A Brief Analysis of the Difficulties in the System of Lifting the Corporate Veil under Hong Kong Law (Part I)-GuangDong Easy Start Law Firm

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A Brief Analysis of the Difficulties in the System of Lifting the Corporate Veil under Hong Kong Law (Part I)

Data：2026-03-25 View：

In commercial disputes involving Hong Kong, mainland creditors often hold the following mindset: since the PRC Company Law and other relevant laws and regulations provide for the system of disregarding corporate personality, as a Special Administrative Region, does Hong Kong also have similar provisions on “lifting the corporate veil”? Furthermore, can they directly require the shareholder of a one-person Hong Kong company to bear joint and several liability by relying on the rule of reversal of the burden of proof regarding “confusion of assets of a one-person company” under mainland law?

Pursuant to the PRC Law on the Application of Laws to Civil Relationships Involving Foreign Elements and relevant judicial interpretations, as a general rule, matters such as the rights and obligations of shareholders of a legal person shall be governed by the law of the place of registration. The rules for determining the rights and obligations of company shareholders under Hong Kong law differ significantly from those under mainland law, and thus the answer is in fact far more complex than imagined. This article will analyze the applicable standards for “lifting the corporate veil” under Hong Kong law by reference to the Hong Kong Companies Ordinance and key judicial precedents.

I. Fundamental Principle: A Duly Incorporated Hong Kong Company is a Legal Entity Separate from Its Members

As early as 1897, the fundamental principle of Hong Kong company law was clearly established in the UK House of Lords case of Salomon v. A. Salomon & Co. Ltd. [1897] AC 22: a duly incorporated company is a legal entity separate from its members. Relying on this principle, mainland courts often rule that members of a Hong Kong company are not personally liable for the company’s debts. Under the current Hong Kong Companies Ordinance, companies incorporated in Hong Kong are divided into two categories according to the legal liability of their members: (1) limited companies; and (2) unlimited companies. Limited companies are further divided into two types: (1) companies limited by shares; and (2) companies limited by guarantee.

Pursuant to section 8 of the Companies Ordinance, a company is a company limited by shares if its articles of association limit the liability of its members to the unpaid amount on the shares held by them. Pursuant to section 9 of the Companies Ordinance, a company is a company limited by guarantee if:

(a) it has no share capital; and

(b) its articles of association limit the liability of its members to such amount as the members undertake to contribute to the assets of the company in the event of its winding up by virtue of the articles of association.

Based on the above provisions of Hong Kong law, mainland courts hold that during the normal existence of a company limited by shares, shareholders are generally not personally liable for the company’s debts, and their liability is limited to the unpaid amount on the shares held by them. Once the share capital is fully paid up, shareholders shall not be liable for the company’s debts. Nor shall shareholders be liable for the company’s debts by virtue of their shareholder status after the company is dissolved.

II. Strict Standards for Lifting the Veil of a Hong Kong Company: The Concealment Principle and the Evasion Principle

In very few exceptional circumstances, the court may exercise its power to lift the corporate veil, based on the “concealment principle” and the “evasion principle”. The UK Supreme Court delivered a landmark exposition on lifting the corporate veil in Prest v Petrodel Resources Limited [2013] UKSC 34, a case concerning the distribution of matrimonial assets, which is highly persuasive in Hong Kong.

The judge in that case summarized two principles for “lifting the corporate veil”: the concealment principle and the evasion principle. The judgment stated that the concealment principle does not involve any “lifting” at all; rather, where a person interposes one or more companies as a façade to conceal the identity of the true actor, the court may look behind the apparent corporate structure to ascertain the facts concealed. The evasion principle provides that if a person is entitled to assert certain legal rights against the person controlling a company, which arise independently of the company’s involvement, but the right or its enforcement is frustrated because the person has interposed the company as a separate legal entity, the court may disregard the corporate veil and hold the controller liable.

Mainland courts tend to strictly apply the above principles when examining whether to apply the system of disregarding corporate personality to Hong Kong companies. It is extremely difficult to prove that the shareholder had an improper purpose such as evading debts or concealment. The second part of this article will combine relevant cases where mainland courts examined the disregard of corporate personality of Hong Kong companies, analyze the difficulties in “lifting the corporate veil” under Hong Kong law, and put forward practical handling suggestions.

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