On the associated enterprises and their legal regulation
|School||East China University of Politics and Law|
|Course||Civil and Commercial Law|
|Keywords||Associated enterprises Unfair related party transactions Company Law Slave company Enterprise Group Business legislation Legal Regulation Control of the company The interests of the company Creditor|
This essay includes foreword and four chapters.The foreword briefly states the motivation of writer and major arguments of the essay.Chapter one clarifies the meaning of affiliated enterprises. This chapter expatiates thecharacteristics, formation and internal correlation of affiliated enterprises. The chapter alsointroduces the characteristics of affiliated enterprises in China during this period of economicconversion and states behaviors of abusing affricated" trading. I think current corporatestructure in China has lots of pitthlls in controlling participation of people who has privateinterest, protecting shareholders" interest and releasing corporate internal information. Lotscompanies in China have been controlled by kinships. Lots of problems happened duringconversion of state owned companies into public companies: those problems have also beentbund in lots of private companies. People are heading for dominant shares in the company,once they have dominant power they start to acquire small shareholders, transfer asset anddefault bank debt. Consequently, it is very urgent and important to reinforce affiliatedenterprises law in China.Chapter two starts with paradigms of "Panda communication co." and "KelongElectronics co". Recently the senior managers of these two companies have been caughtbecause of extracting companies" money in affiliated trading. These cases identify, that unfairaffiliated trading have severe damage to people with common interest with companies. Thenthe chapter digs into the internal reasons of unfair affiliated trading—conflict of interestwithin the companies. During the economic conversion of China, I will further expatiate thechallenges of conflict of interest among independent fictitious person, limited responsibilityand corporate law. Finally, I briefly evaluate the regulations system of affiliated trading inChina. I think there is still no mature legislation system of affiliated enterprises in China, andcurrent loose system has lots of internal conflicts and blind areas, so that the difficculty ofprinciple execution is prevailing. There is no instant solution of legislation, and there iscorrelation among laws. The most important part is to set up complete law principles.especially corporate law principles. Then we can set up a series of systems and criterions:meanwhile. we should not buyout all the advanced systerns in other countries. Chapter three uses Britain and US as the representatives of British-American lawsystem for affiliated enterprises, and Germany as the representative of continental law system.finally I list affiliated enterprises legislation in China. Refer to current severe situation of unfairaffiliated trading, I suggest to imitate the operation of corporate law in Taiwan. which is tosetup affiliated enterprises chapter in corporate law. Further as our legislation system is notmature, the business environment in China lacks of credibility and integrity, so the legislationof affiliated enterprises should be mandatory.Chapter four bases on the specialized affiliated enterprises law stated in the formerchapter, further sketches content of law, including regulation fbr period during formation ofaffiliated enterprises and protection and rescues of minority shareholders and creditors afterformation of affiliated enterprises. Refer to the manners of affiliated enterprises formation, weshould mainly regulate the method of capital investment and contract of capital distribution. Ithink base on current situation in China. it is necessary to set ceiling on capital investment,especially for companies have mutual investment. The protection of affiliates is to eventuallyalleviate the negative effect of affiliated enterprises. I suggest to set up process to prohibitunfair affiliated trading, for example, affiliated trading should get approval from dominantboard members who have no relationship with the trading: major issues should get approvalfrom board; complete combined report or sheet, and complete policy of releasing information:foster agent institution to reinforce surveillance: complete board-voting policy to protectminority shareholders, so as to promote function of external shareholders: keep independencyof affiliates" board and emphasize the integrity of board members, clarify the responsibility ofboard members and managers: complete supervising system, introduce external supervisorslike bank investigators, effectively control the authority of proprietors: define integrity ofmother companies, set up litigation policy for minority shareholders. The protection ofaffiliates creditors is mainly through compensation afterwards. Base on denial of fictitiousperson, we can develop regulations of interest compensation, asset merger, prohibition ofretraction and concession of minor creditors right when debtor bankrupted. Finally. besidescompensation by assistance of law. creditors should improve own consciousness in self-protection, should understand debtors consciously, set up strict contract base on specificsituation, and should not adopt general contents blindly.