| The regulation of illegal distributions under the 2023 Company Law of the People's Republic of China adopts a dual-track approach, superimposing restitution obligations upon shareholders and the compensatory liabilities of directors, supervisors, senior officers, and shareholders. This construction preserves a property-law-based regime aimed at disgorging unjust enrichment while integrating an organizational-law-based regime centered on managerial liability. The underlying philosophies and enforcement mechanisms of these two regimes are fundamentally different, thus a mechanical amalgamation of these disparate systems fails to produce the intended cumulative legislative effect and risks triggering “systemic attrition” due to inherent conceptual conflicts and mechanical friction instead. As to the mechanism of the structure of corporate governance, the duty to ensure the legality of distribution plans lies exclusively with the board of directors and shareholders who vote in good faith should not be held liable. Accordingly, the logic of organizational law should be insisted when determining the civil liability for illegal distributions, and the interpretation and application of Article 211 of the 2023 Company Law should be reconstructed centering on managerial responsibility. The liable parties should be limited to responsible directors, supervisors, senior officers, and bad-faith shareholders, who should provide full compensation for the company's losses. In contrast, bona fide shareholders should, in principle, bear no such liability. To avoid the fundamentally departing from the literal meaning of the statutory text or prevailing judicial practice, bona fide shareholders should exceptionally bear subsidiary obligations limited to the profits they received and apportioned according to their shareholding ratios only when the liable parties fail to perform their obligations in full and the company still has uncompensated losses. |
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