Fair Protection For The Creditor In The Substantive Merger Bankruptcy Of Affiliated Enterprises

With the continuous emergence of affiliated enterprises,how to ensure that creditors get a fair repayment when affiliated companies go bankrupt has been a hot topic in theory and practice.In order to solve the problems caused by the bankruptcy of affiliated companies,China has introduced substantive merger bankruptcy from foreign experience in our judicial practice.This system can help to deal with the asset handling and creditor repayment of affiliated companies when they go bankrupt.One of the Legislative objective of the bankruptcy law is to guarantee the fair repayment of creditors.But the application of substantial merger rule will inevitably affect the rate of repayment of creditors: some creditors will get more repayment but some creditors will get less due to the substantial merger rules.Therefore we have to face the question that how to ensure the fair protection of all creditors when the substantial merger rule is applied.This paper will try to answer this question from three aspects including applicable standards?adjudication procedures and the protection of opposition creditors.Specifically,this article is mainly divided into the following four parts:The first part is a basic analysis of substantial merger bankruptcy and fair protection of creditors.First of all,the substantive merger rule was created to solve the bankruptcy problem caused by the irregular development of affiliated enterprises.However the application of substantive merger will cause a different result compared with the original result that affiliated enterprises go bankrupt individually.Therefore,the creditor's fair protection must be considered in the substantial merger bankruptcy.In addition,there are some difficulties to achieve fair protection of creditors.The second part is how to formulate better applicable standards about substantial merger rule to protect the interests of creditors.This part analyzes the current major international applicable standards for this rule and the application of this rule in China.In China's current judicial practice,the applicable standard for substantive merger is still based on the “ confusion of corporate personality” as the main judging factor.This single adjudication standard may result in the abuse of substantial mergers and it fails to respond to creditors' objections,so this single adjudication standard fail to truly achieve fair protection for all creditors.Therefore,from the perspective of fair protection of creditors,this paper constructs a comprehensive standard including “confusion of corporate personality” ? “difficulty of asset separation” and “the protection of creditor's trust interests”.Among them,“confusion of corporate personality” is the main standard.The third part is to protect the interests of creditors in the applicable judicial procedures of substantial merger and bankruptcy.The initiation of the substantive merger procedure requires the application of the parties,and court plays a guiding role in the procedure.The bankruptcy administrator should have the right to apply for a substantial merger,because the administrator has a clear understanding of the enterprise situation after the bankruptcy procedure is started.In order to protect the creditor's right to know and to express opinions,we should improve the notification and hearing procedures after the initiation of the application for substantive merger,especially make good use of the hearing procedures to fully understand creditors' opinions.In addition,the creditors' opinions should be fully taken into account in the making of the substantive merger ruling,so it is necessary to make good use of the voting system of the creditors' meeting to help the court make a final decision.The fourth part is the protection of objection creditors.The application of the substantive merger is bound to cause some creditors to be dissatisfied.In order to make the substantive merger applicable,the opinions of dissent creditors cannot be left unresponsive.Therefore,after the ruling of substantial merger is made,the creditor should be given the right to file an objection.In addition,in order to prevent objections from creditors and to achieve substantial fairness,reasonable compensation may be provided to them while ruling the application of substantial mergers.The rights of the special dissenting creditors are guaranteed from the two aspects of granting the dissenting right and reasonable compensation so as to realize the fair protection of all creditors.