The Research On Substantive Consolidation Of Shell Companies

The promotion of modern enterprise system and the development of capital market have made the enterprise form-affiliated company- an important economic phenomenon in the reality. Although affiliated company is an independent subject in law, it has countless ties with other companies in question. If the economic ties went tight to a degree, the positon of independent subject would be shaken and a series of legal issues would be induced. For recent years, especially, the phenomenon of one holding company taking control of several shell companies has aroused much legal conflicts in the bankruptcy law field. Under our present bankruptcy system, with the protection of legal person system and limited liability for the company, the holding company takes control of or exerts significant influence to the shell companies, it even capitalizes on the shell companies as tools to realize its illegal goal. However, it’s difficult to make the holding company take liability for the aggrieved shell companies and its creditors which inevitably cause the unfair distribution of liabilities and give the “controller behind the backdrop” a way out. Therefore, when the shell companies which have special ties with the holding company go bankrupt, it is important to apply the principle of combined bankruptcy liquidation in order to protect the interests of the creditors and maintain the safety and order of the market. The thesis aims to explore the application of combined bankruptcy liquidation in the bankruptcy practice and to offer legal advices to perfect and regulate the bankruptcy of affiliated enterprise.There are mainly four parts in the thesis: In the first part, there are brief introduction of the bankruptcy case of Han Tang Stock and 46 shell companies and the summary of the main conflicts. Based on the conflicts,the second part explores the main ways for shell companies to take liability as well as their existing problems. It also analyses the legitimacy and necessity of adopting principle of combined bankruptcy liquidity. From the perspective of overseas and domestic judicial practice, the third part makes an analysis around the case as to whether it confirms to the applicable condition of the combined bankruptcy liquidity principle, the process requirements for application and legal validity etc. For the fourth part, the thesis points out the shortcomings of the present legal system based on the above analysis on the case. At the same time,it also try to give advices for the perfection of regulating shell companies in their bankruptcy liquidity based on the present legal deficiencies.