Research To Equitable Subordination Doctrine

Now in the world, affiliated company is playing an important role in the national economy,and its main form is controlling company and subsidiary. The existence of affiliated company leads to optimization of allocation of resources , improvement of operation efficiency and profitability of the enterprises, and promotion of the development of the enterprises and the whole economy. The traditional corporate law was based on single company, therefore, rapid development of affiliated company challenged traditional law a lot, and the protection of creditors of vulnerable status by reason of affiliated relationship has drawn attention from both theory and practice of various countries. Equitable subordination doctrine is a legislative exploration about whether the controlling company's claim should be subordinated when the subsidiary is bankrupt. It's a kind of compensatory remedy, which aims to compensate the damages of the creditors of subsidiary and subordinate the claims of controlling company within necessary range. In our country, the existing investigation on equitable subordination doctrine is relatively weak and mainly focuses on the protection of the creditors of subsidiary. There is no profound and special research on its development in the U.S.; furthermore, applying rules and legislative problems in China are not mentioned. For the sake of understanding and solving these problems exactly, providing some suggestions to consummate legislation relatively, this text is divided into four parts to discuss the problems on the equitable subordination doctrine.Chapter One introduces the origin of equitable subordination doctrine. This chapter begins from shareholder's limited liability, investigates the background of the foundation of equitable subordination doctrine——the creditors'benefits of the company are damaged by the controlling shareholders utilizing the controlling position based on shareholder's limited liability; outlines the process of its establishment by introducing three classical cases in the U.S.; presents the argument between automatic subordination doctrine and equitable subordination doctrine, also the legal theory of equitable subordination doctrine is introduced.Chapter Two investigates the development of equitable subordination doctrine. Because the equitable subordination doctrine origins from case law in the U.S., its main development takes place in the U.S. This chapter discusses its development in detail in four aspects including parties, conduct, result and subjectivity, then introduces the development of the equitable subordination doctrine in Canada and Taiwan District of China.Chapter Three analyses the necessity and feasibility of introducing the equitable subordination doctrine into China. Based on lack of regulations on affiliated company and weakness of disregard of corporation's legal personality, the equitable subordination doctrine should be introduced. The good faith principal and the theory that the right shouldn't be abused can be the legal base. Besides, this chapter analyses the relationship between the equitable subordination doctrine, contract law, company law and bankruptcy law to demonstrate the feasibility of the introduction.Chapter Four provides the legislative proposals on introducing the equitable subordination doctrine. Based on the essence of the equitable subordination doctrine established by the cases in the U.S. and national conditions, this chapter discusses the author's opinion about the establishment of legal system both in substantive and procedural regulations to realize the localization of the equitable subordination doctrine.