On System Construction Of "Deep Rock Doctrine" In People’s Republic Of China Company Law

Economic globalization has greatly contributed to the company’s development and changes of the form, which makes company develop from the traditional single company form to associated companies or group company form, and seep into all areas of social life. In China, the rise and development of the parent company, group company, associated companies and other forms of enterprise, is a response to the trend of capital flow and economic globalization, which is of great significance to reform and development of the China’s company as well as capital appreciation and social development. However, though it has brought great benefits to society, the negative impacts are becoming more and more prominent. Controlling company makes use of their control over subsidiary company, then engages in improper conduct by capital, personnel, information superiority and operational decision-making, so as to gain improper benefits, which harms the interests of subordinate company and its creditors. Thus, this triggers a series of problems:when the subordinate company goes bust, does controlling company enjoy equal legal status with other creditors, joint distribution of property of bankrupt companies? How to distribute? This paper attempts to draw on United States law on the "Deep rock doctrine" theory, as well as its experience in dealing with related trade dispute cases, so as to better cope with new forms of operation and governance of the company. It primarily discusses specific system construction in Chinese laws, and puts forward legislative suggestions, in order to strengthen the benefit protection of creditors and debtors in related transactions, group company transactions. This paper makes an analysis from five parts.Part1, the problem, that is the main problem of this paper:when subsidiary company subordinate to group company goes bankruptcy, how to deal with the liquidation order of creditors’ rights of controlling company and other creditors’rights of subsidiary company. Then it gives an overview about the emergence and origin of the "Deep Rock Doctrine" in U.S. Law. It also discusses the development process of "Deep Rock Principle" from the "complete subordination theory" to "equitable subordination theory."Part2, legal basis of "Deep Stone Principle". First, this part discusses from the following aspects:equity and justice, prohibition of abuse of rights and fiduciary obligations to shareholders, and points out the construction of the "deep rock principle" strengthens the protection of creditors’rights in disputes of related transactions Then it points out the necessity of introducing the "Deep Stone Principle" in People’s Republic of China according to its real state. It analyzes from affiliated companies’plight of the estate distribution, lack of relevant legislations, the deficiency of Disregard of Corporate Personality system and the practice needs of creditor protection, and it points out that construction of "Deep Rock Doctrine" regimes can provide legal evidence for the illegal acts free from the scope of adjustment of "denial of company personality" system.Part3:development of "Deep Rock Doctrine" in other countries (regions). In the Anglo-American law system countries, the United States, as the birthplace of "deep stone principle", it is regulated in the form of statute law. Great Britain made similar provisions in Bankruptcy Law; Civil law countries, such as Germany, Japan and other countries did not directly reflect the regulation of "deep rock principle", but they achieve benefit protection of creditors in other systems such as "capital replacement" or "statutory subprime".Part4:Comparative analysis between the "Deep Rock Doctrine" and the existing legal system in China. Through the comparative study of "Disregard of Corporate Personality" system and "Debt law protection" system, this part points out the deficiencies of "Disregard of Corporate Personality system","Subrogation and Right of Revocation" and "cancellation right" in terms of System itself, applicable conditions, scope and the burden of proof.Part5:legislative construction and institutional design of the "Deep Rock Doctrine" in China. Firstly, it constructs the concrete elements of "Deep Rock Doctrine" in China from behavior, subjective elements, cause and result elements and results elements. Secondly, rebuild the scope of application which extended to transactions between cross-shareholdings companies or individual shareholders. At last, it discusses how to coordinate and handle the conflict between the "Deep Rock Doctrine" and existing legal system. And combine the "Deep Rock Doctrine" with People’s Republic of China Company Law, Contract Law of People’s Republic of China and People’s Republic of China Bankruptcy Law effectively. Thus construct the "Deep Rock Principle" that are suitable for Chinese legal system, and make the "Deep Rock Doctrine" play a better role on the protection of the interests of creditors.