The formation time of creditor's rights shall not affect the shareholders of defective capital increase to bear supplementary compensation liability

By Cheng Wang

The Introduction

The author recently handled a case, the case is: in June 2017 Lanzhou an equipment company, Beijing an oil company, Dongying an industry and trade company signed the “tripartite agreement”, agreed by Beijing an oil company to bear the debt of Dongying an industry and trade company to Lanzhou an equipment company. Beijing an oil company failed to pay as agreed, Lanzhou an equipment company filed a lawsuit, Beijing Fangshan District People's Court ruled that Beijing an oil company to pay Lanzhou an equipment company 5.94 million yuan. After the judgment came into effect, Lanzhou equipment company applied for compulsory execution, and the court ruled to end the execution procedure.

The author acted as Lanzhou equipment company to resume execution, again by the court to the executor has no property for execution on the grounds of ruling the final execution.

In the implementation of the impasse, the author investigated to Beijing an oil company was established in February 2008, the registered capital of the establishment of 10 million yuan, shareholders for Zeng, He, Fu, Bao, paid-up capital of 3 million yuan, 2.5 million yuan, 2.5 million yuan, 2 million yuan respectively. On July 7, 2018, the company made a resolution of the shareholders' meeting to change the registered capital of the company to 300 million yuan and put it on record in Beijing Market Supervision Administration. The capital contribution of the above four shareholders was 293 million yuan, 2.5 million yuan, 2.5 million yuan and 2 million yuan respectively, among which Zeng increased the capital contribution time for February 1, 2028, and the capital contribution method was currency. Zeng did not actually pay 290 million yuan of capital when the case was executed.

So the author applies for additional Zeng for the executor, within the scope of unpaid capital contribution to an oil company in Beijing to assume supplementary compensation liability for the debt.

Zeng argued:

The creditor's rights and debts relationship between an oil company in Beijing and an equipment company in Lanzhou was formed before the increase of registered capital of an oil company in Beijing, and the shareholder Zeng shall not bear relevant responsibilities for the company's debts before the increase of capital; Whether an oil company in Beijing can repay the debt of an equipment company in Lanzhou has no direct causal relationship with whether its shareholder Zeng increases the registered capital in place. Zeng's capital increase behavior is only responsible for the creditors of the company after the capital increase registration of an oil company in Beijing. Lanzhou equipment company's creditor's rights generated by the transaction with Zeng before the capital increase of an oil company in Beijing cannot require Zeng to bear the responsibility after the capital increase. The author puts forward opinions on behalf of Lanzhou equipment company: the formation time of creditor's rights does not affect the creditors' requirements for defective capital increase shareholders to assume supplementary compensation liability; Even if the creditor's right to the company is formed before the shareholder's defective capital increase, when the company cannot pay off the debts and the company meets the reasons for bankruptcy and does not apply for bankruptcy, the creditor can still claim that the shareholders who have not paid the time limit shall bear the supplementary compensation liability for the company's debts within the scope of not contributing.

The People's Court of Fangshan District, Beijing (2022) Beijing 0111 Civil Judgment No. 1647 of the Early Republic of China shall be governed by the Supreme People's Court on the Application of the Company Law of the People's Republic of China. Provisions on several issues (3) (hereinafter referred to as “Interpretation of the Company Law III”) Article 13, paragraph 2, and “Provisions of the Supreme People's Court on several Issues concerning the change and addition of parties in civil execution” (hereinafter referred to as “Additional Provisions on Implementation”) Article 17, the judgment supported the litigation request of a Lanzhou equipment company, and added Zeng as the person subject to execution, To assume supplementary liability for the debts of an oil company in Beijing as determined in the civil judgment within the scope of unpaid-in capital contribution. However, the judgment does not make a reasonable judgment on whether the formation time of creditor's rights affects the shareholders of defective capital increase to bear the supplementary compensation liability, and adopts an evasive attitude.

