"Unlimited Troubles" Of Limited Companies

When entrepreneurship becomes easier and even more romantic, and convenient enterprise intermediary services are everywhere, entrepreneurs need to pay more attention to relevant details and procedural norms.

　　 Unlimited troubles of limited companies

When people are doing business and running enterprises, the most common form is to establish a limited liability company. This type of company is a good protection for investors - if the company goes bankrupt due to poor management, then investors only need to use the money they invested to repay the debts of the company until they have lost all.

However, the shareholders of a limited liability company called Mingzhong in Hangzhou, Zhejiang Province, have to bear Unlimited liability ! That is to say, in addition to losing all the contributions, the shareholders of the company also need to use their own belongings to repay their debts.

　 Shareholders: unlimited liability? Is there any mistake!  

Hangzhou Mingzhong Company is mainly engaged in chemical fiber products. The so-called chemical fiber products are actually semi-finished products refined from petroleum and used to produce cloth. In 2007, due to the quality problems of Mingzhong's products, the enterprise could not continue to operate. At the time of bankruptcy, Mingzhong Company not only did not have any assets, but also owed a total of 970000 loans to Bank of China Xiaoshan Sub branch.

Mingzhong Company has two shareholders, and the shares of Shen Shuizhong account for 95% of the company.

Shen Shuizhong, the shareholder, was the last to leave the company. Watching some creditors moving desks and chairs in the office, tears in the sinking water could not help falling down.

After the closure of Mingzhong Company, Shen Shuizhong, the major shareholder, has no idea of starting a business again for the time being. At the invitation of his friend, he worked in his friend's company. However, if people are unlucky, they will stop their teeth when drinking cold water. That day, two comrades from the court came to him and handed him a summons. Shen Shuizhong saw that it was Bank of China Xiaoshan Sub branch that sued him. The bank asked Mingzhong Company to repay the loan of 970000 yuan. Shen Shuizhong, the shareholder, would bear unlimited joint and several liability.

Shen Shuizhong was surprised! My company is a limited liability company. Since the company has gone bankrupt and my investment of 580000 yuan has been lost, I should be responsible. Now, why should banks bear unlimited joint and several liability to repay 970000 yuan of bank loans? Shen Shuizhong said, "There must be a mistake! It is impossible for me to assume unlimited responsibility. I have a business license issued by the State Administration of Industry and Commerce, which is a limited liability company."

　　 Bank: resolutely pursue malicious lenders!  

Mi Jian, President, is the Vice President of Bank of China Hangzhou Xiaoshan Sub branch in charge of debt recovery.

On that day, the following secondary branch reported to him that there was an enterprise called Mingzhong Company whose loan of 970000 yuan had been due but had not been repaid. President Mi asked the subordinate sub branches to further do the work of Mingzhong Company to recover the loan. This responsibility falls on Wu Yufeng, President of Bank of China Hangzhou Xiaoshan Guali Sub branch. He found Shen Shuizhong. However, at this time, Mingzhong Company was already struggling. Wu Yufeng said: At that time, the price of the goods coming in from Mingzhong Company was 10000 yuan. Previously, they could sell 10200 yuan. However, due to market fluctuations, they later sold 8500 yuan and 9000 yuan, so they lost money like this. They were unable to repay the money.

Seeing that Mingzhong Company has no ability to repay the loan, the bank proposed a solution: if the loan principal cannot be repaid at once, you can pay the interest first. The two sides agreed to pay 30000 yuan a month. However, three months later, Shen Shuizhong did not repay the bank a penny.

When Wu Yufeng found Shen Shuizhong again, his reply was: "I have no money to make, the enterprise has gone bankrupt, and I can't pay back the money."

Then, Shen Shuizhong suddenly disappeared from the bank's view.

Wu Yufeng thought of all the ways he could think of to find Shen Shuizhong, but he could not find it. This event completely broke the relationship between the bank and Shen Shuizhong.

President Mi Jian said, "This is irresponsible for himself and the bank. It must be intentional. He knew that the money could not be paid back and ran away. To put it bluntly, it was a malicious debt evasion."

It should be said that the bank's judgment on Shen Shuizhong was, after all, a kind of doubt. However, the reappearance in the water soon made the bank more convinced of this speculation.

