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On Creditor Protection Upon Abuses Of Discretion Of Capital Contribution Period By Shareholders

Posted on:2016-11-20Degree:MasterType:Thesis
Country:ChinaCandidate:Y JiangFull Text:PDF
GTID:2296330503951071Subject:Law
Abstract/Summary:PDF Full Text Request
As the protection of company’s creditors has been one of most important topics in company law, it apparently will prejudice the ground of company law system if we disregard this protection. And the recent reform of company capital system brings out new content to this topic.In order of capital adequacy and creditor protection, the Company Law enacted in 2005 stipulates 2-year or 5-year of time limit for shareholder’s capital contribution. However, with the global trend of relaxing capital control, the Company Law enacted in 2013 removed this time limit, allowing shareholders in a limited liability company, a one-person limited liability company or a joint stock limited company founded on promotion, to set the period of capital contribution at their own discretion. On one hand, this change is in line with social and economic development and fuels investment enthusiasm; on the other hand, it probably will be abused by shareholders to escape their capital contribution obligation. In this circumstance, how should a company’s creditor get legal remedy? How to build related systems to protect creditors’ rights and interests? This is not only the issue that shall be addressed in both theory and practice, but also the question that this essay tries to answer.This essay consists of three parts.The first part raises the question. It describes the company capital system reforms in the major economies world widely and the major changes in 2013 China Company Law under this global trend, indicating the company capital system reform brings out impact on the protection of company’s creditors which leads to the hot discussion of the question that under the subscription capital system, how should we prevent shareholders from abusing capital contribution period to evade their capital contribution obligation? How should a company’s creditor get legal remedy in face of the shareholder abusing activities? How to build related systems to protect creditors’ rights and interests?The second part is the analysis of this raised issue. It summarizes the three major situations of shareholder abusing its discretion of capital contribution period, i.e. set the too long period, revise to prolong the period and not set the period, and further analyze under these three circumstances, the possible remedy paths the company’s creditor could approach under the existing legal framework. Based on the comparison, it points out that among these remedy paths, it is the most effective way for creditors to apply Clause 13.2 of Judicial Interpretation III of Company Law with a direct request of the relative shareholder’s compensation liability. However, it is controversial on whether this clause could be directly applied to the above abusing situations.For this question at issue, it analyzes the existing two major academic viewpoints and points out that both points of view have their own deficiencies which require some adjustments.The third part provides the solution to the issue. Considering the current possible remedy paths have their own limits and are unable to provide efficient and direct protection to creditors, based on the theoretical base of Clause 13.2 of Judicial Interpretation III, it recommends to build a direct remedy path for company’s creditors, entitling them to request the shareholder who abuses the discretion of capital contribution period to be liable for compensation directly.Regarding this proposed system, it elaborates on its five use conditions and the potential influence and effect among company, company’s creditor and shareholder and also describes how this system helps creditor to get legal remedy under the above three major shareholder abusing situations. In brief, this system could provide creditors with direct and effective protection in case of shareholder abusing situations, which makes up for the loopholes of the current company law and addresses the problems we encounter in practice.
Keywords/Search Tags:company creditors’ protection, capital subscription reform, contribution period, the theory of third party infringing creditor’s rights
PDF Full Text Request
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