Comparative Study And Improvement Of Substantive Consolidation Bankruptcy Rules

Based on the main issues in the application of substantive consolidation rules in our country's bankruptcy practice,this article compares the relevant provisions on substantive consolidation rules in the common law system,the civil law system,and the United Nations legislative Guide,and combines our country's existing regulations on substantive consolidation bankruptcy and judicial practice in order to find solutions to the existing problems and put forward targeted suggestions for system improvement.This article not only clarifies the basic principles of substantive consolidation from the macro level,but also defines the program design and substantive content of the rule design from the micro level,so as to realize the organic combination of theory and practice.The first chapter of the article introduces the meaning,theoretical basis and functional value of the substantive consolidation bankruptcy rules.Substantive consolidation bankruptcy refers to the special handling rules for bankruptcy cases in which the assets and liabilities of multiple affiliated companies are merged in the bankruptcy process,and after the credits and debts within the affiliated companies are removed,the unified property after the consolidation will pay off all the claims after the consolidation.The substantive consolidation rule originated from the judicial practice of the US bankruptcy law."Substance" corresponds to "Procedure",which means that the rule actually breaks the independent personality between affiliated enterprises and has an impact on the substantive rights of the parties in bankruptcy cases."Consolidation" means that when the rules apply,the assets and liabilities of related companies need to be merged,and each related company merges into the same entity in the bankruptcy proceedings.The theory of enterprise as a whole,the theory of asset division,and the theory of denial of legal personality can all provide theoretical support for it.The value of the substantive consolidation bankruptcy system lies in the principle of fair compensation for creditors,which effectively prevents related companies from illegally transferring assets and interests,evading debts,and harming the interests of all creditors of the company.By correcting the damage to the interests of creditors caused by the improper relationship between affiliated enterprises,breaking the independent personality and limited liability walls within affiliated enterprise members,and realizing the fairness and efficiency value of the bankruptcy legal system.Through the application of this rule,the claims and debts of affiliated companies can be fairly cleaned up,the efficiency of case trial has been significantly improved,and the cost of asset disposal has been reduced.Because in one hand,this rule has its own unique legal basis and functional value.In the other hand,this rule conforms to our country's special development background and realistic needs,this rule therefore appears in our country's judicial practice and be widely applied.In recent years,the number of enterprise groups in our country has increased sharply.Bankruptcy legislation and judicial practice have been continuously innovated and explored.Associated enterprise bankruptcy cases urgently need special rules to be adjusted.Therefore,substantive consolidation bankruptcy rules have gradually appeared in our country's practice and are widely applied.The second chapter of this article analyzes the current problems of the substantive consolidation bankruptcy rules in the theoretical,legislative,and judicial circles of our country.Although the emergence and application of the substantive consolidation bankruptcy rule has its rationality and legitimacy,because of the lack of clear legislative guidance,the emergence of the rule has induced a series of theoretical and practical problems.First,at the theoretical level,the application of the substantive consolidation and bankruptcy rules has brought a major impact on the limited liability system,as well as an impact on the modern company system.Secondly,at the legislative level,according to the rule of law,judges can only try in accordance with the law,and judges cannot arbitrarily apply any rules unless the law clearly stipulates them.From the current point of view,only through the Supreme People's Court issued the "Minutes of the National Court Bankruptcy Trial Work Meeting"(FA[2018]No.53)(hereinafter referred to as the "Meeting Minutes")on 3rd 4th,2018.There is a risk of violating the principle of rule of law in making a substantive consolidation ruling in bankruptcy cases.At the same time,the definition of the concept is the starting point for the design of the substantive consolidation bankruptcy rules.The basic concepts such as affiliated enterprises are the subject and prerequisite of the substantive consolidation bankruptcy rules.The Enterprise Bankruptcy Law of the People's Republic of China(hereinafter referred to as the "Enterprise Bankruptcy Law")is not clearly defined in the interpretation.From a procedural point of view,because there is no clear legislative provision,there is no unified guideline for the initiation and supervision procedures for the application of the substantive consolidation bankruptcy rules.Finally,at the judicial level,in addition to the difficulty in the implementation of the hearing procedure and the difficulty in unifying the start-up mode,the most obvious problem in practice is the confusion of the applicable standards of the substantive consolidation bankruptcy rules.Before the "Meeting Minutes" was issued,there were large differences in the determination of the application of the substantive consolidation bankruptcy rules by local courts,among which personality confusion has almost become a single criterion for judgment.After the "Meeting Minutes" was released,although this inconsistency of application has been improved to a certain extent,there are still problems with unclear levels and no distinction between guidelines and behavioral application standards.The third chapter,from the perspective of comparative law,introduces the domestic and foreign legislation of substantive consolidation bankruptcy rules,and summarizes the legislative experience that can be used for reference when solving