Three months later, people from the following sub branch came to Mijian's office and told him that Shen Shuizhong was back and was doing business. He had a small business department and was driving a car, so he had a good time.

When the company collapsed, he was still very happy - the bank analyzed that people with legal knowledge were giving Shen Shui advice, that is, you registered a limited liability company. Anyway, your company collapsed, and you personally didn't have to repay.

Shen Shuizhong's behavior made President Mi more convinced that he was using the Advantage debt evasion Mi Jian said, "We have learned some information from all aspects. He has set up a small company and is still operating there. In addition, his family conditions are also good, and he also drove a car around. At that time, we felt that it was necessary to collect the 970000 yuan through various channels."

Shen Shuizhong and his family were worried when they learned that the bank thought they were living a smart life.

Shen Shuizhong's wife said, "They just think of themselves. They say we are still smart. What can we take to be smart?" She said that the car they are using is not theirs, but borrowed by friends. She also showed them the Santana dealer's car book they used, and the owner was really not their husband and wife.

But the key is not here. A new discovery brought the situation down sharply.

　　 Where does millions of unlimited responsibilities come from?

For the bank, if the loan cannot be repaid, the lender and the president should bear the responsibility. In addition, the bank decided to recover the loan because it felt that Shen Shuizhong was maliciously evading repayment of the loan.

Just at this moment, a turn came. When carefully checking the registration data of Mingzhong Company, the bank found that Shen Shuizhong did not make capital contribution as required!

The original registered capital of Mingzhong Company was 600000 yuan, and Shen Shuizhong contributed 580000 yuan. However, the bank found that there was a flaw in Shen Shuizhong's contribution. On the capital verification certificate issued by Xiaoshan Audit Firm to Mingzhong Company, it is stated that Shen Shuizhong's contribution is 580000 yuan - the capital contribution certificate is the legal evidence of whether the registered capital of a company is in place, so why does the bank say it is defective? Mi Jian said, "Although he has a capital verification certificate issued by the audit firm, why should the audit firm issue such a certificate? After further digging, he found that there were two passbooks, and he used them to verify capital." It turned out that when the bank went to Xiaoshan Industrial and Commercial Bureau to investigate the files of Mingzhong Company, it found that when Mingzhong Company was founded, Shen Shuizhong's personal deposit certificate is used for capital verification.

Mi Jian said, "His money is not in the enterprise account, nor is it Settlement account , but in his personal account. It may be that the registered capital is not in place! "

The bank believes that if the registered capital is not in place, the qualification of the limited liability company will not be established. Shen, as the investor shareholder, must be fully responsible for the consequences of the entire business process, that is, he cannot enjoy the relevant rights and obligations of the limited liability company.

So since it is not limited, it is unlimited. As a contributor, it is necessary to repay the debts of the bank with its best ability, even its own property.

The bank therefore believes that Shen Shuizhong should bear unlimited liability to repay 970000 arrears.

So, was the registered capital of Mingzhong Company really not in place?

Shen Shuizhong felt wronged about the bank's statement. He said that he had already contributed in full. He said that he did not know about the defect of capital contribution mentioned by the bank. At the beginning, I didn't know the procedure of registering a company, so I asked my friends to help me with everything. I did what my friends said. The audit firm asked him to contribute 580000 yuan from his deposit, and he gave his bank passbook to Xiaoshan audit firm. Shen Shuizhong did not expect that an oversight during the initial capital verification would make his situation so awkward today.

Is what Shen Shui said true? The deputy director of Hangzhou Xiaoshan Audit Office recalled the original situation and said, "At that time, the capital verification was very irregular. This was true of the whole CPA industry. As for your contribution certificate, I don't know what procedures were required at that time."

　　 Inadvertent capital injection causes great financial disaster

Although Shen Shuizhong felt very aggrieved, he could not prove that his registered capital was in place at the beginning, so the bank thought that he should bear unlimited responsibility to repay the bank loan. Before long, the bank filed a lawsuit to the Xiaoshan District Court, asking Mingzhong Company to repay the loan of 970000 yuan, and Shen Shuizhong, the major shareholder, was jointly and severally liable.

