On The Applicable Standards Of Substantive Consolidation Bankruptcy Of Affiliated Enterprises

The substantive consolidation system breaks through the traditional commercial foundation system of the independence of legal personality,and at the same time completely changes the amount,proportion and order of payment of each creditor’s claim,so strict standards need to be set to limit its arbitrary application.Due to the fact that affiliated enterprise transactions can reduce transaction costs and avoid transaction risks,and each affiliated enterprise aims for greater profits,it usually adopts a unified group management model.In 2018,the Supreme People’s Court issued the "Minutes of the National Conference on Bankruptcy Trials of Courts"(hereinafter referred to as the "Minutes of Bankruptcy Meeting"),but the logical relationship between the standards of substantive consolidation and the degree to be achieved were not clarified,resulting in different understanding and application of the applicable standards of substantive consolidation in judicial practice.Along with the increase in the number of bankruptcy cases of affiliated enterprises in China,the system of substantive consolidation has been used more and more frequently,and there is an urgent need to establish a comprehensive system of applicable standards and clarify the specific identification elements of each standard.This paper consists of four main parts:The first part is "bankruptcy and substantive consolidation of affiliated enterprises".The theory of enterprise entity provides a theoretical basis for the substantive merger system.Through analyzing the landmark cases of substantive consolidation in the United States,the history of the "other self" standard,fraud standard,asset separation difficulty standard,creditor reliance benefit standard,and all creditor benefit standard is introduced,and the connotation and characteristics of each standard are clarified.The second part is "the development and current situation of the applicable standard of substantive consolidation in China".By summarizing the provisions of current national and local judicial documents on the applicable standards for substantive consolidation of bankruptcy,this paper finds that there are significant differences between the provisions of different judicial documents,which leads to inconsistent standards of judicial practice adjudication.Then this paper uses the empirical research method to select a sample of 100 cases to sort out and analyze the specific circumstances and characteristics of the judicial practice of substantive consolidation after the release of "Minutes of Bankruptcy Meeting",and then selects typical cases to analyze the development characteristics of the standards applicable to substantive consolidation bankruptcy in China tending to be more rigorous in different periods.The third part is "review and reflection on the applicable standard for substantive consolidation of bankruptcy".This paper summarizes and analyzes the defects in the provisions of judicial documents and the problems that exist in judicial practice.Among them,both have inconsistent standards of application and confusion in the identification of highly mixed standards of legal personality.The fourth part is "construction of a comprehensive system of applicable standards for substantive consolidation of bankruptcy".Based on the principles of prudent application,final application,balance of interests,and efficiency,a comprehensive system of applicable standards with the standard of highly mixed legal personality as the primary applicable standard and the standard of creditors’ income,creditors’ reliance interest,and the standard of reorganization needs as the auxiliary applicable standards is established to unify the adjudication standards to maintain the value of fairness and efficiency and to maximize the interests of creditors.