On The Balance Of Legal Interests Between The Parent And Subsidiary Companies,

Ever since the 1960s, the enterprise group has become an irresistible economic trend. Owing to its unique advantages such as low-cost, low-risk and high-profit, parent and subsidiary company has won worldwide recognition and appreciation. Under these circumstances, many companies establish subsidiaries or even sub-branches for the sake of economic profit and they in turn develop into large-scale enterprise group.Parent and subsidiary company once promoted the development of social economy to a great extent, but they have brought great challenges to the traditional legal policies of company. Traditionally, company polices pay respect to independence and limited liability of a company and they strike a balance of right and interest among shareholders and between shareholders and creditors. Without being independent, the balance mechanism of interest is broken. Yearning for getting the most profit while paying the least cost ,parent company may malpractice its manage power over its subsidiaries which may ultimately impair the interests of both the shareholders of the subsidiary and its creditors. For equity and justice, those problems call for the development of the traditional legal policies of company, reconstruct the balance. Thus, the system of disregard of corporate personality appears. As the supplement of the independence and limited liability of a company, the system of disregard of corporate personality is a one kind of legal measure which on concrete legal relationship in specific fact, denies the company and its shareholder respectively independent personality and shareholder's limited liability and orders the shareholders (including natural person shareholder and parent companies) to responsible directly to the company creditors or the public interest. The system of disregard of corporate personality has become a principle that has been accepted by Anglo-American Law system and Civil Law system and it has played positive role in the protection subsidiary company and the related benefit aspect.Considering various doctrines of different countries and applying accounting's principles and ways, taking controlled as the master line altogether divides four parts to analyze question: The first part limited the parent and subsidiary company concept to regulate the parent and subsidiary company question for the law to provide most basic basis. The second part has mainly analyzed parent company's excessive controlling behavior and harms. The third part has mainly analyzed apply the system of disregard of corporate personality to solve the excessive controlling behavior's necessity and feasibility, and analyzed how to solve the parent company's excessive controlling behavior by the system of disregard of corporate personality. Finally this article aims at primary coverage, in profits from other national advanced experience in the foundation, and propose suggested in clarification about the legislation meaning of parent and subsidiary company , perfection the system of disregard of corporate personality and the strength of the connection report and group accountants settles accounts .