After the lawsuit, President Mi was also worried that if the lawsuit could not be won, It may bring very serious consequences: "It is possible that other similar enterprises, once some signs of operating difficulties appear, do not operate from the most responsible attitude, from the perspective of the enterprise's responsibility to the bank, but may follow this behavior, instead of repaying the loan, the individual has a good life. The bank has the pressure in this regard."

However, there is no explicit provision in the law to let the shareholders of limited companies bear unlimited liability, and there are also disputes in the academic circles. What kind of judgment will the court make?

Soon, the Xiaoshan District Court made a first instance judgment: Xiaoshan Mingzhong Materials Co., Ltd. returned the loan of 970000 yuan to the Bank of China Hangzhou Xiaoshan District Sub branch, and Shen Shuizhong was jointly and severally liable for the payment obligation. This means that shareholders bear unlimited joint and several liability for the company's debts.

The judge of Hangzhou Xiaoshan District Court held that although there was a capital verification report in this case, it was derived from two personal certificates of deposit submitted by Shen Shuizhong, which could not be used for capital verification. Therefore, the court found that the funds of the two shareholders were not in place, and should find that they did not have the legal personality, that is, as we usually say, they are no longer protected by limited liability and should bear unlimited joint and several liability.

Yin Tian, a professor of the Law School of Peking University, believes that it is worth promoting the case that the shareholders of a limited liability company should bear unlimited liability for the company's debts. In addition, it may also breed such a kind of investor who does not inject funds into the company at all when registering the company, or who withdraws after injecting funds. In this case, the company may become a tool used by investors to seek illegal interests and to entrap creditors. Because it is an empty shell, it is actually a fraud to creditors. Therefore, in this case, we say that as long as an investor commits such an illegal act, he will bear unlimited liability for the company's debts, which is very important for us to regulate the company's registration order, standardize our market order, and establish a good business reputation of the company. "

It should be said that the limited liability company is a very mature form of company, which can maximize the protection of the interests of those shareholders who set up enterprises, so that these shareholders have the opportunity to make a comeback after business failure.

However, because some people do not understand the company registration procedures when registering companies, and entrust some intermediaries to carry out the possible non-standard registration, which may be a huge hidden danger in the future operation of enterprises, and it is worthy of attention and vigilance of today's young "entrepreneurs" who are full of dreams.

　　 In the face of credibility, don't say you don't know

The three carriages for the healthy development of market economy are benefit driven, honest contract and survival of the fittest. In China, a market environment that has not yet been standardized, there are big problems in these three aspects. This case is a typical case of violating the second principle.

On the surface, shareholders had to bear unlimited responsibility because they were not strict when registering the company. However, if we dig deeper, we will find that this is a case involving the awareness of corporate integrity contract. We might as well analyze it from three aspects.

First of all, the lack of registered capital is a common problem of many small and medium-sized enterprises. If there is no loan or lawsuit, this issue is not important. But once encountering the dispute in this case, trouble will come, and there is no basis to use your ignorance to evade it. Therefore, in order to avoid risks and only bear limited liability when problems occur, SMEs must make the registered capital available at the time of registration without leaving any loopholes.

Secondly, if there is a problem, we should actively face it. Escape is not the way. It is a natural duty of good faith to repay debts. Even if it can't be paid off at one time, you can negotiate with the bank to pay the bill slowly. How can we survive in the society in the future if we consciously use "limited companies" to evade responsibility and are irresponsible to ourselves and others? If a person has no reputation, he should be blacklisted in the market economy. Of course, because China does not have a "social security number" system similar to that of the United States, it has led many people to "exploit loopholes". If they mess up in one place, they can still live happily if they re register in another place.

Finally, why does the bank give a 970000 yuan loan to an enterprise with a registered capital of only 600000 yuan? If there is a bad debt, what can the bank rely on to protect its interests? So the bank is also responsible in this case. If there is no defect in the registration of Mingzhong, the bank's loan will be lost.

What this case exposes is a systemic problem. The awareness of good faith contract is not in place, the legal protection system is not perfect, and people dare not trust others easily. As a result, they can only use the most stupid method to protect themselves, thus increasing operating costs. This is the fundamental reason why "Chinese people are industrious but not rich". The lack of integrity has made the whole society pay a heavy price.