Font Size: a A A

Company Judicial Liquidation Legal And Institutional Research

Posted on:2011-04-09Degree:DoctorType:Dissertation
Country:ChinaCandidate:L LiFull Text:PDF
GTID:1116360305997618Subject:Civil and Commercial Law
Abstract/Summary:PDF Full Text Request
For quite a long time, China has not established a company judicial liquidation system. Though the system of judicial liquidation has been initially established upon the Judicial interpretation No.2 issued by the Supreme People's Court, but so far, is still difficult to deal with relevant cases. On one hand, the reason lies in the complexity in reality leading to the judiciary difficulties; on the other hand, it shows the current legislation still need to be supplemented and amended. This paper, from the perspective of interests balance theory, comprehensively utilizes the law and economic theory, combined with foreign legislation and relevant cases, categorizes and analyzes the current fundamental legal principles and systems on Chinese company judicial liquidation, and clarifies some vague theatrical issues, and put forward the author's own viewpoints.In addition to the introduction, this paper has four chapters.The first chapter illustrates and studies the basic theories of company liquidation to lay a foundation for further research. This chapter, from the perspective of the Civil Law, citing "fictio" as the theoretical basis, illustrates the nature of company liquidation, the nature of company liquidation can be interpreted as company agency's statutory changes.The theoretical tool to explain the nature of company liquidation from the perspective of the Company Law is "enterprise contract theory". Company liquidation can be interpreted as transfer of the control of the company with different remaining between different subjects. The author, in combination of these conclusions and analysis of interests balance theory and corporate social responsibility, believes that utilization of these two theories should vary based on specific stages of the company's development. At the company's normal operation stage, it should focus on encouragement and protection of the interests of shareholders, and with appropriate consideration to the interests of other stakeholders; at the company liquidation stage, priority should be given to the interests of other stakeholders and the public interest.This chapter then analyzes the conflict of the company stakeholders in judicial liquidation. In judicial liquidation of the company, the main confrontations lie between personal interests and corporate interests, different social public interests, property interests and non-property interests, reinstitution interests and non-reinstitution interests, and among different property (reinstitution) interests. The causes of the interest conflicts include the limited property of the company, information asymmetry between stakeholders and lack of relevant legal system.This chapter concludes with the public policy objectives for balance of the interests in judicial liquidation of the company:to maintain social harmony and stability, and prevent social unrest; to protect the bottom line of social equity; and to maximize the utilization of wealth.Chapterâ…¡, from the perspective of corporate governance, focuses on the intervention of judicial power for the company's liquidation. Corporate governance should be implemented throughout the whole lifespan of a company, it is a dynamic process, and in a broad sense, corporate governance should also include the company's liquidation phase. The major western corporate governance models for the listed incorporated companies are composed of two types:single-layer system and double-layer system. For a limited liability company there are many different governance models to meet the flexible mode of operations. The goal of corporate governance should include the economic objectives and organizational goals. Among which the economic objective is a development mode that can realize the balance of the interests of all stakeholders in the company; and the organizational goal is to establish an organizational system conducive to a balanced development among the interests.Based on the above discussions, the author, from the special features of the judicial power-its strong focus of equality and comparatively limited influence, discuss four aspects in the dimensions of the involvement of judicial power in company liquidation. The first is whether the company's liquidation is an "actionable" issue. Although company's liquidation is not a traditional confrontational dispute, legislations and practice have proved that judicial power is able to deal with the issues of company liquidation. The second is the initiative of the judicial power to play in resolving the company's liquidation issues. Judges should not stick to "adversary system" in dealing with confrontational disputes, but should be more inclined to "doctrine of justiceships". For matters such as whether to start liquidation proceedings, whether to apply or replace members of liquidation team etc., the judge should conduct more in-depth review, for matters such as weather the liquidation team is in compliance with obligations of notice for asserting claims, whether to allow additional declaration for creditor's right etc, the judge should conduct formal review. The third issue is the limitation of the company's own capabilities. The legitimacy and rationality of the cases review by the judiciary faces difficulties in some areas. The most obvious examples are the handling of mass justice and on the aspects of the review on technical results. The fourth point is the interaction between judiciary and the concerned parties. Such interactions possess the features of inequality and legality. According to Habermas's theory of communicative action, the author holds that effective interaction is the most important part for legislative and judicial issues, and also the base of legitimacy for the above acts. Therefore, in judicial liquidation, the courts shall adhere to the principles of basing on languages to communicate directly with the concerned parties to ensure effectiveness and impartiality.The third chapter discusses the trigger mechanism for judicial liquidation, at the same time studies legal means to urge the liquidation obligor to perform the obligations of liquidation. Liquidation is due to dissolution of the company. Relevant legislations have taken into account of the balance of interests between two aspects in the choice of the conditions for the right to sue the company in dissolution. The first is the balance of interests between prosecuting shareholders and other shareholders; the second is the balance of interests between the large shareholders and the minor shareholders. In addition to legislation, the judiciary, in dealing with cases of dissolution of the company will also consider the specific circumstances of the case to address balance issue. The law, in distribution of the instituted right