Navigating Cross-Border Disputes: Exploring Shareholder’s Joint Liability

Background information:

When my UK client faced a trade dispute with their Chinese counterpart, I was tasked with handling the case. Upon investigation, I discovered that the Chinese company had a sole shareholder according to the registration office. Consequently, I informed my client that we intended to list both the company and the shareholder as co-defendants, seeking joint liabilities. Below is the client’s question and my response.

Client Question:

In China, is debt linked to a company or the individual? In the UK, it is linked to the company, not the individual.

Lawyer Reply:

In China, the principle is similar, with one exception. If the company is owned by an individual, and that individual cannot prove the separation of their property from that of the company, they become liable for the company’s debts. This concept is known as joint liability. In this scenario, listing both the company and the shareholder as co-defendants allows for shared responsibility, and whoever has the financial means is obligated to pay the debt in full.

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