'Professional store closers' help companies avoid liability

More judicial measures are needed to address the issue of "professional store closers", people who specialize in helping unprofitable companies with prepaid services "close shop" to evade debts and handle subsequent consumer rights disputes.

For years, incidents have frequently occurred where prepaid service providers, such as gyms, hair salons and educational training institutions close down or cease operations after consumers have recharged their membership cards.

However, in recent years, these companies have often changed their legal representative and shareholder identities to professional store closers to evade debts and consumer accountability.

After becoming the new legal representative, the professional store closers assume the company's debts and have a set of tactics to deal with consumers seeking their rights. They can receive substantial amounts of money from the companies.

Li Ya, a partner and lawyer at Beijing Zhongwen Law Firm, said the problem has attracted nationwide attention and should be addressed in several ways, including legal and administrative means.

Many of the professional store closers are already indebted and might have been blacklisted for credit issues, so taking on more debt has little impact on them, according to Li.

Last month, the Supreme People's Court issued a draft judicial interpretation regarding the handling of civil disputes in prepaid services cases. It stipulated that operators who collect prepayments but are unable to fulfill their contractual obligations due to operational difficulties should promptly liquidate.

Moreover, if a third party helps the operator evade debts, causing consumer losses, the court should support consumers in requesting compensation from the third party and the operator.

The newly revised Company Law, which came into effect on July 1, also stipulates that if company shareholders abuse the independent legal status of the company and limited liability of shareholders to evade debts, seriously harming the interests of the company's creditors, they should bear joint liability for the company's debts.

These measures can help address the problems brought about by professional store closers, Li said.

Additionally, market supervision departments should clearly define the thresholds for changes in legal representatives and shareholders, and conduct technical reviews when necessary to prevent dishonest individuals from becoming executives, he added.

In May, a court in Beijing's Fengtai district disclosed a case related to a professional store closer on its WeChat account.

A consumer surnamed Wang had recharged and purchased classes multiple times at a yoga studio, spending tens of thousands of yuan. In October, Wang suddenly found herself unable to book classes through the online channel, with no response from customer service, and the studio was shut.

She contacted other members of the yoga studio and was told the studio had closed half a month earlier, with its legal representative and shareholders having changed before the closure.

Other members showed her the WeChat posts of the new company's legal representative, surnamed Xue.

Several posts from Xue said: "If your store is no longer operating for some reason, we can help you deal with the liabilities."

Wang quickly realized that Xue was a typical professional store closer.

With over 8,000 yuan ($1,100) left unused in her yoga membership, Wang sued Xue in Fengtai court, demanding compensation for the unused amount on her membership card.

At trial, Xue admitted that in September, the original legal representative of the yoga studio, surnamed Liu, had signed a transfer agreement with him, transferring 100 percent of the company's shares, making Xue the legal representative and sole shareholder.

Several days later, Xue applied to the Fengtai market supervision department to deregister the yoga studio, with the liquidation report saying that all debts and credits had been settled — which was untrue.

The court ordered Xue to compensate Wang for the unused amount on her membership card.

Similar cases have garnered significant attention on Chinese social media.

Li said that in reality, due to the time and financial costs of filing a lawsuit, most consumers often choose to forgo defending their rights.

jiangchenglong@chinadaily.com.cn