Research On The Construction Of Company Creditors’ Protection When Company Enters Into Insolvency In Fact

Creditor’s protection is a key link in bankruptcy proceedings.Different from the protection of creditors after the company enters into bankruptcy proceedings,there is a considerable gap in legislation and judicature on how to prevent creditors’ assets from impairment when company enters into bankruptcy in fact.“Bankruptcy in fact” refers to the special stage where the cause of bankruptcy has emerged but the company has not yet been applied for bankruptcy.When the company enters into bankruptcy in fact,all the risks are transferred to the creditors.At this time,the risk of debt loss is infinitely enlarged,while there’s no legal system for creditors to protect their interests.The concept of "bankruptcy in fact" should be established in China’s legislation,which will provide special protection for creditors.On the determination of bankruptcy in fact,it is required that the company does not pay off the debts due,and balance sheet standard or cash flow standard is approached.It can be found that in our current legal system arrangement,the protection path provided by law has not been regulated uniformly,but scattered among different rules,which can be generally classified as regulation of specific behaviors and post relief.There are three deficiencies in protecting company creditors when company enters into bankruptcy in fact: the lack of the fiduciary duties of directors to creditors,the rigidity of the provisions of shareholders’ contribution obligations,the lack of the mechanism of tort liability law.Accordingly,we can consider improving the relevant system from three aspects,so as to provide special protection for creditors.The first is to construct the fiduciary obligation system of directors in the state of bankruptcy in fact,which is the basis of other system constructions.The improper incentive of directors reaches the peak when company enters into bankruptcy in fact.At the same time,the motive power of shareholders to bring derivative action is insufficient,and the risk of loss of creditor’s rights is enlarged.In this regard,fiduciary duties of directors to creditors can be stipulated,where the occurrence of bankruptcy in fact triggers the duties and endow creditors the right to bring derivative action against directors.At the same time,the rights and duties of the directors to apply for bankruptcy shall be stipulated.If the director’s improper transaction results in the loss of the company’s property,they are labile for any default on their part.And the scope of compensation is determined by the time when the creditor’s rights occur.The second is to construct the system of accelerating the maturity of shareholders’ contribution obligation under bankruptcy in fact.The reform of subscription system creates conditions for shareholders to abuse the contractual rights.The construction can achieve a new balance between the interests of shareholders and creditors.In this regard,we can consider adding judicial interpretation to the company law,expanding the relevant judicial interpretation,stipulating the accelerated expiration of shareholders’ capital contribution liability in the legislation of the company law,and increasing the directors’ obligation to call on shareholders’ capital contribution.When judging that shareholders "fail to fully fulfill their capital contribution obligations",it is more appropriate to adopt the theory of objective elements,and shareholders have the right of plea for preference claims.The third is to build a special tort system with the company’s creditors as the main body of prosecution,focusing on the content of tort liability and the principle of imputation.Because the controlling shareholders are also the key driving force for the interests of creditors to be damaged,but the current relevant legislation does not cover the types of abuse of control that may occur in judicial practice,neither reflect the particularity of the protection of creditors in the state bankruptcy in fact,relevant systems can be improved.We can consider defining the nature of the liability of the controlling shareholder for abusing the right of control as tort liability,increasing the behavior of abusing the control right in legislation,and strengthening the liability of abusing the control right under bankruptcy in fact through the special provisions of the imputation principle.Generally speaking,the limit of fault liability should be strictly regulated.When the company enters into bankruptcy in fact,the determination of the responsibility of controlling shareholders can directly apply to the judgment rules of directors’ and senior executives’ duty of care and duty of loyalty.