Protection Measures for Creditors in the Case of Illegal Capital Reduction

DOI: https://doi.org/10.62517/jel.202414422

Author(s)

Shiyun Sun

Affiliation(s)

Law School, China Jiliang University, Hangzhou, Zhejiang, China

Abstract

In order to standardize the company's capital reduction behavior, the new Company Law has innovated the capital reduction procedures and the legal consequences of illegal capital reduction, defined the necessary procedures of the company's capital reduction, clarified that the illegal capital action is invalid, and added the compensation liability of shareholders and executives with illegal capital reduction. However, the absolute invalidation of illegal capital reduction stipulated by the new law may hinder the benign development of the company. The relief of creditors' objection failure is missing, and the duty of care of shareholders and executives to assume responsibility is not explained in detail. Through the comparative analysis of the old and the new laws, the interpretation of the text and the interpretation of value sorting, combined with the judicial practice of the shareholders taking the responsibility, this paper studies how to improve the legislation, establish the legitimacy of the capital reduction procedure, refine the effectiveness of illegal capital reduction, and specify the duty of care and diligence of shareholders and senior executives. Only by improving the legislation can we protect the interests of creditors to the greatest extent on the premise of respecting the corporate autonomy.

Keywords

Violation of Capital Reduction; Liability of Shareholders; Capital Reduction Procedure; Effectiveness of Capital Reduction

References

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