Protection Of Creditor's Rights In Company M&A

Merger and acquisition (M&A) can achieve concentration of capital and enterprise-scale expansion, accelerate the development of enterprises, promote the optimal allocation of resources, optimize and upgrade industrial structure, improve business efficiency .Based on this, as the necessary form of capital concentration and enhancing enterprises' competitiveness. M&A has one hundreds years experiences and several times climaxes for western countries, and its system has been greatly improved. However, It was introduced in China late, with the development of market economy and with the gradual deepen of the reform, M&A is developed very quickly in China.As the M&A system in China started late. Therefore, the legal norms of company M&A system are not perfect, the lack of a complete set of effective legal system, or even the existence of legal loopholes or vacuum. In particular, the result of company M&A usually comes out with the variety of management rights and a substantial influence on their business and development .It Involves not only changes the contents of the corporate entity, the company' s property and debt transfers, but also affects the interests of creditors. At present, the mechanism of protection against creditors in our country is not perfect. There are many problems in it .It is a common phenomenon that the interests of creditors are violated. However, it is difficult for creditors to suit for their rights because the mechanism of protection against creditors is rigid and the rules in our company law are not perfect and fair. Especially in the present time of our country, in the course of company M&A, most creditors are inferior and trampled upon as a result of their own and other reasons outside .Controlling shareholders, directors, and managers often take advantage of their advantageous status and unsymmetrical information to plunder and seriously damage the creditors' interests. Therefore, we must pay special attention to the interests of the creditors in the M&A. we should improve the specific legal systems and the corresponding remedies as soon as possible. Therefore, it is an urgent problem for us that how to improve the existing mechanisms for protection of creditors in corporation M&A and to establish the mechanism that give priority to efficiency and do not ignore the unfair.From the current domestic situation of the research in this field, the present law only can supply very limited protection and redress. This does not mean the issue is not important, which is not worthy to be paid too much attention in theory and in practice. On the contrary, if the problem is not solved, it will violate the original intention of the development of corporate system, and it will set heavy shackles for the companies to expand operations and to pursue efficiency goals. It is not helpful for companies to play a greater future potential even in today's age. In addition, from the creditor's point of view, whether this system is perfect or not is directly related to the interests of creditors and the confidence of investors in the company's investment. It also related to the company's ability to be more worthy of trust and creditors' support. In my view, the reason why few studies on this issue is that it may be too specific .The protection of the interests of creditors need to penetrate into the blood of the M&A, which requires implantation of the dynamic process of the M&A, Involving every aspect of each system. I launch my discussing major in five parts as followed:The first chapter is divided into two parts: From the beginning, i discuss the concept and the characteristics of the M&A, and then I discuss the modes of the M&A. The first question is begun with the concept of the corporation M&A. The author believes that it often still reflects consultation between the parties. It realizes a leap in the size of the company in the peaceful means without war, which is an agreement between both sides. The author analyzes the legal nature of the M&A, and reviews the two theories of the major nature of the M&A. The author believes that there is no essential difference between the two, but it is only from different angles we evaluate the nature of the M&A.Chapter two is divided into two major problems:The first one: the author discusses the reasons and principles in protecting the interests of the creditors in the M&A. The author believes that it is justified that the companies expand their operations and maximize their profits. The design of the limited liability system is not unscientific and irrational. However, with the legal justice and values measured, the companies can not disregard the interests of creditors when it pursues its own benefit. The law can not absolutely allow the expense of fairness to efficiency. In addition, from the point of view in practice,without going through the dissolution, liquidation procedures in the M&A. And the M&A affects the companies' solvency and credit. Thus, the protection of the interests of creditors becomes more urgent and necessary. The second issue the author analyzes the two principles in protecting the interests of the creditors in corporation M&A: the principle of appropriate protection and the principle of equal protection of creditors. Although the company M&A relates to the protection of creditor interests and fair idea of the law. However, examining the nature of the M&A, in author's opinion, it is only a probability, not the same as necessary for the weakening of the companies to pay off their debts.Chapter three: The author analyzes the scopes and means of protecting creditors in company M&A. Firstly, there are two attitudes on the scopes. One is a small number of states regulations, as the representative of the Germany. It provides creditor protection program only applies to the eliminated companies. Another approach adopted by most countries, including China, that is, it applies to both eliminated companies and also applies to the surviving corporations in protection of creditors. The author analyzes these attitudes. Secondly, the author discusses the means to protect interests of the creditors (advanced prevention and relief afterwards). That these two approaches both have advantages and disadvantages, it is difficult to distinguish between good or bad. In reality, countries are fully aware of their shortcomings and deficiencies in these two approaches, in order to avoid disadvantages and obtain their respective merits, both approaches become more integrated.Chapter four: The author focuses on the rules to protect the interests of creditors made in other countries and in Taiwan Province of PRC. The author compares their practices in order to improve the system in China. The author focuses on the following issues. The procedural requirements in protecting the interests of the creditors in the M&A (such as inform, objection), self-relief of the creditors, excluding the application of limited liability shareholders etc.Chapter five: the author evaluates the system of protecting creditors in company M&A in our country, i put forward a number of well-made concrete proposals on the basis of advanced practices in other countries and in Taiwan Province of PRC.