The Definition Of Corporate Division

Although corporate division has been provided in Corporate Law in 1993, it is still difficult to reach a consensus about applying the division provision among researchers and judges. There are points of similarity between division, investment, and the sale of assets. To distinguish those transactions, Corporate Law provided different resolution procedures. However, creditors can not exert influence on resolution procedures. It is common that creditors ask the court to restructure the transaction.In order to remedy the procedure criterion, scholars equal division as shareholder level division, through which the corporation transfers its assets and liabilities and the shareholder his or her shares. Thus, the scope of division does not contain the in rem division, division by acquisition.Corporate division shall play a bigger role in business transaction, because the protection mechanism provided by corporate law contributes to reach agreements among stakeholders. The premise behind corporate law is facilitating the reorganization of corporation. Consequently, corporate law provides total succession, appraisal rights for the dissenters and the solidary liability for the creditors.Businessmen, taking business plan into consideration, shape the deal structure, which shall be respected by the courts until it did harm the minority shareholders and the creditors. In that case, the courts shall restructure the deal through judge’s discretion to protect the plaintiff. The fundamental difference among division, investment, the sale of assets is the mechanism provided by the law through which the courts reduce oreliminate the negative externality produced by the transaction. Researchers make great efforts to define the concept of division, who believe that the concept delimits the scope of applying division and thus aids in distinguishing between division and other disposal behaviors. Their successes due to limit the division to the shareholder level division. However, business transaction could not be subject to this view. That is, the division provision is used to entire different transaction, and businessmen also reach the end of division via investing, selling and repurchasing shares.Balance of interest is the basic spirit in modern judiciary. Therefore, where the defendant chooses other disposal mode to reach the end of division, the courts shall protect the stakeholders, who otherwise would automatically get the safeguard of division provision, via restructuring the disputed transaction as division.