Principles And Essential Conditions For Defining Unfair Affiliated Transactions

"Regulation of Affiliated Transaction"is a relative integrated and complicated issue which refers to varies of laws and regulations which even in different departments of law. However the existence of affiliated transactions is inevitable and with high risk, plus an immature legal environment, the topic is worthwhile of discussing. That's why this paper explores the principles and essential conditions for defining unfair affiliated transactions while taking the characteristics of occurrence situation and related laws in China into consideration, to improve the regulation of affiliated transactions in China. Major contents include an introduction in the beginning three major chapters and a conclusion.At the beginning, the nature and characteristics of affiliated transactions; the harm of unfair affiliated transactions and; and conditions as well as shortcomings of related laws and regulations in China are briefly introduced. Then the author explains the significance and major content of this paper.In ChapterⅠ, fairness is concluded to be the core value of regulation systems for affiliated transactions in modern times. The theory of defining unfair affiliated transaction is pointed out of great significance to unify and coordinate various systems and stages under the regulation system.The principles and essential conditions are proved to be mutually affected and make the defining process a more compatible and stable one.In ChapterⅡ, the principles:"fair transaction","respecting inner control procedure","encouraging information disclosure"and"different treatment under different conditions"are discussed. The discussion covers information about the significance, the basic statement of the principle and the ties between principles. The conclusion is that the principle of"fair transaction"stands in the center of this system, the principle of"different treatment under different conditions"represents the most unique part, the other two principles function as the support of substantive fairness which balancing fairness and effectiveness.In ChapterⅢ, the three essential conditions are listed: subject——affiliated parties, act——breach of duty of loyalty during the transaction; consequence——one side(of interest confliction) derived injustice benefits while the other side suffered lose. This part focus on the following points to proceed: the scope of affiliated parties lies in the existence of substantive affiliated relationship; the word"transactions"covers more than"contract"; the duty of loyalty requires more than the duty of care; the result of unfair affiliated transactions consists of two parts.In the end, based on the above discussion, considering the condition of legislation and justice in related field in China, two suggestions are raised: first, keep substantive fairness in the core place during the defining; second, the major strength should be put on the regulation of unfair affiliated transactions which brings interest conflict between shareholders (especially controlling shareholder) and the company. To be more concretely, developing shareholder's duty of loyalty in Company Law is of great importance.