Associated Enterprise Bankruptcy Law Issues Discussed

Along with the development trend of economic integration in today's world,not only the relationships among the enterprises of the same country are becoming more and more closed,but the enterprises from different countries are also accelerating the pace of cooperation.In order to reduce operating costs,resist business risks and pursue more great economies of scale,the enterprises consciously and constantly expanding its production scale and industrial chain in various fields,as a result of which the affiliated enterprises came into being.There is on doubt on the economic benefits brought by the affiliated enterprises.However,"the legitimacy of the enterprises in law is far from being as simple and natural as the reasonableness of the enterprises in economy." The independence of the each affiliated enterprise may be harmed and the rules on tax,finance, accounting,enterprises administration,bankruptcy may be challenged when the intricate economic relationships among the affiliated enterprises in such as funds,personnel,management,contracts and so on development to a certain extend.The legal issues arising out of the bankruptcy of an affiliated enterprise may be different from the legal issues arising from the bankruptcy of an individual enterprise.The bankruptcy of an affiliated enterprise may be treated the same as the bankruptcy of an individual enterprise provided that the trade between affiliated enterprises is conducted in accordance with the rules of market economy and the principle of fairness.If not so,the illegal issues of the bankruptcy of an affiliated enterprise addressed in this Article will occur,and the rights and interests of the small shareholders or creditors of the affiliated enterprise may be harmed,as result of which it is necessary to consider to process the bankruptcy liquidation of an affiliated enterprise according to the rules that are different from the rules for the bankruptcy liquidation of an individual enterprise,to achieve the true fairness of the procedures of bankruptcy. The controlling company can be easy to designedly transfer and distribute the interests among the affiliated enterprises since it in control of or have significant impact on the subordinate company,which results in the affiliated company being easier to involve in the false bankruptcy, bankruptcy fraud,and other illegal activities,as a result of which the interests of the creditors and small shareholders are subject to damage.The rules that are applicable to the bankruptcy of affiliated enterprise are absent in the current legal system of China.In the judicial practice,the rules for the bankruptcy of an individual enterprise are applied to the bankruptcy of an affiliated enterprise,which has significant limitations.Therefore,this Article firstly clarifies the concept and characteristics of affiliated enterprise,and then put forward the opinions on how to perfect the regulatory rules on the bankruptcy of an affiliated enterprise based on the special situations of China,through analyzing the limitation of the current legal system of China in the regulating the bankruptcy of an affiliated enterprise and studying and adopting the foreign rules for bankruptcy of an affiliated enterprise.The arrangement of this Article is as follows:Chapter One - Affiliated Enterprise and Illegal Issues out of the Bankruptcy of an Affiliated Enterprise.In this Chapter,the author analyzes the concept and characteristics of affiliated enterprise,and then expatiates on the imperilment and legal problems brought by the illegal activities out of the bankruptcy of an affiliated enterprise. Chapter Two - The Solutions for the Illegal Issues out of the Bankruptcy of an Affiliated Enterprise under the Current Legal System.In this Chapter,the author studies on the regulation on the illegal activities out of bankruptcy by the present laws of China based on the absence of the special legislation for the bankruptcy of an affiliated enterprise.Chapter Three - Study and adopt the Foreign Legal System on Bankruptcy of Affiliated Enterprise.The author introduces the legal systems of bankruptcy in common law system,Germany,and Taiwan,including the principle of piercing the corporate veil,deep-rock doctrine,the definition of substantial consolidation and obligations of controlling shareholder,etc.in this Chapter.Chapter Four - The Establishment and Perfection of China's Regulatory Rules for the Illegal Activities out of Affiliated Enterprise.In this Chapter,the author brings forward the opinions on the establishing and perfecting the China's regulatory rules for the illegal activities out of the bankruptcy of an affiliated enterprise,such as perfecting the current legal system through making judicial interpretation, establishing the preventing-processing-regulating system from the long-term consideration,and cracking down on the illegal activities out of bankruptcy.