TSINGHUA CHINA LAW REVIEW
The Impact of International Corporate Group Bankruptcy Regime on China —— The Perspective of Substantial Consolidation Theory
Created on:2025-01-21 15:21 PV:94
By BAI Bing |Articles | 17 Tsinghua China L. Rev. (2024) |   |   Download Full Article PDF

Abstract

Current legislation in China regarding substantive consolidation in group insolvency cases is fraught with deficiencies, and the insolvency laws are not only lagging but also rife with contentious provisions. On one hand, the substantive criteria for application are muddled and the underlying meanings of these standards are rather ambiguous. On the other hand, there is a lack of procedural systematization, with a diversity of application subjects that lack consensus, a variety of application modes that require standardization, and jurisdictional rules that are full of gaps and in dire need of refinement. From a comparative law perspective, international legislation on corporate group insolvency exerts a multifaceted influence on China. The EU emphasizes procedural coordination but has limited application, the US has significantly developed the principle of substantive consolidation, and Germany's creditor protection provisions offer valuable lessons. In light of this, China shall undertake efforts on various fronts to construct these rules. It is essential to establish theoretical guidance that upholds the principles of fairness and the maximization of creditors' interests. Moreover, the substantive rules need to be improved to harmonize the system involving the denial of legal personality. Most importantly, procedural rules must be clarified to define the order of claimants, establish a rational mode of commencement, and achieve the centralization of jurisdiction. Only through such measures can the current challenges in the practice of substantive consolidation rules in group insolvency be effectively addressed.