Research On The Deep Rock Doctrine And Reference To China

The development of large-scale social production contributed to the rapid development of corporate groups. And the development of corporate groups led to the frequent occurrence of affiliated transactions. The parents-subsidiary companies are the main body of corporate groups. As the parties of transactions are related, the transactions between parent companies and subsidiary are tend to be unfair. As a result, the interests of external creditors are hard to safeguard. “The deep rock doctrine”, originated from a judicial precedent in America, provides a reference for the protection of corporate creditors’ interests. Different from the system of disregard of corporate personality, the deep rock doctrine does not deny the personality of corporations and the limited liability of shareholders. The rule of the doctrine, which is relatively modest, is to discharge the parent corporations’ interests as a creditor subordinately in certain circumstance. The Supreme People’s Court has made attempt to the introduction of the deep rock doctrine in 2003. Unfortunately, the deep rock doctrine has not been provided in the official rules. In March 31, 2015, The Supreme People’s Court quoted the deep rock doctrine in the typical case released. It indicates that the Supreme People’s Court holds a positive attitude to the introduction of deep rock doctrine. With the further improvement of the market in our country and the development of the socialist concept of rule of law, we have the conditions to introduce the doctrine to our country. This paper is divided into four chapters for the discussion of the doctrine.As for the first chapter, it analyses the tendency of unfairness in the affiliated transactions and the violation of creditors’ interests currently. The tendency of unfairness in the affiliated transactions is determined by the particularity of the parties in the transactions. In the Parent-subsidiary corporations transaction, the parent corporation is tend to intervene the management of subsidiary and transfer the assets and profits to obtain improper benefits. Meanwhile, the continued expansion of transactions between parent corporation and subsidiary may lead to huge debt. Once the parent corporation goes bankrupt, the subsidiary is likely to go broke with financing ruptures. According to the current legal system, the parent corporation and external creditors will get equal repayment. The form of equality is contrary to the principle of fairness and justice in case of parent corporation’s misconduct.Chapter2 is about the origin of the deep rock doctrine and the value of the principle. Deep rock doctrine, originated in America, deepens the principle of equal rights. The application and legal effect of the doctrine are not entirely consistent with the system of disregard of corporate personality which is already introduced to China. The deep rock doctrine makes the interests of parent corporation as a creditor inferior to the other creditors on the premise of recognition of parent corporation’s claims. The two kind of legal system could complement each other, being the weapons for the protection of creditors’ interests.Chapter3 focuses on the application of the deep rock doctrine in 3 aspects. As for the object of the doctrine, the creditors are divided into voluntary creditors and non-voluntary creditors to facilitate the discussion. As for the conduct requirements, the rules of America provides a good example. As for the last one, the result requirements, will be discoursed by the purpose of the doctrine.Chapter4, offering proposals to introduce the deep rock doctrine, is the core of the whole article. The introduction of the doctrine will be analyzed in 2 aspects, the substantive law and the procedural law. As the improvement of the economy and the accelerate process of building a socialist country under the rule of law, it is time to introduce the deep rock doctrine to China.