Research On Equitable Subordination Doctrine

With the development of the economy, the company has changed greatly in the structure and form. The form of a single company cannot meet the requirements of the socialized production and capital concentration, and the trend group of companies becomes irresistible. Traditional company law often gives more protection on the interests of shareholders in the structure of a single company, and this gives rise to the phenomenon that shareholders abuse the control right to make a profit. In the group of companies, the relationships of capital and personnel, between the control company and the affiliated company, or between affiliated companies, is inseparable. On the one hand, it does well to gain access to trade secrets, to prevent the loss of technical superiority and proliferation, and to raise the company's operating efficiency maximizing the company's profit goals. On the other hand, the controlling company often takes advantage of its superiority formed by its controlling position and does business with its affiliated companies improperly. It not only damages the interest of affiliated companies, but also makes the creditors of affiliated companies get little or no damages. The law, which always punishes wrong and advocates good, should regulates the improper conducts of control shareholders or control companies in order to obtain its goal of justice. The equitable subordination doctrine is a legislative exploration, which tells whether the claims of controlling companies or shareholders will be subordinated when the subsidiary company goes bankrupt. This article is divided into four chapters and discusses the doctrine systematically. Chapterâ… will introduce the change of shareholders'limited liability and the origin of the equitable subordination doctrine. This chapter begins with the shareholders'limited liability, and investigates the background of the doctrine's development, while the limited liability became the tools with which the control shareholders and companies avoided the legal liability. The process of its establishment will be outlined by introducing three classical cases in America, and three theoretical issues related and their legal basis will be exploited at the same time.Chapterâ…¡will compare the application of the equitable subordination doctrine in different countries. This chapter firstly expounds the theory of shareholders'subordinate claim in German Law, introducing its development and practice of legislation and judicature, then makes criticism. Secondly, a comparison between German and America is made in details in three aspects including parties, requirements and legal results. Finally, the choice of legislative form, as well as reasons related, in our Taiwan District will be introduced specifically.Chapterâ…¢analyses the necessity and feasibility of introducing the equitable subordination doctrine into China. Due to the imbalance of interests made by improper utilization of control right, the interests of creditors have not been given enough protection in our company law, contract law and bankruptcy law. Because of the weakness or disregard of the company's legal personality, the equitable subordination doctrine should be introduced in our country.Chapterâ…£discusses the legislative problems of localizing the equitable subordination doctrine in our country. Based on the comparison made among different countries and the social reality in China, this chapter provides some legislative proposals about the establishment of this legal system, both in substantive issues, such as parties or requirements, and procedural matters.