An Analysis Of The Substantive Consolidation Bankruptcy Of Minfa Securities

Substantive Consolidation Bankruptcy Doctrine of affiliated enterprises can help improve the efficiency of bankruptcy, simplify insolvency proceedings, reduce bankruptcy costs, and protect the interests of creditors of the debtor. Because of those benefits, Substantive Consolidation Bankruptcy Doctrine of affiliated enterprises has been adopted more and more in judicial practice. However, the Substantive Consolidation Bankruptcy Doctrine belonging to exotic insolvency rules, and there is no formal legal norm recognizing it, so its judgment criteria and operating rules varies from court to court. This paper take Min issuing securities substantive consolidation Bankruptcy as a classic example, based on the bankruptcy operational processes, discussed the operation rules of the substantive consolidation bankruptcy insolvency proceedings from the perspective of manager's operating norms.This paper is divided into four parts, as follows:The first part presents the case profile and the focuses of the issue. The case profile are composed by a brief introduction of the case, the facts that the court recognized and the reason for bankruptcy of substantive consolidation being applied, and the specific process of the liquidation cases for Min issuing securities.Based on those, two focuses of the issue are concluded, the applicable conditions and the operating norms of combined bankruptcy rules.The second part illustrated the applicable conditions. Even though Substantive Consolidation Bankruptcy Doctrine has no complete system framework, there are two theories for it, they are Disregard of Corporate Personality and Fiduciary Duty of Shareholders. Disregard of corporate personality is the last resort and should be treated prudently, so only when the following conditions are covered, the rules of combined bankruptcy can be applied. These conditions includes: first, related party abusing related relationship; second, the personality of company are mixed too much to separate with related company; third, each company is unable to pay his debts with all his property. By analyzing the case based on these conditions, this paper concludes that the Substantive Consolidation Bankruptcy Doctrine is rightful to be applied to the case.The third part illustrated the operating norms of the Substantive Consolidation Bankruptcy Doctrine. As a development to normal bankruptcy, combined bankruptcy has its specificity. From normal proceeding of bankruptcy, the proceeding of combined bankruptcy is different in the following aspects: Firstly, the initiation proceeding, which are closely associated with the subject of applying, the conditions of applying and the court which having the right of competency; Secondly, the confirmation of manager; lastly, the disposition of property, credit and debt. Analyzing form the above aspects, this paper concludes that the proceedings of substantive consolidation bankruptcy being applied in the case are rightful.The forth part illustrated how to perfect the Substantive Consolidation Bankruptcy Doctrine rule of associated companies. Firstly, manager hires professional institution to issue a audit report to prove that those companies have incidence relation and are highly mixed. Secondly, before property consolidation, each company should be audited separately; and then be audited as a whole after combination. Thirdly, prolonging the period of each stage in bankruptcy proceeding properly. Lastly, confirming the civil responsibility of directors, supervisors and senior managers in the proceeding of combined bankruptcy.