New Company Law Are the Parties to Related Party Transactions Joint and Several Liability? Let's take a look at the content of the newly revised Company Law, the second paragraph of Article 23 of the Company Law mainly involves the regulation of related party transactions and shareholder behavior, especially when shareholders control multiple companies and carry out certain acts of evading debts and seriously damaging the interests of the company, these companies shall be jointly and severally liable for the debts of any one company. This provision helps to prevent shareholders from circumventing legal liabilities through complex corporate structures and related party transactions, and protects the rights and interests of the company's creditors, the company itself and other shareholders.
This new provision has the following impacts on the company's legal risks:
Companies must pay more attention to internal governance and the management of related-party transactions to ensure transparent and fair decision-making and avoid improper related-party transactions. Otherwise, once it is found that there is a violation, it may not only face legal penalties, but also need to be jointly and severally liable for the debts of related party transactions.
Shareholders need to exercise control over the company more carefully and avoid using multiple companies to carry out acts that harm the company's interests. If shareholders abuse their control and cause the company to suffer losses, these companies may be jointly and severally liable. If the company is unable to repay, shareholders who abuse control will face the risk of a huge law.
This provision will help to enhance the transparency and fairness of the Company Law, make the parties to related party transactions more prudent and transparent in their decision-making and actions, and reduce the occurrence of misconduct.
When there are improper related-party transactions between companies, the interests of minority shareholders and creditors are often the most vulnerable to damage. This provision helps to protect the interests of these vulnerable groups by imposing joint and several liability on affiliates.
In summary, the amendment to the second paragraph of Article 23 of the Company Law is of great significance for protecting the rights and interests of the company and other shareholders, ensuring that the new regulations make a negative assessment of shareholders' behavior of evading legal liabilities through complex corporate structures and related party transactions in accordance with the law, and order related parties to bear joint and several liability.