This article research that in corporate groups when controlling corporation use controlling position to secure pecuniary benefit resulting to damages subsidiary corporation, legal protection of creditors of subsidiary corporation comparative of Common Law, ALI, PCG, The Bankruptcy Law in U.S. and Corporate Law, Civil Law, Bankruptcy Law in Korea. Piercing the Corporate veil is a common law doctrine by which court disregard the separate entity in particular circumstances and impose liability on the participants behind the entity"s veil. ALI, PCG § 5.01. directors, senior executives and Controlling Shareholders, when interested in a matter affecting the corporation are under a duty of fair dealing. Common law has traditionally advised that directorial duties run to the corporation and its shareholders. Creditors may generally sue derivatively, on behalf of the corporation, for breaches of fiduciary duty when the corporation crosses into insolvency, rather than having to wait until a statutory Bankruptcy filing. In Trenwick America Litigation Trust v. Ernst & Young, L.L.P., the Delaware Court of Chancery noted that the plaintiff had failed to show the subsidiary was insolvent at the time of the challenged conduct. It was only after noting the inadequacy of the pleadings on the point of insolvency that the court found the parent owed no duties the subsidiary or its creditors. Case law suggests, however, that a subsidiary"s creditors could bring a viable breach of fiduciary duty claim against the parent corporation or at least a claim for aiding and abetting the conduct of the subsidiary"s directors.
Both fraudulent transfer law and law of equitable subordination entail the same remedy of expropriation and transfer. The moral intuition behind the two doctrine, nevertheless, has come to differ. Fraudulent transfer law focuses on the debtor"s intent to cheat her creditors-though intent is presumed in the so-called constructive fraud cases. Equitable subordination, on the hand, focuses on creditor misconduct. Whereas the debtor"s intent is examined at the time of the fraudulent transfer, creditor action unrelated to the origin of the creditor"s claim can justify equitable subordination. Substantive consolidation provides a vital remedy for creditors who were wrongfully misled into credit to a debtor or to do rough justice when the debtors" financial affairs are so commingled that it is impossible to unravel them without inflicting yet further economic injury on creditors.
In this article, to consider relationships of between controlling corporation and subsidiary, propose that establish provisions of protection creditors of subsidiary on corporation law and bankruptcy law in Korea.