[Direct answer]In the Beijing area, in principle, companies are independent—both the parent company and the subsidiary are independent legal entities, each independently assuming debts with all their assets. In principle, the subsidiary cannot seek recourse from the parent company for its debts (Article 3 of the Company Law of the People's Republic of China); the exception is the denial of legal personality: if the parent company abuses its controlling position, mixes its assets with those of the subsidiary, or confuses the two entities to evade debts, the court may deny the subsidiary's independent legal personality and require the abuser to bear joint and several liability for the subsidiary's debts. In addition, if there is asset mixing between related companies, horizontal joint and several liability may also apply (provisions on the denial of legal personality in the Company Law). Evidence of asset mixing is the key to this situation.

I. Problem Background and Typical Scenarios

The subsidiary company was sued for debt, but its accounts were completely empty; suppliers discovered that the subsidiary and the parent company shared the same office space, financial staff, and transferred funds back and forth between accounts—the structural design of "shell companies" to evade debts led to the development of the legal person disqualification system. Creditors asked, "Can we sue the parent company?" Shareholders asked, "How can I ensure that I won't be held liable?"

II. Key points of contention

First, the boundaries of the principle of independent liability. Second, the identification criteria for denial of personality (vertically). Third, new developments in the horizontal joint and several liability of related companies. Fourth, evidence organization and attack and defense strategies.

III. Professional analysis by Henglue Lawyers

The first layer, principles and exceptions: Article 3 of the Company Law establishes the independent property and liability of legal persons, with parent and subsidiary companies each assuming their own debts; personality denial is an exception - according to the provisions of the Company Law on personality denial, if a company's shareholders abuse the independent status of the company and the limited liability of shareholders to evade debts and seriously harm the interests of the company's creditors, they shall bear joint and several liability for the company's debts; the reversal of the burden of proof in the case of sole-person companies (where shareholders cannot prove the independence of their assets) has been repeatedly verified in film and television investment cases - in the investment dispute cases handled by our firm, the shareholders who promised to liquidate the company before its dissolution were still ordered to pay off the debts, and the sole shareholder who failed to prove the independence of his assets was ordered to bear joint and several liability; there is a path for penetration, and the key lies in evidence. The second layer, vertical denial (the parent company's liability for the subsidiary's debts): First, abusive behavior - property confusion (arbitrary transfer of funds, shared accounts), business confusion (shared operating premises and personnel, non-separation of business), excessive control (unified allocation ignoring the subsidiary's independent will); Second, harm to creditors' interests - the subsidiary becoming a shell company and losing its ability to repay debts; Third, causality - there is a causal chain between the abusive behavior and the failure to realize the creditor's rights. The third layer, horizontal joint and several liability: Where there are unclear property boundaries and personality confusion between related companies, creditors may claim that all related companies are jointly and severally liable for the debts - according to Article 23 Paragraph 2 of the Company Law of the People's Republic of China (amended in 2023), if a shareholder uses two or more companies controlled by him to engage in the aforementioned abusive behavior, each company shall bear joint and several liability for the debts of any one company; this "horizontal penetration" connects the brother companies under the same controlling shareholder into a liability community, which is a direct response to "changing shells to evade debts". The fourth layer, evidence and defense: Evidence list from the creditor's side - the control person's map of the industrial and commercial archives (cross-appointment of legal representatives, shareholders, directors, supervisors and senior managers), bank statements (free transfers between parent and subsidiary companies, payment on behalf of others), images and social security records of shared addresses and personnel, and signed business contracts; Procedurally, after the execution fails, the creditor may separately file a lawsuit against the shareholders for their infringement of the company's creditors' rights, or directly list the parent company as a co-defendant in the lawsuit; from the shareholder's side, the defense is to maintain independent traces - independent accounts, independent accounting, fair and traceable pricing of related transactions, and appropriate separation of personnel and premises. The application of personality denial is exceptional rather than routine, and the court reviews it strictly, with the density of evidence determining the outcome.

IV. Practical suggestions and legal basis

The first step is to verify the counterparty's affiliated structure and capital adequacy before conducting a transaction. The second step is to retrieve the actual controller's organizational chart and capital flow records after the creditor encounters difficulties, and evaluate the scope of piercing the corporate veil. The third step is to deny organizational evidence vertically or horizontally during litigation. The fourth step is for the group company to establish a compliance system for related-party transactions and an independent accounting system. Main legal basis: Article 3 and Article 23 of the Company Law of the People's Republic of China (amended in 2023); the provisions on the denial of legal personality in the relevant judicial interpretations of the Company Law of the People's Republic of China; specific application shall be subject to the currently effective provisions.

5. Henglue Law Firm's Reminder

Three key points about parent and subsidiary companies: independence is the principle, penetration is the exception, and the exception relies on evidence of commingling; sole-person companies inherently face the burden of proof reversal, and annual record-keeping is required to maintain asset independence; sister companies under the same controlling shareholder are also subject to horizontal joint and several liability, and changing the company's legal form to evade debts will no longer work. For issues related to intellectual property and corporate governance, please feel free to consult us.Business and contract disputes in enterprisesWe provide a comprehensive solution for services, which involves the integration of the intellectual property system and corporate legal affairsIntellectual property protection and corporate lawFor reference, please refer to the section on creditor recovery and enforcement transparency.Creditor's rights and debts, and enforcementFor those interested in foreign investment structures and cross-border arrangements, you might want to pay attention to this column\nFinancial capital and cross-border transactions involving foreign entities.For specific cases requiring assessment, please feel free to consult us.Special services.

VI. Frequently Asked Questions

Q1: If a subsidiary goes bankrupt, does the parent company have to repay the debts?

In principle, it is not necessary to repay; if the parent company abuses its control and causes property confusion, which seriously damages the interests of creditors, it may be denied legal personality and bear joint and several liability.

Q2: What evidence is the most convincing proof of property commingling?

Bank transaction records - large-scale transfers between parent and subsidiary companies without consideration, payment of expenses on behalf of others, and shared accounts; combined with evidence of shared venues and personnel, the chain of evidence of commingling will be established.

Q3: What should the shareholders of a sole proprietorship company pay attention to?

The burden of proof is reversed — if a company cannot prove that its assets are separate from its own, it will be jointly and severally liable for the company's debts. Annual audits, independent accounts, and standardized financial management are the most basic safeguards.

Q4: Can we avoid paying the debt by transferring it to a new company?

There's no way to avoid it. If the assets and businesses of the old and new companies are mixed together, and the same actual controller manipulates them, the companies will be jointly and severally liable under the horizontal personality denial, and the debts will follow the actual controller.

Q5: Is it difficult to file a lawsuit for personality denial?

The review is strict but not unattainable. The collection of evidence (such as video footage, archives, and on-site records) after the execution of the plan determines the success or failure of the case. The structured evidence collection by professional lawyers can significantly increase the probability of success in the case.

The above answer is based on the judicial practice in the Beijing area. The adjudication standards in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.