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Xu Yangguang: Substantive Consolidation of Affiliated Enterprises Bankruptcy

[Abstract] Substantive consolidation is an important system in dealing with cases of affiliated enterprises bankruptcy. Its theoretical foundation is related but different from the doctrine of piercing corporate veil in corporate law. In the U.S. case law, since its birth, the application of substantive consolidation experienced a change from expansion to restriction. Although disregarding legal personality remains as the principal standard, some supplementary standards are also being weighed, such as the difficulty of distinguishing assets from liabilities, the reliance of creditors on the separate legal personality of the debtors and so on . In China, currently there is a strong demand for substantive consolidation in dealing with affiliated enterprises bankruptcy in practice. Nevertheless, the relevant rules have not been established either by legislation or by judicial interpretation. There are a number of issues need to be solved, such as the jurisprudential ground of substantive consolidation, which party should be entitled to file the motion, what standard that the courts should reply on and how to protect the rights of dissenting creditors. There is an urgent call of establishing a substantive consolidation system that is based on overseas experience and Chinas practice.

Keywords: Affiliated Enterprise; Substantive Consolidation; Piercing Corporate Veil; Limited Liability

(Editor: Liu Xiaoling)

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