Research On Interrelated Transactions

Interrelated transaction is a new economic phenomenon and legal issue arising from the constant progress and development of social economy. The existence of the interrelated transaction both have it's advantage and disadvantage in market economy. The purpose to regulate the interrelated transaction in the company law doesn't forbid the emergence of the interrelated transaction, lies in to regulate the trading activity of the subject in it, takes precautions against the unfair interrelated transaction, finds an equalization point among the interest of each side of the affiliated enterprises, of minority shareholders and the social public interests.Different countries' ideas of the definition, range and characteristics of interrelated transaction vary. Therefore, there has been no commonly acknowledged definition for it so far. Due to the ever intensifying problem in social economic practices that many market subjects are violating the interests of corporations, some of their shareholders, and their creditors by taking advantage of interrelated transactions, it is necessary to perfect the relevant laws and regulations on interrelated transactions by studying the laws on interrelated translations, by fully recognizing the positive and negative effects of interrelated transactions on market economy practices, and by referring to the regulation ways of foreign countries and other regions concerned on interrelated transactions. This paper, therefore attempts to make a research on the issue of corporation regulations on interrelated transactions, based on legal regulations analysis, from five perspectives: a brief introduction to interrelated transactions, the corporation laws' protection of interrelated transactions on corporations and some of their shareholders, the corporation laws' protection of corporation creditors in interrelated transactions, corporation regulations on self-translations ,and the perfection of China's corporation legislations.Interrelated transactions, also called"transactions between interrelated sides", or "associated transactions", are actually transactions concluded between interrelated sides. The research on,therefore, the definition, nature and range of interrelated sides becomes the basic issue of the research on interrelated transactions. The first part of the paper analyzes the features, range of interrelated transactions and their impact on the corporation system by comparison and analysis of the varied definitions made by different countries and regions on interrelated transactions and interrelated sides.Because in interrelated transaction one side is often "dominating" or "having a great impact on" the other side,the transaction is usually decided or manipulated by one side,resulting in a number of unfair interrelated transactions. The legal interests of corporations and some of their share holders are often violated in interrelated transactions. The second part of the paper focuses on the corporation law's protection of the legal interests of the corporations and some of their shareholders in interrelated transaction. It also discusses the enacting and perfection of protective system of the legal interests of corporations and some of their shareholders in interrelated transactions, through the analysis of the major measures adopted by different countries to protect corporations and some of their shareholders in interrelated transactions, such as, ratification system of shareholder conference, shareholder voting system, independent director system, the dominating shareholders' compensation system, shareholders' conference canceling system, shareholders' derivational law suit system.As one side of the interrelated transaction is usually dominating the other, the former often purposely violates the interests of the corporation creditors and concludes unfair interrelated transactions for its own or a third party's benefits, which objectively enlarges the risks on the part of the corporation creditors. In order to protect the legal interests of the corporation creditors, this paper, in its third part, discusses ways to protect the interests of the corporation creditors in interrelated transactions by means of corporation negating system, together with the discussion of the corporation negating principles, and the applicable conditions and range.The latter consists of the doctrine of "deep rock". We sincerely hope the article can help to perfect our related law system. The last chapter discusses the sequence that shareholders receive payment from the company as creditors in the event of the reform or insolvency of the company outlines that when the conduct of shareholders satisfies the principle of fairness their credit can be equally repaid as other creditors, otherwise inferior to them. Finally, this essay concludes the discussion by means of observing on the issue that the mechanism of shareholders' liability for the creditors consists of the important part of the company law system and will help the integration of the company legal system. This essay merely establish this liability mechanism by virtue of the legal theory, yet in order to provide sufficient and satisfactory protection for the interests'of creditors and boost the integration and enactment of company law system, further and detail legislation is badly wanted.