Research On Fundamental Issue In Corporate Division

Corporate Division is a major corporate reconstruction behavior and it will influence the minority shareholder and creditor interests a lot, especially in the context of our enterprise restructuring. Therefore, how to protect minority shareholder and creditor interests is a very important issue when we use corporate division to increase efficiency. Corporate division system is legitimate just when it protects minority shareholder and creditor right well. However, our present relevant legislation is not perfect, which makes the corporate division lack of legislative support, and influences the separation efficiency and the protection of the interests of minority shareholder and creditor. Therefore, it is necessary to research the protection of minority shareholder and creditor when corporation divides.This paper consists of three parts.Partâ… : The basic theory about the corporate division. Firstly, it explains the legal meanings and characters of the corporate division. Our current Company Law provides no clear definition of the corporate division and it is generally recognized that"the corporate division refers to a company's business is divided into two or more parts, which is to establish a new one or merge with others."Corporate division has following characters: Corporate division is a way of corporate reconstruction and is different from simple transactions;Corporate division may result in a separation of the company into two or more separate companies with independent legal personality, and consequently, it is a personality change in behavior;The object of the corporate division is not simply a separation of property but operation. Secondly, it illustrates the adjunction scope. Basing on case regarding company divided aboard and related domestic regulation, the author states that the adjunction scope includes pure division and combinative division. There are two kinds in pure division: existing division and extinguish division. Existing division means part of the business of divided company is invested into capital of the newly incorporated company, and the divided company keeps operating by means of the rest business. Extinguish division means that the business is divided from the divided company and invested into newly cooperated companies as capital. Combinative division means the method that when divided the business of company, combines the divided part of business with other company. Then, it makes compares between corporate division and business transaction, investment transmission and incorporating subsidiary.Partâ…¡: Protect the interests of minority shareholder on the corporate division occasions. Firstly, explicates the necessity to protect minority shareholder on divide occasions. Corporate division is not only the division of property but also the problems of shareholder's withdrawal or reenroll, asset calculation, arrangement of shares and so on. When shareholder especially the minority shareholder thinks corporate division conflict with their biggest benefit or the division is less effect, what kind of remedy can they explore? This requires design of the system of law to take shareholder right sufficiently to protect shareholder benefit. However, reviewing our practice of legislation, Company Law only roughly regulates on the dividing procedure, the property division on company divided and the burden of debt but hesitate on protection to minority shareholder benefits. This is bad to protect shareholder right, therefore, is necessary to perfect the legislation for the protection to minority shareholder benefits in corporate division. Secondly, explain the shareholder right on division occasions: the right to know the financial accounting reports and other business decisions of the company; the right to request the repurchase of shares when object to the corporate separation; the right to request attention to its shareholder rights and ask compensation when company violates his right. Then explain how to improve the law system of shareholder right in our country.Partâ…¢: Protect the interests of creditor on the company division occasions. Firstly, explain the necessity of protect the interests of creditor. Secondly, analyze the protection of the interests of creditor on corporate division occasion in the world, open information system, also known as the notice and disclosure of information systems; Object to the separation, which means creditor disagrees with the division of the company; guarantee liquidation system, which means creditor may request separate company for the firms wishing to provide security or for the settlement of claims; commit liability together, which means the existent company after the separation and the new company after separation absorb the debt in full or on the original; the lawsuit of the invalid, which means the creditors ask the court to confirm the separation of the company invalid, as the company violated the law when separated. Finally, analyze the protection of the rights of creditor on corporate division occasion in China and express my recommendations to improve the Company Law.