Piercing the corporate veil: Australia and China

Szu-Shen Tham

While Australia has long adopted the corporate veil piercing doctrine from the UK model, China has only recently enacted veil piercing provisions in 2006. This thesis compares Australia’s long standing veil piercing doctrine and China’s recent veil piercing enactment to determine which jurisdiction provides better veil piercing laws in protecting creditors’ interests. The findings of this thesis are significant for creditors such as foreign lenders or business partners who wish to choose a wellprotected and safe market in which to invest. This thesis will provide a discussion and comparison on Australia’s and China’s directors’ duties to prevent insolvent trading and instances in which veil piercing can occur. There will be an addition of another jurisdiction, United States in lieu of China, because China’s insolvent trading laws are based on US laws and there is a dearth of academic literature in the area of insolvent trading laws in China. This thesis will argue that Australia has better veil piercing laws to protect creditors’ interests compared to China due to the very limited scope of China’s veil piercing laws, which are drafted in vague terms and the Chinese civil legal system (in which the doctrine of precedent is absent). In addition, the author suggests that this is due to the fact that many companies are still State Owned Enterprises in China, subject to strong political influence and therefore protective of state shareholders.

Piercing the corporate veil: Australia and China

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