The Logical Framework for Disregard of Corporate Personality of Affiliated Companies

With the integration of the disregard of corporate personality system for affiliated companies into the Company Law in China, it is imperative to provide precise interpretations of the relevant provisions in order to regulate corporate operations and uphold order effectively. Through the examination of pertinent cases and the synthesis of theoretical perspectives in the field, this study delves into the theoretical underpinnings and practical challenges of the disregard of corporate personality system within affiliated companies. Based on this foundation, it is argued that a comprehensive understanding of this system must be approached from three critical aspects: the entity dimension, in litigation scenarios, creditors should act as plaintiffs, the debtor company as the defendant, and affiliated companies as co-defendants or third parties. As for the conduct dimension, apart from formal elements, a crucial focus should be placed on whether the shareholders of the debtor company have engaged in improper benefit transfers through affiliated entities. The intentional impairment of creditors’ interests by controlling shareholders is not a mandatory element for disregarding the corporate personality of affiliated companies. Accurate comprehension of these three dimensions is essential to ensure the rational application of this system.