Discussion on Creditor Protection of Subsidiary Corporation in China Affiliated Transaction under Deep-Rock Doctrine
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As the continuous development and expansion of Chinese corporations, the affiliated transactions between controlling corporations and subsidiary corporations are more and more frequent, and the unfair tendency of transactions is more and more obvious. Unfair affiliated transaction not only brings profit loss to the subsidiary company, but also directly affects the interest of its external creditors. In terms of the protection of external creditors of Subsidiary Corporation, the Deep-Rock Doctrine, with its characteristic gentleness, solves the interest conflicts between creditors and controlling corporation and its controlling shareholders by adjusting the repayment order of creditor's rights, which guarantees the interests of external creditors, partly sacrificing the superior position of shareholders with posterior treatment. Although the Supreme Court published ‘Shagang Case’ as one of the typical cases in 2015, affirming the reference significance of this principle to the case, the application of this principle in China is still unclear. Based on the meaning and development status of deep-rock doctrine, analyzing the difficulties faced by adopting deep-rock doctrine in China to protect creditor and making the solution can better protect the interests of subsidiary corporations’ creditor.
Deep-rock doctrine, Controlling Corporation and Subsidiary Corporation, Affiliated transaction, Subordination of creditor’s right