The Judicial Review Of Affiliated Transctions

An affiliated transaction is a more complex economic phenomenon that is accompanied by the development of corporate enterprise and arises among all kinds of profit subjects that its profit relation is at the joint company. It has the nature of objective and inevitable. It is unreasonable and also impossible to simply prohibit the affiliated transactions. But the objectivity and inevitability of affiliated transactions do not mean that it must have the fairness and legitimacy. Just for the complex reality, academics and legislators from different countries conduct the affiliated transactions from the aspect of legislation and strengthen supervision. It actually experienced from simply to complex that the standpoint of legal controlling the affiliated transactions and the disputed issue is focusing on the fairness. China is no exception. A bright spot of the new revision of the "Company Law" is that defines clearly the affiliated transactions and standardized the action of it. Article 21 of company law states: "The company's controlling shareholders, actual controllers, directors, supervisors, senior managers may not make use of their affiliations relation to damage the corporate interests." This provision establishes the legal basis and principles that conduct the affiliated transactions.However, for the particularity of affiliated transactions that be different from the general commercial transactions, and under the effects of the information asymmetry and corporate governance structure so on, if simply perfect legislation in advance and strengthen the supervision on the process, not only lead to do not estimate the cost of legislation, oversight, but also bring the less effective results. Therefore, I suggested that it might attempt to change a way of thinking to reduce the extremity that is caused by the affiliated transactions. Because the disputed issue of standardizing the affiliated transactions, I suggest that at the same time of perfecting legislation and strengthening supervision, introduce the affiliated transactions into the field of justice. At our country' s current stage, make use of the existing legal resources, and establish a system of judicial review of our affiliated transactions. Because of the neutrality and prudence of judicial, the strict procedures are better for settling the impartiality of affiliated transactions.When question the effectiveness of the affiliated transactions behavior, the court can intervene and censor the justness of affiliated transactions, and by identifying the injustices trading behavior' s civil liability, prevent from abusing the affiliated transactions, and protect the right of the related profit subjects, interests of relevant subject. On Five parts of my paper, specifically analyze the judicial review of affiliated transactions as follow:The first part: Analysis the necessity and feasibility of censoring the affiliated transactions. From the problems that arising from the generation mechanism, legislation and regulatory, and the right relief so on, we can analyze the necessity of censoring the affiliated transactions. According to the legal nature of affiliated transactions, the procedure of entering into the judicial review, and the entity standards that can be reference, and the overseas practical experience, demonstrate the feasibility of establishing the judicial review of affiliated transactions. The second part: Discuss the standards of judicial review of affiliated transactions. From analysis the legal form and the substance of transactions, as a form contract, there was no separate law to offer the standard to estimate whether the affiliated transactions are legal or not. we still learn from foreign practice, according to the relevant regulation in the "Company Law" and "Securities Act", "Contract law", the provisions of the SFC, from the both sides of procedure standards and substantiality standards, make the judicial review of the affiliated transactions.The third part: Choice the model of judicial review. Be seasoned with the "two-track" of the legislation, my opinion is that combine censoring the substance with the procedure, analyze specifically the specific questions. Irregularity on procedures does not necessarily lead to negative the effects of transactions. Legality on procedures does not necessarily lead to the positive effect. Whether the transaction is fair or not should be as the emphasis of censoring substance, and look it as the most direct basis of determining the effect of contract. For grasping the depth of consorting, as respecting the commercial activities, I think that the standards are not too strict.The fourth part: Determine the effectiveness of judicial review of affiliated transactions. Unite the analysis in all former parts, according to the related law; identify the effectiveness of affiliated transactions that it is embodied on contract. As I claim that establish the regulatory of judicial review of affiliated transactions, I briefly explain that the relationship of judicial, legislative and regulatory. If establish the judicial review of affiliated transactions, there are needs to perfect the attached.