Research On The Applying Of Equitable Subordination Doctrine Of Credit Of Bankrupt

The ultimate goal in the distribution of bankruptcy is considering the interest of each creditor.Only in this way can each creditor obtain the equal protection to avoid the imbalance of their interest. This is the value of the sequence in the distribution of bankruptcy. Especially when the corporation is in a state of insolvency, the property of the corporation can not meet the need of all of its creditors. The bankruptcy distribution as the final gate for each party to achieve their interest can play an important role in maintaining the balance of interest of the various parties. It also can ensure the security of social transactions; maintain the credit system and economic order. So in this stage our law should pay more attention to the equal protection of the interest of each creditor.While the corporation law is not opposed to the actual controllers, directors, senior management as the company’s creditors, but they have the natural advantage on the control of subordinate company and acquiring the information of the subordinate company, so in fact these insiders can get better position than other creditors of the subordinate companies. As a result these insiders enjoy more advantage in the realization of their rights of subordinate company. In the distribution of bankruptcy of the subordinate company, these insiders can get equal repayment in proportion with other ordinary creditors. But this distribution may infringe upon the interests of other creditors in the distribution of bankruptcy. So it is unfair to other creditors and is contrary to the legislative value of substantive justice in the distribution of bankruptcy. The equitable subordination doctrine of credit is used to adjust the imbalanced interests and compensate for the loss. In order to ensure that all creditors can get substantial equitable distribution in the course of bankruptcy, this doctrine request the right of shareholders for their loan to the subordinate company and the right that generated form improper conduct receive payment after the other creditors. In this way the law can balance the interests of all creditors in order and make sure the fair and reasonable distribution of the bankrupt property. The goal of this rule is minimizing the adverse effects of bankrupt enterprise for the creditors.In this paper, except the introduction and conclusion, the text is divided into four parts:In the first part, the author analysis the drawbacks that allow the controlling shareholders to get the bankrupt property with other creditors at the same time. This part shows that the plight of the treatment of credit in bankruptcy distribution needs to be addressed in my country. In the second part, the author summary our corporate law, bankruptcy law, contract law and tort law on the protection of creditors. After that, the author affirm the value of general protection system provided by corporate law, praise the significance of the bankruptcy revocation system and bankruptcy invalid system, recognize the meaning of the protection of contract and relief of tort. Because these system can not fully protect the interests of creditors. So we need to learn from overseas practices to build equitable subordination doctrine of credit in the distribution of the bankrupt in our country to protect the creditor’s rights. In the third part, equitable subordination doctrine of credit is divided into two kinds. One is the rule of the credit that generated form shareholders’ loans. The other is the rule of the credit that generated form improper conduct. The author explains the rules of the substitution of capital for shareholders’ loans before and after the German Corporation Law Reform. The author also discusses equitable subordination rules of credit of misconduct in the United States and Taiwan. Then the applicable rules and legal effect of these rules are also interpreted. The author believes the unique value on the protection of the interests of creditors in the distribution of bankruptcy. So our legislation should learn from them. In the forth part, the author explains the construction of the equitable subordination doctrine in our country. Then the author discussed the rule of the substitution of capital for shareholders’ loans and the rule of misconduct to build the equitable subordination doctrine of our country in detail. In addition, we also need improve the system on affiliated companies in corporation law and other related system in bankruptcy law. Only in this way can the equitable subordination doctrine play better effect.