A Study On The Protection Of Corporation Creditors

The Protection of Creditors has always been taken as an important issue of civil law since the development of Roman law. With the birth of corporation system and the ever increasing importance of creditor’s rights, the study on the protection of corporation creditors has become one of the main points of corporate law around the world. Traditionally, protection of corporation creditors under the civil law system was based on the idea of capital credit and carried out under strict capital system, but it has been proven that this kind of protection was not only limited in effect but also greatly affected the corporation management. Since asset is the safeguard for debt, protection of creditors should be based on asset and give full play to creditor’s self-protection. Therefore, the system of creditor’s rights shall be constructed under the corporate law. The main ideas of this dissertation are as follows.Chapter one discuss the creditor’s rights protection and its effect. Credit is one of important property rights, but creditor’s rights are usually damaged. Various kinds of creditor’s rights protection in civil law play important role in rights protection. However, there are insufficient to some extent in themselves and in creditor’s rights protection. Capital requirements are main parts of creditor’s rights protection in company law, but long-term practice indicates that creditor’s rights protection for capital requirements are not best choice. Except capital requirements, it’s necessary to seek other protecting measures for company creditor.Chapter two discusses assets credit on which protection of creditors is based, and the protection system. Since creditors and corporation assets are closely related and the asset is safeguard for creditor’s rights, we should investigate more effective measures for protection of creditors from the view of asset. As a legal concept, asset should focus on value creation function of asset as well as other elements excluding the quantity of asset. Because corporation assets changes continuously, more attention shall be paid to the effect of changes of asset for better protection of creditors. Corporation credit concept should be changed from capital credit to asset credit since asset will ensure the fulfillment of creditor’s rights. Therefore, the establishment of asset credit is of vital importance. One of the most important measures to maintain asset credit is to provide and access to asset information. The U.S. corporate law is generally led by asset credit with focus on creditor’s self-protection based on asset. The best way for protection of creditors is to make creditors more active and corporation information available, since creditors is more concerned with his own interest and the fulfillment of creditor’s rights may be realized from corporation assets. Under the guidance of asset credit, creditor’s rights, including the right to know with respect to corporation assets information as well as the right to dissent, shall be established. Moreover, the liability system for directors and shareholders is needed in order to protect the interests and rights of creditors.Chapter three surveys creditor’s right to know information on assets. It is very important for the creditors to have the right to know with respect to corporation assets information. Moe attention has been paid to issues concerning assets information, including both the static and dynamic information. Questions relating to creditor’s right to know are more complicated since creditors are not only often in inferior situations for access to information but are different from each other. National measures for protection of creditors, so far as the way for the creditors to know corporation assets information is concerned, including the establishment of corporation registration system, financial accounting report system, business accounts system, and the system to inform changes of substantial assets. In practice, creditor’s knowledge about corporation assets information is by way of financial accounts and changes of substantial assets. At present, Chinese legislation can not meet the practical need though there are some related stipulations on creditor’s right to know corporation assets information. Therefore, legislation is badly needed in order to well deal with the questions concerning creditor’s access to corporation assets information.It is impractical for creditors to take part directly into corporation governance in China. It is also immature for China to make access to assets information by way of contract for the cooperation of other systems is needed, such as the credit system. In view of current Chinese situations, the consultation system for creditor’s access to corporation assets information shall be established in Chinese legislation. In principle, each creditor has the right to consult corporation assets information but the assets have to be restricted to a certain amount in order to avoid abuse of the right to consult. The object of the right to know includes the information on financial accounts and changes of substantial assets. The financial accounts may only be presented in law suits while the information on changes of substantial assets may include capital changes and business transfer. The exercise of the rights to know is justified on its purposes. All possible obstacles shall be taken into consideration during the course of construction of the right to know, for example the capital systems, assets information, capabilities of creditors and the coordination of other protective measures.Chapter four discusses the dissent right of the creditor. Learning the information about the company’s assets, as for the need for creditor protection, creditors should be entitled the right to bind the company to dispose the assets. The creditors should bear the normal asset changes in the regular business, but for the illegal disposition they can declare it avoidance. For the significant asset changes, such as capital changes and transfer of business, they should be given the right to dissent. In civil law countries, the right to dissent is mainly to require the company to pay off or provide guarantees in certain conditions. The procedures to exercise are basically the same, while there is the difference on the effectiveness between essentials doctrine and counter doctrine. The dissent right provides a protection measure which is not sole for creditors when the assets are decreased. The right to dissent should also be established in the transfer of business in order to avoid the occurrences of the debtor’s evasion to the obligations.Chapter five surveys how to bear the legal liability during the creditor protection. The asset decrease is directly related to the shareholders, directors, thereof it is the important means to govern their behaviors is to avoid the illegal decreases. As the final relief to the creditor’s rights, it’s supposed to establish the responsibility system of the shareholder and director. The shareholders should return the illegal gained dividends. The corporate personality should be denied because of the abuse. And it should be also established the director’s fiduciary duties to creditors so as to constraint the director’s behaviors effectively. Concerning our current corporate restructuring issues, the principle of "debt with the transfer of property" is stipulated in the judicial interpretation, which is fully aware that the assets can be the safeguard of the debt redemption. Beyond that, it puts the critical protection on the remaining assets after the transfer, but the improper design leads to the unequal protection of creditors, and causes confusion in the judicial practices.