Proposal to Introduce the Theory of Piercing Corporate Veil in Taiwan

Taiwan Solidarity Union legislator Hsu Chung-hsin recently put forward a proposal to incorporate the theory of piercing corporate veil into Taiwan law. Hsu believed that limited liability is often abused in today’s corporations and by incorporating this theory of Anglo-American law, dishonest businessmen that looted their corporations are more likely to be averted. Many modern corporations tend to be thinly capitalized or have very few shareholders, both of which can make creditors susceptible to dishonest or even vicious behaviors. While some of these behaviors may be subject to criminal prosecution, e.g. breach of trust, fraud, etc., these penal statutes are not sufficient and are sometimes difficult to apply in these circumstances. The theory of piercing corporate veil allow the courts to look through corporate veil and go after the controlling shareholder that would otherwise hide behind it. Nevertheless, whether this Anglo-American legal theory can really be made a part of Taiwan law is yet to be seen.