The Expansion and Restriction of the Rule of Disregard of Corporate Personality

Although the rule of disregard of corporate personality in Chinese company law has been continuously improved through the experience gained in trial practice, it still has the problems of over-expansion in application and boundary extension, which are mainly manifested as inadequate demonstration of causality, a broad standard for assessing damage results and the biased configuration of the rule of reversal of burden of proof. Tracing back to its origin, these problems may be caused by a cognitive deviation regarding the limited liability system, the inadequacy of the general capital outflow rules to protect the interests of creditors and the paradox of the burden of proof within the rule of disregard of corporate personality. As an exception to the limited liability of shareholders, the over-application of the rule of disregard of corporate personality may have a destructive impact on the cornerstone system of the company law. It is imperative to improve and restrict the rule of disregard of corporate personality in corporate law, reshape the proof paradigm of its causality requirement, clarify the examination standard of its consequence requirement, correct the rule of reversed burden of proof, and clarify the applicable boundary between it and the general capital outflow rules.