Corporate Control And Protection Of Creditor

This paper mainly studies the parent corporate control and the interest protection of subsidiary company creditors from the perspective of parent and subsidiary company. As the controlling shareholder of its subsidiary company, the parent company enjoys the subsidiary corporate control, which exists inevitably and is exercised legitimately; but at the same time, the huge economic benefits contained in the corporate control, together with the strong position in the control and the shelter of limited liability of shareholder, urge the parent company to abuse the corporate control, through means like unfair affiliated transaction, ignoring the independent personality of the subsidiary company, and violating the interests of the subsidiary company and its creditors. Facing this conflict of interests, Company Law of the People's Republic of China is clearly lack of protection of creditors. Through analysis and evaluation of relevant overseas specialized regulations protecting the company creditor and laws adjusting the parent and subsidiary company relationship, this thesis brings forward corresponding recommendations on the basis of the actual situation in our country.In this paper, comparative study method and standardized analytical method are adopted with a view to promote the development of relevant theories and practices concerning Company Law of the People's Republic of China. The thesis is divided into four chapters.Beginning with the general theory of corporate control, through the study on the connotation, classification of corporate control and control configuration structures under different option modes, Chapter One points out that the ownership and execution of corporation control by large shareholder has common meaning for the company practice in China. And due to the further development of company group with the parent and subsidiary company as the core in our country, the discussion on corporate control is of more practical significance on the respect control of large shareholder (parent company) on company (subsidiary company). The paper then gives a detailed analysis of the parent corporate control under the mode of parent and subsidiary company. After accepting the value of the parent corporate control, the author points out that the abuse of control has severely harmed the interest of the subsidiary company, the other subsidiary company shareholders and the subsidiary company creditors, which has become the cause of negative effects of corporate control. Chapter Two focuses on the analysis of the conflict between control abuse of the parent company and the creditors of the subsidiary company. Through analysis of the character of the parent and subsidiary company, together with the insistence of limited liability of shareholders at the parent and subsidiary company, it is almost inevitable for the parent company to abuse its control. In practice, the parent company, through unfair affiliated transactions, such as affiliated guarantee, interest transmission and illegal lending between the parent and subsidiary company to transfer and occupy the property of the subsidiary company, harming the interests of the subsidiary company and its creditors. Therefore, this thesis points out that the subsidiary company creditors are faced with greater difficulties than ordinary company creditors. They should be not only passive at the legal protection like ordinary company creditors, but also active at improper control of the parent company supported by limited liability. Thus, it is more urgent for the subsidiary company creditors to obtain legal protection.From the perspective of comparative method, Chapter Three introduces and analyzes overseas laws and regulations and relevant legal practices which protect the subsidiary company creditors. It is pointed out that the piercing the corporation's veil, Deep-Rock Doctrine, and Substantive consolidation Doctrine in the Anglo-American law, the de facto Directorship Notions in the French Bankruptcy Law and regulations on factual affiliated companies in Germany law all protect the subsidiary company creditors through the bearing of legal responsibility of the parent company over the subsidiary company creditors. The bearing of responsibility is conditional, which is based on the abuse of the control by the parent company over the subsidiary company through certain means.Chapter Four deals with the suggestions on the legislation consideration and perfection of the legal protection of the subsidiary company creditors under the mode of parent and subsidiary company in China. This chapter points out that the regulations on disregard of corporate personality in Company Law provide legal basis for the interest protection of the subsidiary company creditors. However, because the legislative provision is over principled, in this paper, in terms of applicable status and conditions of substantive law, the author puts forward improvement recommendations on procedures such as jurisdiction court, parties, and Burden of proof and judgment effectiveness; at the same time, the author believes that protection of the subsidiary company creditors in advance is essential. Through standardizing the affiliated transactions, such as the timely disclosure of the affiliated transaction reports, the strict application of approval of affiliated resolutions, exclusion system of voting rights of controlling shareholders, and the prohibition of cross-shareholding between the parent and subsidiary company, the protection of creditors can be strengthened.