the National Enterprise Credit Information Publicity System, and the publicity period is 20 days.
If there are no objections raised by relevant departments, creditors or other interested parties during the publicity period, the market entity may apply to the registration authority for cancellation of registration within 20 days of the expiration of the publicity period. If an individually-owned business handles the cancellation of registration in accordance with the simplified procedures, there is no need to publicize it, and the registration authority shall send the application for cancellation of registration of the individually-owned business to the relevant departments such as taxation, and if the relevant departments do not raise an objection within 10 days, they may directly handle the cancellation of registration. Where the deregistration of a market entity is subject to approval in accordance with law, or where the market entity's business license has been revoked, ordered to close down, revoked, or entered into the directory of abnormal business operations, the simplified deregistration procedures do not apply.
Article 47 of the Detailed Rules for the Implementation of the Regulations of the People's Republic of China on the Administration of Registration of Market Entities: To apply for simplified deregistration, an application and a letter of commitment from all investors shall be submitted.
