Involvement Of Creditors In Corporate Governance, Legal Issues

The corporate governance issue, the equivalence of "Two Sessions" in Legal academics, is always triggering new topics which are inevitably followed by heated discussions. One hot issue raised in this field is creditors' involvement in corporate governance. The stakeholder theory ushered in a new perspective to this area despite the differences between scholars and practitioners concerning the concept and content of corporate governance. The justification of this theory is supported by the concept that a corporation is an entity created by a combination of contracts as well as being demonstrated by the text of "Principles of Corporate Governance" which is newly issued by OECD.Chapter one of this thesis starts with the introduction of conceptual evolution of corporate governance and then discusses the controversy between the traditional and modern connotation of corporate governance. Specifically speaking, traditional corporate governance theory abstracts the structure of internal corporate governance to an agency relationship established by and between shareholders and managing teams and the criteria developed by this traditional theory testing the efficiency of a corporate governance structure is whether it is capable of maximizing the shareholder's interests. Such an argument, however, just reached only oneaspect of corporate governance. The other aspect approached by this thesis is to appreciate the notion that a corporation is shared by stakeholder and accordingly emphasizes the creditors' interests.Chapter Two theoretically contends the legitimacy and necessity for the involvement of creditors in corporate governance. Firstly, this part provides an economics basis to justify the involvement of creditors in the process of corporate governance by citing the latest Western Economics research results, particularly referred to how the efficiency of corporate governance could be promoted by agency theory and by creditor rights management under transaction cost theory; Secondly, a more detailed presentation of the stakeholder theory is made through a canvass of the connotation of this theory. Meanwhile, the issue of corporate social responsibilities which has been widely referred to recently is also discussed to jointly prove the rationality of creditor's involvements in corporate governance. Considering the traditional legal means is insufficient for the protection of creditors' interests, it is particularly important to enable the creditors to take part in the corporate governance in their own name.Chapter Three of this thesis introduces practices of foreign countries concerning creditor's involvement in corporate governance. This chapter is divided into two parts and discussed 'corporate loan creditors' and'Corporate bonds creditors'respectively in order to specifically analyze these foreign practices. From the aspect of corporate loan creditors, the main subject for discussion is the Major Bank System in Japan and Comprehensive Function Bank System in Germany. The main content, causes of formation and the manner of operation of both two systems are summarized. Furthermore, the relationship between banks and enterprises in Britain and the United States which is totally different from Japan and Germany is also profiled and a briefly contrast is made. All aforesaid discussion is intended to serve as a reference while deciding what kind of system should be adopted by our country. As for the aspect of Corporate bonds creditors, the author concentrates on some countries in which the Corporate Creditors Meeting System is adopted and researches the specific system design including the launching and convening of the conference, the resolutions and their effectiveness, etc. Such an examination of foreign systems is purposed to provide a reference for our country's relevant system design.Some specific legal practices designed for the system of creditors'involvment in corporate governance in China are proposed in the chapter four of this thesis. In this part, the author lists and explains some special difficulties faced by banks in China when they attempt to intervene in the process of corporate governance. Accordingly, the author has proposed the possible solutions: firstly, the legal obstacles should beremoved by clarifying the legitimate status of banks when they lawfully intervene the corporate governance as creditors; secondly, the established Hosting Bank System should be improved and perfected in the context of Chinese local characteristics. The author suggested, for example, that the Mutual Shareholding System adopted by Japan and Germany should not be completely 'transplanted' to China. The second portion of this part proposes the establishment of corporate bonds creditors meeting system in China. In this portion the author provides a comprehensive research for the resolutions and their effectiveness of the creditors meeting in context of China's specific conditions.