Zeng appealed, and the civil judgment of Beijing Second Intermediate People's Court (2022) Beijing 02 Min Zhong No. 12322 ruled that “the appeal was rejected and the original judgment was upheld”. The judgment stated in the court's opinion that “an appeal that its capital increase behavior after the formation of the creditor's rights and debts relationship between an equipment company in Lanzhou and an oil company in Beijing, so it should not bear the liability for supplementary compensation lacks legal basis, the court does not accept.” “There are differences between the relevant cases raised by Zeng's appeal and the facts of this case, and there is no case in which the same case is ruled differently.” “And (2003) Zhihe Zi No. 33 is a case response and is not reference to this case.” “After investigation, the first-instance court's determination of this case conforms to the reality of the case and the current judicial practice, and the court has no objection.”

Combined with some other judgments around the country, the author found that there is a problem plaguing the theoretical and practical circles: When the creditor's right of the company is formed after the shareholder's defective capital increase, when the company cannot pay off the debts and the company conforms to the bankruptcy cause and does not apply for bankruptcy, the creditor can claim that the shareholders who have not paid the time limit shall bear the supplementary compensation liability for the company's debts within the scope of capital contribution, that is, the shareholder's capital contribution accelerates the maturity, which has not been disputed in judicial practice. However, when the creditor's right to the company is formed before the shareholder's defective capital increase, when the company cannot pay off its debts and the company conforms to the cause of bankruptcy and does not apply for bankruptcy, can the creditor still claim that the shareholders who have not paid the time limit should bear the supplementary compensation liability for the company's debts within the scope of capital contribution?

Disputes in practice

In practice, one view holds that the defective capital contribution shareholders after the formation of creditor's rights should not bear supplementary compensation liability by referring to the reply of the Executive Work Office of the Supreme People's Court on Whether Shareholders should bear liability to the creditors of the Company due to defects in capital increase after the establishment of the Company. This is a negative statement.

Another view is that the provisions of paragraph 2 of Article 13 of Interpretation 3 of the Company Law should be applied, which does not distinguish the formation time of the creditor's right of the company from the formation time of the shareholder's capital contribution obligation. Therefore, even if the creditor's right of the company is formed before the shareholder's defective capital increase, When the company cannot pay off its debts and the company meets the reasons for bankruptcy and does not apply for bankruptcy, the creditors can still claim that the shareholders who have not paid the time limit shall bear supplementary compensation liability for the company's debts within the scope of not contributing money. That's for sure.

There is also a view that the provisions of Article 13, paragraph 2 of Interpretation 3 of the Company Law are aimed at protecting the commercial risks arising from the transaction with the company based on the trust of the company's ability to perform the contract reflected in the company's registered capital. Although this article does not distinguish the formation time of the creditor's rights of the company and the formation time of the shareholder's capital contribution obligation, the trust in the company's performance ability should be based on the registered and publicized information of the company, and the risks arising from transactions based on the unregistered and disclosed information of the company should be borne by the creditors themselves, which is more in line with the principle of fairness. This is a negative statement.

We believe that

The formation time of creditor's rights does not affect the creditor's demand that the shareholder with defective capital increase bear supplementary compensation liability. Even if the creditor's right to the company is formed before the shareholder's defective capital increase, when the company cannot pay off the debts and the company meets the bankruptcy reasons and does not apply for bankruptcy, the creditor can still claim that the shareholders who have not paid the time limit should assume supplementary compensation liability for the company's debts within the scope of capital contribution, that is, the accelerated maturity of shareholders' capital contribution.

