Case Report: new factual situation for lifting corporate veil under China laws

Limited liability has been recognized as one of the fundamental features of companies and corporations throughout world, which was heralded as great an invention as the steam engine.

Under Chinese laws and in Chinese judicial practice, it has proven that it is difficult to get the court to pierce the corporate veil, a metaphor referring to the limited liability…

China Land VAT: how to avoid or defer payment of land value added tax

Land value added tax is a big cut of profits from property owners in China.

Land VAT is applicable basically in two scenario: (1) corporate property owners that sell properties, including foreign entities that hold China properties,and (2) individual owners of non-residential properties.

If the owner simply sells in the market for cash, then the land VAT

Inheritance of corporate shares in a China company (III)

This is the third post regarding inheritance of corporate shares in a China company. Again it is about a special situation that may become more and more in reality with more and more Chinese riches migrating to foreign countries.

I. Facts of the Case

In 2002, a Chinese husband set up a trading company with a third party, and business went well. In 2006, the husband…

Nominee Shareholder Agreement under Current Chinese Laws

 

A nominee shareholder agreement (the "Agreement") used herein refers to the agreement or contract concluded between two persons (individual or body corporate) whereby A wants to invest in a certain company but for various reason he is hidden from public disclosure and instead, his investment is made and registered in the name of B who appears on public…

Share Repurchase under China Company Laws – Commentary on China Supreme Court Ruling

[For a PDF version of this post, please click here.]

Sparked by court cases in private equity investment world recent years, share repurchase by the company (whose shares are being repurchased) has been a hot topic in the legal arena. Foreign investors in China may well be involved in such a share repurchase arrangements, and it is of interest to foreign investors…

Can company’s creditors go after shareholders who have not paid up subscribed capital?

This is not a new topic on this blog. However, it prompted me to look further into the issue when I realized that in judicial practice, courts are actually very much divided on this issue.

Following the company registered capital reforms initiated back at the end of 2013, the market has witnessed many newly setup companies that have a huge amount of registered …

Watch out your manager for your China business

Just recently a client of mine, a foreign company that has a subsidiary business presence in China, approached me for a service to investigate some suspicious dealings that were made by one of his senior manager in Shanghai subsidiary.

The foreign parent company apparently discerned something fishy from a decline in profits of the subsidiary company and commenced…

The Dilemma of Minority Shareholder in a China Limited Liability Company

Facts: a limited liability company ("LLC") incorporated in 2013 in China has two shareholders with the majority shareholder having 60% of equity interests (there is no share in a China LLC, and equity is expressed in percentages), and the minority shareholder having 40%. The Company has a three-member board of directors with the majority shareholder appointing…

Rights for minority shareholders under China Company Law

Being a minority shareholder in a China limited liability company can be a nightmare for investors, foreign or domestic. You get stuck there with no hope and find yourself no easy exit. I have witnessed many such sad stories happening to foreign clients who participated in Sino-foreign equity joint ventures.

So it will be meaningful for investors to know what…

Sue a Chinese company: tap the pockets of its shareholders and even directors

More than often, when you deal with a Chinese company, supplier, business partner or contractors, you are dealing with a China limited liability company incorporated under China Company Law. As a universal principle, the limited liability doctrine offers the "veil" protection for the shareholders or members of the those limited liability companies (hereinafter…

Issues related to sale of Chinese properties by foreign corporate owners

I have been helping foreign owners in selling more than a dozen of their Chinese properties in the past years. In practice, there is no big roadblock on the way including the final step of converting and repatriating their sale proceeds denominated in Chinese currency, namely, Renminbi, or RMB.

However, sale of China properties owned by foreign companies…

China Company Registered Capital Reform and its Implications on Your China Business

It has been more than two years since China launched its reform on corporate registered capital (also termed as legal capital) regime with a view to reviving and boosting investment by the grassroots people. Apparently, it has been a successful reform so far. But in the meantime, this reform has its far-reaching bearing on the way companies are funded and on …

中国公司法下的股东知情权诉讼的注意要点

下述文字是助理律师张雅璐的法律研究结果。对股东行使知情权要求查询公司财务状况的诉讼的要点问题进行归纳和总结

所引述的案例如下:

Case1:李淑君、吴湘、孙杰、王国兴诉江苏佳德置业发展有限公司股东知情权纠纷案

Case2:上海联华新新超市有限责任公司与上海新吴淞商贸总公司股东知情权纠纷上诉案…

Update on Jahwa General Manager Employment Case

January this year, I wrote a post commenting on the then ongoing high-profile employment dispute involving the general manager, Mr. Wang Zhuo and his employer, Shanghai Jahwa Corporation, a listed company in China. You can click here for more: https://www.sinoblawg.com/?cat=7.

Today, a piece of news ran on a news website shedding the final lights on the …

Corporate deadlock – a reason to dissolve your China company

It is not rare to see a Sino-foreign joint venture company (indeed any type of company) to run into a stalemate where the operation comes to halt or the minority shareholder(s) is marginalized with no rescue. For the victims in such deadlock, there should be a way out of it. After all, justice should be upheld.

I. The Law and Judicial Interpretation

As a remedy to…

Legal personality of Corporation and limited liability

Companies or corporations (in this text, a company is the same as a corporation unless otherwise indicated in the context) are so ubiquitous in our life and yet at law, companies are so elusive to define.

I am reading the book "Business Persons-A legal theory of the Firm" by Eric W. Orts, a law and economic professor at Wharton School, a nice piece of work reviving…

Agency between Shareholders and Companies

This is more an academic thought than a practical tip.

I am reading the book “Agency, Partnership and the LLC” (2nd ed, West Nutshell Series)  by J. Dennis Hynes in particular to find support for my personal understanding of the agency relationship between shareholders/members and the companies/corporations they invest.

In China, law scholars seldom…

Answer to a question posed by a blog reader regarding legal representative of China company

Here is the question:

Dear Jason,

Today I was doing some research on the legal representative of WFOE's. During my research I came across the following article:

https://www.sinoblawg.com/?p=1394

In your article you mention the following:

When this legal representative resigned by submitting his resignation letter to board of the directors of the WFOE,

How to fire a general manager of a Company in China?

I. Basic Facts and Legal Concepts in the Ongoing Case

Shanghai Jahwa Corporation, a listed public company in China, was not happy with its general manager in an internal corporate struggle, so Jahwa's board of directors made a decision in May of 2014 to fire the general manager citing the manager's personal responsibility for loopholes in Jahwa's internal …

When does a share buyer become shareholder in a Chinese company when buying its shares?

To many, it may seem a simple and even stupid question. But it is not.

I   In the Case of Domestic Company

In a country with the tradition of statute laws, when a statute law fails to offer a clear answer to a certain legal issue, it can be a problem in practice.

With respect to the captioned question, China Company Law does not provide clearly for when a buyer of the …