Theory Of Associated Enterprise Bankruptcy Protection For The Benefit Of Creditors

A new industry is formed with the development of economic globalization:affiliated enterprise, which can promote allocation optimization of resources to improve the competitive power of companies, bringing the enterprise unequaled profits that a single corporation can hardly get. However, everything has pros and cons. Despite the operation advantage affiliated enterprises has, its unique controllability brings about a series of negative effects. E.g. in order to obtain group interest or its own, controlling company use the power it has to commit crimes like the flight of capital contribution after setting up the subsidiary corporation, interference in its independent operation, unjust business with the corporation, the illegal transfer of the intra asset, damaging the interest of the subsidiary company as well as the creditors'Though there exist relative business legal norms like Company Law and Bankruptcy Law in China, there is little regulations about affiliated enterprises, let alone the related judicial interpretation. Separate corporate personality and limited liability of shareholders in the Company Law together with the fair and justice in the concept of Bankruptcy Law are challenged by the unique controllability as well as injuries to creditors'interest through the abuse of the control power.This article will elaborate the creditor protection when the enterprise goes bankruptcy from the following four parts:The first part will analyze the creditor's rights in the affiliated enterprise from the aspects of its capital system, dealing confusion, personnel control and related-party guarantee. The illegal measures and their damage to the creditor will be discussed and summarized.Part two is the analysis of the existing legislation on affiliated enterprise in the two law systems. Taking the example of American Law from Anglo-American law system and the German Law, Taiwan Law from the continental legal system, this chapter focuses on the comparative analysis of the principle of piercing the corporate veil, deep-rock doctrine and substantive consolidation doctrine from the first law system and compensation principle, the control company under certain circumstances and specific responsibilities of persons responsible from the latter one.Part three discusses the deficiency of the existing legislation on affiliated enterprise. It points out the problems of creditor protection in the bankruptcy of the enterprise and the necessity to protect the outsider creditor in the process. Suggestions are made to guarantee the legal advantage of the creditor.The fourth part gives a general idea of how to link the foreign legislation and domestic one. This chapter supplies an overview on how to apply the laws imported from abroad, application conditions as well as burden of proof, proposing some advices.