Participation Of Creditors In Corporate Governance, Legal Issues

An outstanding problem that the interests of company creditors can't be protected effectively appears in China's corporation system. This paper will do some researches on jurisprudential problems of company creditors'participation in corporate governance, based on interest protection of these creditors. This paper figures that corporate governance should be an organization and function institution of rights and obligations between shareholders and stakeholders, which aims at benefit balance among interest individuals. Corporate social responsibility theory, corporate contract theory, economy democracy theory, enterprise body theory, firm finance theory and enterprise state-contingent ownership theory provide theoretic basis for company creditors'participation in corporate governance and indicate this participation's essential significance that is control company creditors'investment risks in order to balance the benefits between company creditors'and shareholders. The investment risks of company creditors result from shareholders'limited liabilities and insiders'control. There are two methods to control this kind of risk and protect creditors: the 1st one is commonly protection from Corporate Law; the 2nd one is contractual protection for company creditors from Civil Law, but under most circumstances these two means can't protect creditors effectively because company creditors can not be able to attach themselves to the risk headstreams and shareholders'limited liabilities result in obstacles. Therefore, to protect the benefits of creditors need to enact company creditors to participate in corporate governance. There are two present modes of company creditors'participation in corporate governance all over the world: direct participation and indirect participation. The 1st one is that company creditors can participate in enterprises'operation or vote on company's decision-making; the 2nd one is that to allow creditors to exert specific rights and deploy company power-balance mechanism and power-supervision mechanism by establishing specific system to reach the interest-balance purpose of corporate governance. For direct participation mode, this paper introduces and appraises the means by which banks in other countries and company debenture holders participate in corporate governance and company creditors'position and authority of office during the course of enterprise-reorganization,special liquidation and bankruptcy; as far as indirect participation mode, this paper introduces and appraises the legislative status of other countries'disregard of corporate personality and directors'liabilities to creditor, which embodies the interior meaning of corporate governance. It is obvious that there are defaults in China's institutions of company creditors'participation in corporate governance. It is necessary to enact this kind of institutions that we should assimilate the advantages of other countries'legislations on the principle of "efficiency comes first, balance equity"and "the unification of the duty, the right and the profits", and establish the paths through which creditors can participate in corporate governance under different circumstances. Meanwhile, it is necessary to constitute and ameliorate the indirect participation mode of corporate personality disregard system and directors'liabilities to creditor system, in order to protect company creditors'legal rights and interests.