Legal Regulation Of The Parent-subsidiary Relationship

This paper is divided into four sections. For the first section, it argues from parent-subsidiarycorporation relations of corporation law, especially rights protection of subsidiary. The paper firstdraws a definition of parent-subsidiary corporation, which, in comparison with the basic conceptof foreign parent-subsidiary corportaion, shapes three forms of parent-subsidiary corporation andthe way of formation of the parent company’s controlling power. Section two discusses theproblem of abuse of parent company’s controlling power, which leads to the damage ofindependent personality of subsidiary and gaining its interest by using illegal trading relations.And then, a brief analysis is given by introducing the poor implementation of current legislation ofabuse of parent company’s controlling power in legislative regulation. With the method of thecomparatvie law, the third section reviews domestic legislations and relevant legislations abroad,argues successful experiences of transplantation of law. The last section, in order to completing theregulation of praent-subsidiary relationship, spreads out discussion mainly from abuse of parentcompany’s controlling power in legislative regulation ranging from the optimum set-up ofshareholders meeting and board of directors to a further clarification about the fiduciary duty ofcontrolling shareholders, and ranging from regulation of parent-subsidiary corporation’s tradingrelations to improvement of the corporation personality denying system.The theoretic significance of this paper consists in not only its analysis about the link ofparent-subsidiary corporation relations and its inequality but its analysis about the loss ofsubsidiary and its creditors caused by abuse of parent company’s controlling power. The paperalso construes its poor implementation of domestic laws and regulations of abuse of parentcompany’s controlling power. Therefore, on the basis of foreign experiences, this paper offerslegal principles theory and practical suggestions to further optimize its regulation ofparent-subsidiary corporation’s legal relations.