Basis of law

Article 3 of the Company Law stipulates that “a company is an enterprise legal person, which has independent legal person property and enjoys legal person property rights. The Company shall be liable for the debts of the Company with all its property. Shareholders of a limited liability company shall be liable to the Company to the extent of the amount of capital contribution they have subscribed for; ... ” Article 28 stipulates that “Shareholders shall pay their respective capital contributions as stipulated in the articles of association on time and in full. ... If a shareholder fails to pay his capital contribution in accordance with the provisions of the preceding paragraph, in addition to the full amount he shall pay to the Company, he shall also be liable for breach of contract to the shareholder who has paid his capital contribution in full and on schedule.” Article 178 stipulates that “When a limited liability company increases its registered capital, the capital contribution subscribed by shareholders of the additional capital shall be governed by the relevant provisions of this Law on the payment of capital contribution for the establishment of limited liability companies. ... ” It can be seen that, as a shareholder of a company, whether it is to increase capital or establish capital contribution, it has the legal obligation to pay the full amount of capital contribution, and it is subject to the provisions of Article 3 of the Company Law, and it shall be liable to the company according to law within the scope of its subscription.

Article 13, Paragraph 2 of Interpretation 3 of the Company Law stipulates that “Where a creditor of a company requests a shareholder who fails to perform or fully perform his capital contribution obligation to assume supplementary compensation liability for the part of the company's debts that cannot be paid off within the scope of principal and interest of the capital contribution, the people's court shall support it.” Article 17 of the Additional Provisions on Implementation also stipulates that “if the enterprise legal person subject to execution has insufficient property to pay off the debts determined by the effective legal documents, the shareholder, investor or initiator who has not paid or paid the capital contribution in full when applying for execution applies for change or additional capital contribution, or assumes joint and several liability for the capital contribution according to the Company Law, shall be the person subject to execution. The people's court shall support those who assume liability according to law within the scope of capital contribution not yet paid.” Neither Interpretation III of the Company Law nor the Additional Provisions on Implementation distinguishes between the formation time of creditor's rights and the sequence of shareholders' defective capital increase.

The boundary division of whether shareholders bear responsibility for the company's debt does not lie in the time point before and after the capital increase, but in the range of the amount of capital contribution subscribed by them. In this regard, Article 17 of the Provisions on the Implementation of Additional Changes does not divide whether shareholders bear responsibilities before and after the company's capital increase, but only sets up the applicable threshold of “not contributing or not paying capital in full”, which is consistent with the legislative spirit of the Company Law and relevant interpretations.

In terms of legal theory, the formation time of creditor's rights does not affect the supplementary compensation liability of defective capital increase shareholders. First, as civil subjects with complete behavioral capacity, shareholders should make rational and comprehensive judgments on the company's operating ability before becoming shareholders. Second, as a shareholder of the company, it shall ensure the adequacy of the company's capital, whether it is the original shareholder or the new shareholder; Third, creditor's rights are equal, and the protection of ordinary creditor's rights should not be treated differently. It is a way to realize their creditor's rights to request shareholders to assume supplementary compensation liability within the scope of failing to fulfill their capital contribution obligations or failing to fully fulfill their capital contribution obligations. In the process of capital increase of the company, shareholders or investors fail to fulfill their capital increase obligations or fail to fully fulfill their capital increase obligations. It is the infringement of the legitimate rights and interests of the company and the creditors by the defective shareholders of the capital increase, and the relevant right holders should not be treated differently.

Recognition of the two replies

The sources of ambiguity are the Reply of the Execution Work Office of the Supreme People's Court on whether shareholders should be liable to the creditors of the company due to defects in the capital increase after the establishment of the Company (2003) and the reply of the Supreme People's Court on the Appeal case of the Execution of Xisteel Group (2005) (2005). So how to correctly understand and understand these two replies?

Using the subrogation of corporate creditors to explain: The first paragraph of Article 535 of the Civil Code stipulates that “where the realization of the creditor's right due to the debtor's delay in exercising its creditor's right or the subordinate rights related to the creditor's right is affected, the creditor may request the people's court to subrogation the debtor's right against the other party in his own name, except that the right is exclusive to the debtor himself." The article provides for the subrogation of creditors.

