Research On Protection Of Creditors In Affiliated Transaction

With the economic and social development, multinational corporations and Group corporations are playing an increasingly important role in the world of business. Affiliated transaction becomes a common phenomenon in the economic operation. Affiliated transaction is a neutral concept for itself which is not affixed with "fair" or "unfair" label. Studies have shown that appropriate affiliated transaction will reduce costs, achieve economies of scale, and integrate corporate resources to maximize enterprise competitiveness. But we can not ignore the fact that affiliated transactions are also often the origin of liability disputes.Protection of the rights of creditors is not only to defend their own interests, but also an act guaranteeing company's sustainable development, and thus the security of the entire market. It is thought as a pivotal subject of Company Law. In the existing Company Law of China, there are a lot of provisions which embody the concept of protection of shareholders, but the provisions on the protection of creditors are relatively insuffisant. Fairness and justice is an eternal goal of law, it becomes a very urgent task to understand profoundly China's relevant laws and related transactions on creditor protection in such an inadequate legislation as today, and to improve the legal system to better protect the creditors. Although this subject is related to various department laws, this paper tries to give a in-depth analysis from the perspective of company law.The paper is divided into three parts:Chapter I is dedicated to the definition of "affiliated transactions" and analysis of typical interest relationship in affiliated transaction. Current theories have not reached a unanimous delimitation of affiliated transaction, while the arguments are focused mainly on two questions: 1. whether the definition of "affiliated transactions" should adopt general type or list type? 2. Whether a uniform definition should be made based on some fundamental characteristics of affiliated transactions, as many department laws have specific regulation in accordance with laws or adjustments on different objects of specific cases? This paper points out that the definition of related party transactions should be summarized and enumerated type in grasping the nature of related transactions basis. Then, it discusses the relationship of interest from perspective of creditor protection.Chapter II is dedicated to a theoretic and practical research of creditor protection under the circumstances of affiliated transactions. First, from analysis of the foreign theories, and emphases introduction to "Non-encumbrance principle", "Piercing the corporate veil", "Deep Rock Doctrine," "the principle of substantive consolidation", points out the reference meaning to legislation of China. Second, it summarize the specific manifestations of damaging the creditor in practice of affiliated transaction, and as a basic study for Chapter III.Chapter III moves on to analysis of creditor protection under affiliated transaction in current company law, and draws some suggestions for potential improvement. Started from a state-of-the-art analysis of current legislation, the paper pins out some deficiencies of corresponding legal provisions as per creditor protection under affiliated transaction, and carries out specific suggestions for potential legislation improvement aiming at major stages of an entire legal process from "legal establishment", "corporate existing", to "corporate bankruptcy and liquidation". According to specific characteristics of these stages in time consequence, corresponding legal measures, preventive or supervisory, can be combined to fully protect the interests of creditors.