Adjustment Of The Relationship Between Parent Company And Corporate Law

Taking the objective reality of the operational model of parent/subsidiary companies which is an economic phenomenon existing universally in the contemporary world as the premise for exposition,this article has carried out fairly deep-going research on how to strengthen the adjustment of the relationship between parent/subsidiary companies. The focal point is an effort to resolve the question of protecting the interests of subsidiary companies and their obligees and minority shareholders and the question of reciprocal holding of shares by parent/subsidiary companies. Taking into account of the deficiencies in the Company Law in China in this respect and drawing on the legal systems of Western countries on the adjustment of the relationship between parent/subsidiary companies,it puts forward relevant proposals in legislation in the light of the specific conditions in China.Five issues are discussed in this article. The first two issues fall into an overall survey and die ensuing three issues are separate discussions.The first issue is about the legal definition of parent/subsidiary companies. This issue is divided into three parts. Firstly,by examining the three kinds of criteria for definition on the concept of parent/subsidiary companies in legislation for overseas companies,it identifies a kind of criteria for definition and a definition of parent/subsidiary companies that should be adopted in the Company Law in China. Secondly,it analyzes the legal characteristics of the relationship between parent/subsidiary companies:(1) Parent/subsidiary companies are independent judicial entities in law;(2) Controlling shares and contract are basic bonds linking parent/subsidiary companies;(3) The relationship between parent/su nies is one between control and being controlled. Thirdly,by making an analysis and comparison between parent'subsidiary companies and the relevant concepts of groups of enterprises,holding company and controlling company,it has strengthened out the relationship between parent-subsidiary companies and those concepts.The second issue involves the challenge given by parent/subsidiary companies to the current Company Law and the way to cope with it. This issue is divided into three parts:Firstly,it fully affirms the functional value of the operational model of parent/subsidiary companies. Secondly,by discussing the vices that may possibly exist in the relationship between parent/subsidiary companies and the reasons for it as well as a series of legal problems derived from it,it emphasizes the necessity for the Company Law to adjust the relationship between parent/subsidiary companies. It holds that in view of the tremendous effect and influence of parent/subsidiary companies on the society and the economy at present,adjusting the existing law to suit the emergence and development of parent/subsidiary companies has become a pressing matter of the moment. As far as the Company Law is concerned,the relationship between parent/subsidiary companies has become a very important content that needs to be regulated and formulated at present and in future. Only when the Company Law prescribes the legal relationship between parent/subsidiary companies at the most fundamental level,is it possible to lay the foundation for an overall adjustment. Thirdly,it proposes a model and a key point for adjusting the relationship between parent/subsidiary companies in the Company Law in China. As far as the model of adjustment is concerned,on the basis of making an analysis and comparison between the two models adopted by various countries at present,it holds that me company Law in China should draw on the approaches of Germany and Taiwan by adding to it a separate chapter prescribing,in a concentrated way,the special legal issues of parent-subsidiary companies or groups of companies. As far as the key point of adjustment is concerned,it holds that the emphasis should beplaced on the question of protecting subsidiary companies and their obligees and minority shareholders and the reciprocal holding of shares...