Study Of Parent-subsidiary Relationship Between Legal Regulation

The occurrence of parents-subsidiary companies is a trend of economic development. Since the middle of last century, the competition of the markets becoming much tenser, for the sake of becoming the winner in the competition, many companies enlarged their scales, and Bloc Company became an inevitable trend. Since the sub-branches are not an independence entity, if the branch have some problems, the main company will bear the burden; on the contrary, the mode of parents-subsidiary is different, the subsidiary company has corporation qualification, if it bankrupt, the parent company is only responsible for the investment, because the subsidiary company is independent from the bloc. So, the parent company not only enlarged it's scale, toned up it's ability of competition, improved the outer environment of management ,but also the subsidiary company can get more capital and business information. Therefore, most of the blocs adapt the mode of parent-subsidiary companies. But the mode of parent-subsidiary companies is a two-edged sword ,with the economic benefit ,the traditional law theory of firm was challenged: first, commonly the parent company have the necessary power of controlling the subsidiary company, but in many case the parent company abused this power, so the subsidiary company lost it's independence and the power of self-management .It is harmful to the interest of subsidiary company and it's few shareholders ; secondly, since the parent company and the subsidiary company are independent from each other ,if the parent company makes the subsidiary company lost it's independence , the subsidiary company will become the tool of the parent company, it is harmful to the creditor; thirdly, if both the parent-subsidiary companies owned the stocks of each others, the harm is obvious, it will make the capital of the company accounted repeatedly, help the inner exchange, makes the company's management lost control. For resolving these questions, we must restrict the power of parent company; protect the benefit of the subsidiary company and its few shareholders also the creditors by legislation.Being gratified, the western countries were responded for this question with a high attitude, making the related regulations, such as: by using the doctrine of enforcing shareholder's duty of being honest and the "derive lawsuit" to protect the subsidiary companyand its few shareholders; by using the doctrine of "Piercing the Corporate Veil'" or "Disregard of the Corporate Entity" to protect the interest of the creditors of subsidiaries; by restricting the stocks' across owning or the already owned stocks' voting right to avoid the bad effect etc.'In our country, the mode of parent-subsidiary companies also has a deep meaning. We are in the primary step of socialism; the development of the economy is just in the beginning, but this mode has already showed us its advantage. For this economic phenomenon, we have a little legislation, such as no. 13: "Companies can set the subsidiary company, the subsidiary company has the corporation qualification, can take on the civil duty independently". This legislation set a regulation for the parent-subsidiary companies in our country, but lack of detailed rules about how to protect the interest of the subsidiary company and its few shareholders, and also can't protect the interest of the creditors.The above mentioned are main content of this thesis, the stress is discussing the legislation for the relationship between parents-subsidiary companies, and also have some suggestions of the related legislation in our country: In the aspect of protecting the interest of the subsidiary company and its few shareholders, we should make more special legislations, such as giving the shareholders the right of suing the parent company, and add the legislation of the dominating shareholder's duty of being honest; introducing the doctrine of "Piercing the Corporate Veil" to protect the interest of the creditors of subsidiaries: Consummating the parents-subsidiary companies" share across holding by the principle of forbidden with exception.