Research On The Legal Regulation Of The Bankruptcy Of Affiliated Enterprises

Affiliated enterprise is one of the important economic phenomena in the modern society. When it has acted as a force for economic growth, it also has shown up many problems which are difficult for traditional legal adjustment. The bankruptcies of affiliated enterprises especially have brought great challenges to the traditional legal system. Being different from a single independent enterprise which traditional bankruptcy law applies to, affiliated enterprises are enterprise combinations without the status of an independent legal entity which consists of several enterprises with the status of independent legal entities under the unified management to form a kind of controlling relationship by means of taking a controlling stake or signing contracts. The essential characteristic of a juridical person is its independence which embodied not only in the independence of property, personnel, organization and operation but also in the independence of bearing legal responsibility. However, the legal nature of associated enterprises is control. Affiliated enterprises maintain and make full use of their independence of legal responsibility, but weaken other independent features of a juridical person, the unfavorable consequences caused by which is prominently revealed in the bankruptcy procedure of associated enterprises. Even if the controlling enterprise uses the improper control relations to cause its subordinate business failure or uses the unfair affiliated transactions to cause the controlling enterprise failure by transferring the high-quality assets to the subordinate enterprises, the controlling enterprise have is liable for the bankruptcy debt of the subordinate enterprises, and vice versa. Creditors of those bankrupt enterprises will suffer most from the deficiencies in the legal system.Nowadays in China, affiliated enterprises dodge creditors through bankrupting is a very common phenomenon, but the current laws of China have not defined associated enterprises, especially the legal regulation concerning the bankruptcy of affiliated enterprises is at the vacuum state so that there are deficiencies in the legal system to protect the interest of subordinate enterprises, minority shareholders and creditors, which severely impairs the order of market economy and the security of transactions. Presently, the legal regulations concerning the bankruptcy of affiliated enterprises in world countries are quite different. Some countries persist in the traditional principles of law, some carry on the careful improvement based on the traditional law, while others proceeding from the actual economic conditions of the bankruptcy of affiliated enterprises to develop a set of novel legal principles, which can be a good reference for the legal regulation of the bankruptcy of affiliated enterprises.This paper, focusing on the company law and bankruptcy law, adopts the research method of theory combining with practice, reality combing with development and the combination of borrowing successful international experience and emphasizing basic state conditions to do some research on the several problems about bankruptcy of affiliated enterprises. It puts forward the proposal about perfecting the legislation guarding against the risk of bankrupt affiliated enterprises from two aspects of advance and afterwards. Prevention measures include perfecting the information disclosure system of affiliated transactions, providing honesty obligations of the controlling shareholders, perfecting the exclusionary rule on the right to vote for the controlling shareholders and perfecting the rules of piercing the corporate veil. While Afterwards regulation measures can learn from deep rock doctrine and substantive consolidation doctrine in the Anglo-American legal system for reference. This paper also studies how to improve the legal system regulating bankruptcy liquidation of affiliated enterprises.