Research On The System Of Subordinated Compensation Of Shareholders' Creditor's Rights In Bankruptcy Procedure

Shareholder creditors are acting as insiders in the company’s operations and have superior position over ordinary creditors.Shareholders have made the company indebted through improper acts such as related party transactions so that when the company went bankrupt,it competed with ordinary creditors for liquidation damage and thus harmed the interests of ordinary creditors.In the context of the subscription system after the reform of China’s company law in 2013,this problem is even more serious.The phenomenon of shareholders operating the company through debt financing has greatly increased,and how to properly protect the interests of ordinary creditors when the company goes bankrupt has become a difficult problem.The issue of the priority of shareholders’ claims in bankruptcy proceedings is a blank area required by Chinese law.Simply establishing a call system or applying a denial system of legal personality cannot effectively solve the problem,and the social effect is not good.Therefore,under certain conditions,subordinate compensation of shareholders’ creditor’s rights becomes a need to balance the interests of shareholders’ creditors and ordinary creditors.European and American countries have formed related systems such as“equitable subordination doctrine"in response to this problem,which is of great significance to China’s current situation.After the shareholders’ claims are inferior,the application of the compensatory principle can achieve the balance between the maximization of shareholders’ autonomy and the protection of creditors’ interests and the protection of corporate interests.There have been many articles and judicial practice cases in China that have borrowed from advanced foreign systems.The research on the applicable conditions of subordinate compensation of shareholders’ claims has made some progress.The Shagang case as a typical case reflects the Supreme People’s Court’s tendency to balance the interests of shareholders and ordinary creditors.The introduction of the shareholder’s subordinate compensation system can be compatible with China’s legal system,which can not only fill the gap in the field of bankruptcy law,but also achieve the purpose of complementing the function of the legal personality denial system.In the bankruptcy proceedings,when it is determined that the shareholder’s creditor’s rights should be subordinated to be repaid,the shareholder’s creditor’s rights should be inferior to the external creditor’s rights,internal creditor’s rights and punitive creditor’s rights,and the application of the right of exclusion shall be appropriately restricted.In terms of applicable conditions,if the shareholder’s improper behavior in the company’s operation has caused damage to the interests of external creditors,the shareholder’s creditor’s rights should be subordinated when the company goes bankrupt.Shareholders’ misconduct includes improper capital contribution,unfair transactions and abuse of control status.The degree of damage caused by the shareholders’ claims will affect the application of the system,and the shareholders will bear the responsibility to prove the amount of subordinate damage,otherwise they will bear the unfavorable liability of the entire debt.Based on the experience of foreign advanced legislation,and in light of China’s actual conditions,the applicable objects of the shareholder’s subordinated compensation system should be appropriately expanded to ensure the feasibility of the system’s application.