united-states business finance china
Financial law - limited liability - use of personal balance sheet term
<p>It appears that senior executives in China are using their personal balance sheets to help the property development companies they own make their interest payments on time as regulations and market financing conditions have created liquidity issues for many such companies. According to <a href="https://www.bloomberg.com/news/articles/2021-11-21/china-property-moguls-use-billions-of-their-own-cash-on-rescues" rel="nofollow noreferrer">news coverage</a>, this is unlikely to happen in the United States given the legal structure afforded by &quot;limited liability.&quot;</p>
<p>It's a bit unwieldy to describe. Essentially, regulators want this to happen to an extent. Perhaps this is a reflection that private wealth is not ring-fenced in China and/or personal ownership of assets doesn't have a robust legal framework. One expert had this to say:</p>
<blockquote>
<p>&quot;In China, regulators can pressure the large or controlling
shareholders to mix their personal assets with the company’s and treat
the two as inseparable,” said Zhiwu Chen, director of the Asia Global
Institute at the University of Hong Kong. “It’s also partly because
the controlling shareholders, especially founders, often do treat the
company’s assets as if they were their personal property.&quot;</p>
</blockquote>
<p>I'm not seeking the exact Chinese law name or anything. Just a consensus framework to analyze this situation (using private wealth to recapitalize a company of which they are a major shareholder) in legal terms.</p>
<h2>Question</h2>
<p>For this to even be possible, we would say that China lacks a notion of a <a href="/questions/tagged/limited-liability-company" class="post-tag" title="show questions tagged &#39;limited-liability-company&#39;" rel="tag">limited-liability-company</a> and instead has <em>what</em> for its stance on eligible debt servicing sources? (essentially looking at alternative frameworks, i.e. if it's not limited liability framework, how might we categorize this legal framework as it stands in China)</p>

<blockquote>
<p>For this to even be possible, we would say that China lacks a notion
of a limited-liability-company and instead has what for its stance on
eligible debt servicing sources? (essentially looking at alternative
frameworks, i.e. if it's not limited liability framework, how might we
categorize this legal framework as it stands in China)</p>
</blockquote>
<p>I think it would be more accurate to say that China does not make many legal distinctions made in Western law in the same black and white manner that the U.S. does.</p>
<p>China has property rights, but they aren't as absolute. <a href="https://www.forbes.com/sites/sarahsu/2016/11/30/china-improving-property-rights-protections/?sh=708771726e5c" rel="nofollow noreferrer">Forbes magazine noted in 2016</a> (in the face of reforms on paper that may or may not end up amounting to much):</p>
<blockquote>
<p>Chinese firms and residents have long suffered under poor property
protections, enduring eviction from family homes to make way for new
developments and facing fierce competition as patents and copyrights
are repeatedly violated.</p>
</blockquote>
<p>China has protections for investors, but they aren't as absolute in the case of a senior, actively involved investor who participated in management.</p>
<p>China has a theoretically independent Central Bank, but if the Chinese Communist Party is concerned about an issue, it will toe the party line.</p>
<p>China has crimes, but doesn't demarcate is starkly between conduct that is criminal and sanctionable, and conduct that is not criminal and can be carried out legally and shamelessly. China is more comfortable with the state intervening in moderate ways with conduct that an American would consider to be &quot;immoral&quot; but not &quot;illegal&quot;, like not keeping in touch with your elderly parents and frequently having shouting matches in your own home with your spouse. This is in the process of being technologically modernized in the form of a &quot;<a href="https://www.wired.co.uk/article/china-social-credit-system-explained" rel="nofollow noreferrer">social credit system</a>.&quot;</p>
<p>In generally, all legal lines in Chinese law are fuzzier than in U.S. or other forms of Western law.</p>
<p>See, e.g., &quot;<a href="https://rads.stackoverflow.com/amzn/click/com/B0006CP494" rel="nofollow noreferrer" rel="nofollow noreferrer">Law without lawyers</a>&quot; (1977), which while it is old, captures the deep conceptual distinctions between the Chinese legal system and Western legal systems. My answer is also based on more recent media accounts, many of which I do not have links readily at hand to provide.</p>