of judicial liquidation, should follow the principal that those who possess majority of the interests in the company shall take priority in the liquidation. The top priority shall be the creditors, followed by the shareholders, with the last of the State.If the Liquidation obligor fails to perform the obligations, it may result in liquidation of the company can not proceed. Therefore, legal means must be used to supervise the liquidation obligor to take the initiative in liquidation, including the means of accountability of civil liability and administrative and criminal measures. Where liquidation obligor fails to perform obligations of liquidation, he shall be liable for damages of liquidation, rather than the "liquidation responsibility". Nature of the damages of liquidation is a tort liability based on high duty of care. In other instruments, measures of register of the record for company dissolved, seizure and freezing of the personal property of the liquidation obligors, as well as restrictions on going abroad.Chapter IV focuses on the implementation of the liquidation of the company and the judicial results recognition mechanism. Upon receiving the application of judicial liquidation, the top task of the people's court is to form a liquidator panel. Taking into account of the decisive power of the people's court in the "core interests" of the judicial liquidation, which includes establishment of the liquidator panel, determination of its duties and remuneration of the liquidator panel etc., this paper defines the relationship between judicial liquidator panel and the liquidated company as a "Judicial enforcement agency". Features of this model include the following aspects. Firstly, this kind of agency has a strong mandatory characteristic, but meanwhile also possesses some autonomy characteristic; Secondly, this kind of agency will be launched under the circumstance that civil agency model can not be achieved so to protect the interests of stakeholders; finally, this agency model possesses a strong policy characteristics. This chapter then discusses the composition of the liquidator panel. Existing regulations may cause the lack of expression mechanism for "external" interests in the liquidator panel, which will result in the losses of creditors and other stakeholders. The final plan to solve this problem is to organize a team of professional, neutral liquidators without constraints from inside the company. Now it may be considered appropriate for creditors and other stakeholders to represent in the liquidator panel.In the discussions of judicial liquidation of the company, the author selects the checks and balances of the rights of creditors and liquidator panel, mechanism of pay-off for common debts, and settlement sequence of judicial liquidation of the system as the key research issues. For the checks and balances of the rights of creditors and the liquidator panel, the notification system of notice to creditors, creditors'objection system and restriction system on the actions of the liquidator panel are illustrated. Among which creditors'objection right is an important right for the creditors to express their demands of the interests. However, currently there is no formation of a permanent meeting of creditors, decisions can not be effectively challenged, and the creditors themselves can not enter into the liquidator panel to effectively claim their rights. Therefore, if disputes on assessed claims by the creditors have been approved, it should be allowed for the creditors to nominate their own candidates into the liquidator panel. System of pay-off for common debts should try to balance the interests of all stakeholders, but since the creditors have not formed a relatively fixed organization, this loose state actually leads to the definition and approval of the agreement in fact guided by the liquidator panel. Therefore, during judicial liquidation of the company there should have a meeting of creditors, which aims at the interest representation on behalf of all creditors; full exchange of information, mutual supervision; and coordination of the internal interests to reduce potential conflicts. Judicial liquidation of the company shall also clarify a clear liquidation sequence. In addition to secured creditors, the liquidation costs, damages for personal injuries and harms, labor claims should enjoy priority to be paid off, but state tax revenue (including non-social insurance administrative fees) should not be listed as priority in compensation claims.In terms of confirmation on the conclusion of the judicial liquidation of the company, this chapter, inheriting from the conclusions of the second chapter, explores the characteristics and methods of the judicial power in reviewing the conclusions of the liquidation, and categorizes the characteristics of the judicial review as followings: Firstly, from the reviewed contents, the review mainly focuses on whether the liquidation process has violated the laws or involved obviously unreasonable conduct; secondly, from the level of review, the review is mainly from a legislative perspective. Thirdly, the review should belong to the scope of substantive review.Finally, this chapter discusses the issues on the treatment of outstanding claims after cancellation of a company. The author divides the issue into two circumstances and gives respective discussions. The first circumstance is the company has been cancelled but not through the legal liquidation process. There may be two different cases for this circumstance, the first case is the company's liquidation obligor tries to evade debt by intentionally or negligently avoid the legal liquidation obligations. At this point, the company's liquidation obligor shall be liable for not act rationally. The second case is during cancellation of the company, the shareholders have made a commitment to the industrial and commercial administrative department to pay off the debt. For this case, this paper believes that the effectiveness of the commitment should be acknowledged, and people committed shall be required to pay off the outstanding claims a after the write-off. Another circumstance is that there are still claims on the rights by the creditors after the cancellation of a company through legal settlement process. At this point, there are three different cases. In normal case, a company, after cancellation through legal liquidation process, will not pay off any debt. If someone is willing to take the corresponding debt, then it falls into the scope of voluntary assumption of debt, and should be allowed. In the event that the shareholders promise to pay for debt after write-off, it should also be recognized, but the shareholders only need to pay off within the realm of their distributed share of the remaining property, the part in excess may not be settled.
Keywords/Search Tags:judicial liquidation, interests balance, non-bankruptcy liquidation, liability for damages of liquidation
PDF Full Text Request
Related items