Research On Substantive Consolidation When The Affiliated Enterprise In Bankruptcy

The peculiar organization and management of affiliated enterprise has caused many legal issues. It is particularly acute on the social, economic and legal problems of the bankruptcy field. In an associated enterprise, the actual controller usually makes use of the special internal relationship to move the interests between members. Especially when the enterprise happens to financial risks, this inappropriate behavior is almost commonplace. At this time, making the affiliated enterprise in bankruptcy substantive consolidated may be a good idea to secure the most creditors’interests and improve the efficiency of the bankruptcy procedure in case all of the other remedies, including bankruptcy revocation rights, the bankruptcy invalid system, the system of disregard of corporate personality, the interests compensation from shareholders and so on,can’t correct those wrong behaviors and clarify the relationship of assets and debts between the affiliated enterprises. China has no regulations yet on substantive consolidation of the affiliated enterprise in bankruptcy. The judicial practice is still in the experimental stage of exploration. In view of this reality, this paper discusses a series of legal problems on substantive consolidation of the affiliated enterprise in bankruptcy.In addition to the teaser case and epilogue, the paper is divided into five parts:The first part introduces definition and subject of the substantive consolidation principle, which is the premise of the study. Referring to the Chinese and foreign scholars’understanding, the writer tries to make own definition. Moreover the writer thinks that it is not suitable to make too many restrictions on the subject, whether partnership enterprise or individual proprietorship enterprise or other economic organizations should be reserved the available space to allow them apply the substantive consolidation principle. The second part discussed the premise applied the substantive consolidation principle. On the basis of the study of the American bankruptcy practice and the UN’s legislative guidelines, the writer states some influencing factors from the level of theory and practice, and then summarizes two basic types of the affiliated enterprise’s substantive consolidation:"the type difficult to distinguish mix property" and "the type hard to correct the improper benefit-transfer behavior"The third part discussed the applied range of the substantive consolidation principle. After studying the opposite opinions of "universal application" and "exceptional application" in the U. S. judicial circle, the writer explicit that the substantive consolidation principle in China should abide by exceptional application.The fourth part discussed the start pattern of the substantive consolidation principle. According to the summary of existing’s cases, the writer sums up three patterns:the consolidation by the shareholders’ agreement; the consolidation by the decision of the court; the consolidation by the vote of the creditors’meeting.