The view reflected in the two replies of the Supreme People's Court that whether the company's creditors can demand the shareholders with defects in capital increase to bear the liability should be distinguished whether the defects in capital increase are before or after the formation of corporate debt, which is based on the principle of commercial appearance doctrine and from the perspective of protecting the reasonable trust of the third party. This regulation was reasonable under the background of paid-in system of company's registered capital at that time. However, after the revision of the Company Law in 2013, the registered capital of the company was changed to the subscription system. External creditors should pay more attention to the company's assets when deciding whether to conduct transactions with the company, and whether the company's assets are good is more reflected in the company's assets. It includes both the assets already existing before the transaction between the creditor and the company, and the assets that the company should acquire after the transaction. According to the Company Law and its judicial interpretation, shareholders with defects in capital increase have the obligation to make up their capital contribution to the company, and the company has the right to request shareholders with defects in capital increase to make up their capital contribution. Therefore, when the company is unable to pay off the debts of the creditors, the creditors can of course exercise the right of subroment and exercise the rights on behalf of the company to the defective capital increase shareholders, no matter whether the creditor's rights are generated before or after the defective capital increase, as long as the creditor's rights to the company really exist and have not been paid off.

The two replies of the Supreme People's Court were issued in 2003 and 2006; Interpretation III of the Company Law came into force on February 16, 2011, and Additional Provisions on Implementation came into force on December 1, 2016, both after two replies. Article 13, Paragraph 2 of Interpretation 3 of the Company Law and Article 17 of the Additional Provisions on Implementation both provide detailed and specific provisions on the liability of shareholders with defects in capital increase to the creditors of the company. The above provisions do not impose other restrictions on the exercise of rights by creditors of the company, and do not distinguish whether the time of defective capital increase occurs before or after the occurrence of creditor's rights and debts. Therefore, no matter from the historical interpretation or the system interpretation, the two replies of the Supreme People's Court should no longer apply. And on the legal status of it, the reply is not judicial explanation, just the Supreme People's Court for the case of a reply, do not have used the force of law. As sichuan province higher people's court ”no. 2522 (2018), sichuan people discussed in adjudication: “The Supreme People's Court execution work office about shareholders flaws because of capital after the establishment of the company should reply shall undertake liability for the creditors problem" in 2003 cases of reply, according to the principle of the new law is superior to the old method, Implementation in 2011, the Supreme People's Court on some issues of applicable < > company law of the People's Republic of China (3) the rules ”and the implementation in 2016, the Supreme People's Court about the change in civil execution, supplementary provisions on some issues of the parties shall have the priority to apply.

Executive board of the Supreme People's Court has made clear that, in fact, reply no. 33 (2003) of his word and the executive changes the supplementary provisions of article 17, the provisions of article 18, the rules on capital and scope of defect of shareholder is not liable to make special provisions, after the effective date of the performance change of additional provision, the capital increase of defective problem no longer do differently, All will be subject to the rules.

I look forward to

Around the court verdict is differ, the judicial practice is made by the Supreme People's Court more than a decade ago caused two reply, reply as long as the two are not clear repealed, there are still some cases in the future will continue to adopt two reply to the referee.

It seems the company law it is necessary to modify the response on this question. Article 48 of the Revised Draft of the Company Law stipulates that “in the case that the company cannot repay its debts and obviously lacks the ability to repay, both creditors and the company have the right to demand shareholders to pay their capital contribution in advance”, which is more concise than the Minutes of the National Conference on Civil and Commercial Trials issued by the Supreme People's Court in 2019 and deserves recognition.

Advice but to completely solve the above problem, this is amended as “the creditor's rights form does not affect the time requirements that defective capital and shareholders liable for the creditors, is unable to repay the debt in the company, and the apparent lack of solvency, creditors and the company shall be entitled to require shareholders to pay in advance.” As a result, this kind of problem in theory and practice is solved.