Piercing the Corporate Veil - A Solution for Japanese Companies Act and Comparative Law Analysis regarding Hypothetical Case

Abstract

This paper presents a solution for Japanese Companies Act and comparative law analysis regarding hypothetical case on “piercing the corporate veil”. It is a revised version of “Hisaei Ito and Hiroyuki Watanabe, Piercing the Corporate Veil”〔Ch. 6 of “Mathias Siems and David Cabrelli (eds), Comparative Company Law - A Case-Based Approach, 2nd edition (Oxford, Hart Publishing, 2018)”. In that book, this case was prepared by Japanese scholars, then lawyers from 12 countries(9 European countries, US, Japan and South Africa) responded to it based on their own law, and finally, based on these 12 case solutions the questioner wrote the case report. This paper added the results of joint research with lawyers and businessmen from various jurisdictions at Waseda University L.L.M. and Business School, based on hypothetical case. With the addition of Belgium, China, South Korea, Taiwan, Singapore and Brazil as new jurisdictions, consequently comparative law research covering 19 countries have conducted. In particular, research on corporate law in Asian countries has been strengthened. Also it was tried to explain and analyze the solutions of European countries from a practical point of view. (The author is solely responsible for this paper, but details of case studies in some jurisdictions and comparative law research with Japanese law will be published separately at a later date.) Overall, French and Japanese law are very protective to the creditor in the current scenario. US law seems to be the least interested in creditor protection, with the US solution referring to contractual solutions for creditors. Yet, as a whole, it is difficult to make a general assessment on whether countries favor the interests of directors, shareholders or creditors. The company laws of most countries provide various tools of creditor protection, with many of them not concerned with directors’ duties but safeguarding the assets of the company (such as capital requirements). The following suggestions were made by many jurisdictions: application of such doctrine is very limited or there is very high hurdle to prove it. Regarding Japanese law, it is true that the existence of piercing the corporate veil doctrine has been established, including a Supreme Court judgment. However, you will find that in Japan there are few cases where this doctrine was actually accepted in court, and in most cases, it has been dealt with based on other interpretation theories on the provisions of the positive law. The solutions have also shown that questions of creditor protection are more complex than, say, shareholder protection because they touch on many areas of law apart from company and insolvency law, including contract, property, tort, civil procedure, accounting and securities law. Additional complications arise as a result of the need for the law to provide a balance between different types of creditors, such as secured and unsecured creditors, and by virtue of the fact that some laws are applicable to creditors regardless of whether the debtors are legal or natural persons, whereas others are specific to the creditors of companies. All these points cannot be discussed in this book in detail, but in the next chapter we will deal with another typical problem of creditor protection in company law. In addition, as an Appendix, Japanese Supreme Court Judgment in 2005 on Piercing the Corporate Veil was introduced.