The Law And Economics Of Creditor Protection In Corporation

Protection for creditor's interest is an important subject in the field of corporation laws. Along with the more and more important role debt capital is playing in capital markets, it is more concerned by jurists and economists. On protection for creditor's interest, Corporation Law is not enough to meet its own needs. Under the background of diversified routes for legal analysis, by the method of Weight Method Economical Analysis, add the traditional analyzing method to re-analyze the matters on protection for creditor's interest and propose suggestions, that is the featured and difficult point that is commonly concerned and to be answered in theoretical and substantial cycles. By illustrating and analyzing the protection strategies for creditor's interest from various points of views through Weight Method Economical Analysis and many other analyzing methods, in this essay, a conclusion about the features and future development trend for protection for creditor's interest is reached. And based on this conclusion, the weak points in the protection strategies of creditor's interest in force in China are estimated and suggestions on its perfection are proposed in the essay.In the preface, the importance of protection for creditor's interest and its practical and theoretical significance are pointed out. In the basis of analyzing an explanation for the analyzing methods and routes on analyzing the illustration of protection for creditor's interest, the existing problems of protection for creditor's interest are given in this essay. And an overall interpretation for the structure of this essay is also given.In the first chapter, the overall framework of the theoretical basis and the legal strategies for protection for creditor's interest are illustrated. The theoretical basis that creditor's interest is protected is not only on the problems-risk externalities problems, which caused by limited liability but also on the complex changes that happened under the background of financial crises in the structural evolutionary and developing process of the commercial entities like companies. These changes have deepened and broadened the financial crises and made creditors face more risks and crises. Legal strategies needed in the protection for creditor's interest have gradually developed into a legal strategy systematical framework from a comparatively simple capital regulation in the traditional corporation law. That is to say that an organic interactive strategy system has formed through financial analysis, disclosure of information, responsibility regulation and judicial interference and other legal strategies.In the second chapter, the advantages and disadvantages of rules on capital and the effect of the reform on protection for creditor's interest are re-analyzed, and based on rules on capital point of view, suggestions on protection for creditor's interest are proposed. By what the creditors say for themselves is the most direct and important question met in their interest protection. The regulation given by Corporation Lowest Cost-the traditional corporation law on corporation credit is gradually going out from the reference meanings on investors'protecting their own interests and increasing investment efficiency. It is believed in this chapter that softened rules on capital has not only increased corporation transaction efficiency but also provided new chances for reconstructing corporations. For creditors, corporation credit provides stable returns, but also is reducing their investment capital at the same time and thus will increase their investment profit. Obviously, under the background of the corporation rules on capital softening, corporation credit is entitled a new historic meaning and important historic mission. The investment environment of high profit, low cost and stable returns is the real meaning of corporation credit's influence to creditors. It is proposed in this chapter that to face the fact that corporation capital is changing all the time, help corporation creditors to check and inspect on corporation capital through financial analyzing tools. Capital is the most direct guarantee to interests of creditors, no matter how the rules on capital change, how capital rises and falls, how the company formulates profit distribution rule, to do with financial analysis can make creditors get detailed information on corporation capital.In the third chapter, the functions of disclosure of information with corporation capital to creditors is discussed, the advantages and disadvantages of information on controlling creditor's profit cost and increasing creditor's income and the effect on protecting interests of creditors are analyzed. It is believed in the chapter that disclosure of information is a main route for the transmission of corporation capital to creditors and provides a powerful guarantee for creditors to get detailed information. The disclosure of information quality will surely strengthen the credit of corporations to creditors and increase efficiency of both creditors and corporations. Inside trading as an illustration of disclosure of information in practice has proved perfectly the fluctuation status on the influence of disclosure of information towards interests of creditors. In the chapter, it is proposed that different creditors have different demand grades on information due to their own powers. To provide information about debtor corporations for different creditors according to their demands is needed. Mandatory disclosure of information is playing an unlimited role in this aspect. For creditors, disclosure of information is one of the necessary strategies to protect their own interests.In the fourth chapter, the protection function of the executives and auditors regulation on disclosure of information and assets safety and the importance on protection for creditor's interest is focused on. It is proposed in the chapter that corporation credit is a credit bunch, the legal strategies that based on corporation capital, take disclosure as a route and guaranteed by responsibility regulation have formed an inter-corporation credit support. Legal strategies promote each other and are all necessary. The direct effect of protection for creditor's interest is the minimization of investment cost and the maximization of profit for creditors. The aim of corporation credit formed of various legal strategies is to lower the cost that creditors protected for their rights and increase their profits. Thus responsibility regulation is the last line of defense that creditors protect their own interest through agreements.In the fifth chapter, how the interaction goes between corporation contract and governmental interference and how interests of creditors get the best protection between the two are very important. It is believed in the chapter that efficient judiciary interference provides creditors with credit support outside the corporations. The freedom of contract provides a legal strategy for self-protection of interest through agreements. Under the guarantee of responsibility regulation, corporations transmit the actual information to creditors, show them the true situations of corporations on capital, this is the game result of creditors, shareholders and corporation executives under the freedom of contract. However, governmental interference provides creditors with a channel that protects interest through judicial interference when contract invalidation happens. We can see that, through legal strategies formed by applying agreement freedom and governmental interference, to lower cost and increase profit is the necessary choice for protection for creditor's interest by corporation credit.In the conclusion, the important effect of all the processes in which legal strategies protect creditors is confirmed. We should continually adjust concepts on protection for creditor's interest and construct and enrich relative legal strategy systems in the process of adapting to capital markets and self-development of corporations.