To Discuss Corporate Liquidation Procedure System And Improvement In China

With the rapid economic development and the improvement of market economy in China, the number of registered companies has been growing, and so has been the number of cancelled companies. Especially in recent years, affected by the US subprime crisis and the global economic downturn, more and more companies have exited from the market. Liquidation is the inevitable procedure for a legal exit of a Company, and thus improving the liquidation procedure is particularly important.The concept of liquidation should be clarified before the corporation liquidation procedure is introduced. Corporate liquidation is the sub-concept of liquidation and refers to a way in which a legal liquidation group ends the business activities of a Company that are irrelevant to the liquidation, clears its properties and deals with its credits and debts, allocates the remaining possessions, and concludes various legal relations in which the Company is a party to protect the interests of related parties after causes of dissolution or other legal causes appear. This definition implies that the corporate liquidation procedure is the procedure and step that the legal liquidation group must observe in a liquidation event. During the liquidation process, if the legal liquidation group is not careful or responsible and violates legal regulations, it has to bear the legal liability.Considering the importance of corporate liquidation procedure, in order to protect the legitimate rights and interests of relevant Shareholders with the liquidation procedure, it must follow the principles of procedure ruled by law, procedure publication, procedural justice, efficiency, balance of interests, and procedural participation to protect personal value and social value.Under the conditions of clear value objectives and correct guiding principles, liquidation procedure is segmented and classified by the relationship between Shareholders and Company property. According to the existing laws, regulations and judicial interpretations, liquidation procedure is classified into voluntary liquidation, compulsory liquidation, and bankruptcy liquidation. Voluntary liquidation is the liquidation carried out by the legal liquidation group according to legal requirements without the intervention of public power. Both compulsory liquidation and bankruptcy liquidation procedures are carried out by a liquidation group or bankruptcy administrator under the guidance of the court. In order to better achieve the purpose of liquidation, the law segments these three liquidation procedures and stipulates the connections between them. In practice, these three liquidation procedures work efficiently to protect the legitimate rights and interests of relevant subjects and play an important role in legal exit of companies.Despite the significant role of corporate liquidation procedure, it still has some shortcomings and needs to be improved. Specifically, there are problems as follows. First, the liquidation procedure is not transparent enough. Many of reports in the liquidation process are not open. Secondly, report has not been made public. Secondly, the liquidation period setting is unscientific. There are few regulations on the liquidation period in the liquidation procedure, even for some important steps during the liquidation process. There are problems in the connections between different liquidation procedures. The connections among the three liquidation procedures are prescribed in principles only and need to be further segmented. Moreover, there are no regulations on the supervision over the liquidation procedure. Supervision is the best way to ensure an impartial liquidation; however, the regulations on supervision are not systematic. Finally, there is a problem of liquidation accountability. Responsibility is the last barrier to ensure impartial and fair liquidation. Poor responsibility investigation will lead to risks in the impartiality and fairness of liquidation. With the problems above unsolved, mistakes are doomed in the liquidation process. In order to ensure an impartial and fair liquidation and protect the legitimate interests of relevant Shareholders, the liquidation procedures should be improved. First, the transparency of liquidation procedure should be improved to run the liquidation on the table. Transparency is the best guarantee of an impartial and fair liquidation. Second, the corporate liquidation period should be improved. The definition of a liquidation period can prevent indefinite liquidation. Third, the connection between liquidation procedures should be improved. Well connections among voluntary liquidation, compulsory liquidation and bankruptcy liquidation can improve efficiency and reduce cost of liquidation. Fourth, the supervisory and accountability procedures of liquidation should be improved and the accountability approach should be optimized. Supervisory procedures can ensure that the liquidation is done according to law and is a means to prevent problems. Accountability is also a means of supervision, or post-supervision. Although accountability investigation requires high costs, an improved accountability procedure can ensure efficient and high-quality liquidations.