Piercing Corporate Veils under Revised PRC Company Law Provisions
Revised PRC Company Law expands debt liability across sister affiliates and forces single shareholders to prove independence or assume full joint liability.
Article 52 Equity Forfeiture Notice
Meaning
Formal communications initiating the removal of a shareholder for non-payment of capital provide a necessary procedural step before the cancellation of shares. An article 52 equity forfeiture notice is a written document sent by the company to a shareholder who has failed to meet a capital contribution demand after the grace period has expired.
Grace Period
Final warnings provide a window for a shareholder to rectify an investment shortfall. The article 52 equity forfeiture notice must specify a time limit of at least sixty days for the shareholder to pay the outstanding amount. Failure to comply within this period allows the company to proceed with the deprivation of shareholder rights.
Administrative Process
Board resolutions authorize the issuance of the formal warning. Following the expiration of the article 52 equity forfeiture notice without payment, the shareholder loses the rights to the unpaid portion of the equity.
Share Disposal
Reallocation follows the finalization of the forfeiture through a formal resolution and updated registration. The company must either transfer the forfeited equity to another party or reduce its registered capital to account for the cancelled shares. If the firm chooses to sell the equity, the proceeds are applied to the company treasury, while a capital reduction requires a public announcement and a separate filing with the Market Supervision Administration.