Piercing the Corporate Veil in China: Where is it Now and Where is it Heading?

Abstract

This paper presents the results of the first comprehensive empirical study of China’s veil-piercing cases adjudicated under the statutory veil piercing regime as introduced in the 2005 company law reform. It provides insights into the way Chinese courts have interpreted and applied the veil piercing doctrine, an area of law renowned for its complexity and uncertainty worldwide. Some comparisons are drawn between the results of this study and those produced by similar studies in common law jurisdictions from which the Chinese veil-piercing regime was transplanted. The empirical findings are analysed to answer the question of whether and how China’s veil-piercing law has fulfilled its stated mission to protect creditors. In doing so, a number of suggestions are made with a view to improving the efficacy of the veil-piercing regime in China. The paper also applies the interest-group theory to explain and predict the development of China’s veil-piercing regime. The outcome of the research would be of considerable significance to, amongst others, foreigners who lend funds to, contract with, or invest in Chinese companies.

Keywords: piercing the corporate veil, China, empirical study, comparative perspective

JEL Classification: K22, K42