| China introduced the doctrine of piercing the corporate veil formally in its 2005 company law overhaul, attracting widespread social and academic attention in China and beyond. This represents a bold move as well as an useful experiment in that China has codified a common law doctrine renowned for its perplexity and amorphousness. How has China codified the doctrine? How is it applied in practice? And what lessons, if any, can we learn from the Chinese experience? To answer these questions, this paper undertakes the first comprehensive empirical study of China's piercing cases adjudicated under the statutory veil piercing regime. The study produces some interesting results and compares them with similar studies in overseas jurisdictions, including the U. S., the U. K. and Australia. Based on the empirical findings, the paper evaluates the efficiency of the veil-piercing legal regime in China and makes proposals for improvement.The key empirical findings of this study are as follows. Firstly, although the history of China's veil-piercing regime is relatively short, it has been actively utilized in practice, producing a significant number of cases. Secondly, the overall rate of piercing in China is significantly higher than those in overseas countries, and is still rising on a yearly basis, Thirdly, a large percentage of cases occurred in economically less developed regions in China, and the piercing rate there as a whole is also found to be significantly higher than that in economically more developed regions in China. Fourthly, all cases were found in the context of small limited liability companies, and there is a pattern that the more closely held the company, the more likely courts pierce. It is also significant to note that the veil was pierced in all the cases involving one-member companies. Fifthly, contrary to the theoretical predictions, the piercing rate is roughly the same in a tort context as in a contract context, and Chinese courts even pierce the veil less frequently in the corporate group setting. Finally, commingling appears the most often as the reason advanced for piercing the veil, and the highest incidence of piercing is in cases where the piercing argument was based on commingling of assets. |
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