the problems.At the international legislative level,the United Nations Commission on International Trade Law's "Insolvency Legislation Guide"(hereinafter referred to as the "Legislative Guide")has more detailed provisions on substantive consolidation issues.Although it cannot constitute international law,the "Legislative Guide" with a soft law nature can still produce actual results,our country's legislation on substantive consolidation rules can also be carried out with reference to this document.From the legislative level of other countries,substantive consolidation bankruptcy has a history of nearly 80 years in the United States,and its content has been continuously improved and enriched through case law.In the process of gradual improvement,the applicable standards and conditions of the substantive consolidation rules have also undergone a"strict-loose-strict" transformation process.In addition to the United States,the consolidation order and asset consolidation regulations of New Zealand,Australia and other countries are also like the actual consolidation.However,civil law countries do not have relevant regulations for substantive consolidations.The main reason for this different legislative choice is the differences in the legislative systems,institutional characteristics,and value pursuits of the two major legal systems.In my country,substantive consolidations also originated from the active exploration of local courts.Although they are widely used in practice,they have not formally established a substantive consolidation bankruptcy system in legislation.The main basis for the rules lies in the general provisions of the Supreme People's Court in the form of "Meeting Minutes" documents that set up special chapters for substantive consolidation and bankruptcy rules.However,the "Meeting Minutes" is only a judicial guidance document at this stage,with a low level of effectiveness,and the substantive consolidation rules still lack legislative normative guidance.At the same time,studying the development status of substantive consolidation bankruptcy rules in our country cannot be separated from the current legal framework.After the implementation of the"Civil Code of the People's Republic of China"(hereinafter referred to as "Civil Code"),it will also have a certain impact on the rules of substantive consolidation bankruptcy.It not only lays the foundation for the legal concept of substantive consolidation bankruptcy,but also brings current needs in future legislation.Focus on issues of concern and coordination.Due to the significant differences in the legislation of various countries in the world,it is difficult to find answers to the specific problems in our country in the legislation of other countries.However,referring to the relevant regulations of other countries,we can find some common content and provide references for our country.For example,on substantive issues,you can refer to the application of the principle of equity in other countries,requiring the court to make a substantive consolidation decision,paying attention to the interests of multiple parties,weighing the applicable pros and cons of the substantive consolidation under the influence of multiple factors,and then making a ruling.In this way,we can solve the problems of arbitrary application of substantive consolidation rules,pursuit of unity of value,and confusion of applicable standards in our country.Regarding procedural issues,we can learn from the more relaxed attitude adopted by the courts of other countries to solve the problem of determining the jurisdiction of the courts in our country.The fourth chapter of this article introduces the perfect path of the substantive consolidation bankruptcy rules.It not only clarifies the guiding principles and legislative techniques of the rules,but also fully considers the operational difficulties in the practice.The system design of the substantive consolidation bankruptcy rules is planned in detail.In response to the hot issues of concern encountered in China.First,the construction and improvement of substantive consolidation bankruptcy rules need to clearly guide the basic principles.On this issue,in accordance with the requirement of "fundamental",the principle that has fundamental guiding significance for the legislation and justice of the substantive consolidation bankruptcy rules should be determined as the basic principle.Among them,the principle of balance of interests,the principle of prudential application,the principle of comprehensive protection,the principle of creditor trust,and the principle of respect for creditor autonomy,as they meet the fundamental requirements of the substantive consolidation and bankruptcy rules,should be listed as the guiding principles of the rules.Second,the construction of substantive consolidation bankruptcy rules requires special legislative techniques to make the rules have both"guidance" and "flexibility".It requires both guiding written rules and leaving sufficient room for discretion to form "instructions" and "flexibility."The legal framework of "statutory law"+"judicial interpretation"+"guidance case".Third,the most important thing is to make the rules truly operable based on the guiding principles and combining the disputes and practices in practice.In the substantive rules,future legislation should further clarify the applicable standards for substantive consolidations and establish applicable standards for both general and guiding categorical standards and deterministic and specific behavioral standards.Three dimensions are set in the content,personality confusion is the core applicable standard,other categorical standards are added as an aid,and the circumstances that exclude the application are set.In the procedural rules,it is necessary to establish a more systematic and complete procedural system,so that the substantive consolidation has a clear legal basis to follow from the case application initiation procedure to the trial supervision procedure.At the same time,the substantive consolidation bankruptcy rules are derived from practice,and special attention should be paid to responding to special and difficult problems in judicial practice.Special design problems encountered in practice should be specially designed in the substantive and procedural rules to respond to judicial concerns.