Fiduciary Duty of Controlling Shareholders to Creditors: A Dual Perspective of Legislation Theory and Explanation Theory Based on Article 20 of China’s Company Law

Although the fiduciary duty of controlling shareholders to minority shareholders and directors to creditors have eased the tension between controlling shareholders and creditors to a certain extent, they cannot fundamentally correct the imbalance of interests between them. In the context of China’s Company Law, the theory of fiduciary duty and the principle of good faith jointly provide the legal basis for the controlling shareholders to assume fiduciary duty to creditors, However, the system of denial of corporate personality, which can only be applied under special circumstances, cannot provide creditors with conventional remedies against the general abuse of rights by controlling shareholders. Creditors are faced with inadequate general protection by China’s Company Law. This article does not attempt to answer the question of what is the fiduciary duty of the controlling shareholder to the creditor, but based on the analysis of the explanation theory perspective of Article 20 of China’s Company Law, puts forward the improvement path of the legislation theory of China’s Company Law. On the one hand, the revised Company Law of China can positively establish the fiduciary duty of controlling shareholders to creditors, the company and other shareholders, form a benign interaction of corporate governance, and provide appropriate guidance for the behaviors of the controlling shareholders. On the other hand, it is also necessary to provide the creditor with a remedy for general breaches of trust other than special breaches of trust by controlling shareholders, and to add provisions for general breaches of trust by controlling shareholders to creditors. Finally, in response to the provisions of the Civil Code and the Interpretation by the Supreme People’s Court of Several Issues Concerning the Application of Book One General Provisions of the Civil Code of the People’s Republic of China, the revised Company Law of china may also further explicitly stipulate that resolutions of shareholders by abusing their rights and damaging the interests of the company, other shareholders or creditors should be ruled as invalid, so as to expand the scope and types of remedies for fiduciary duty.