Property Rights In The Company Emerged From Bankruptcy Protection - On The Insolvency Law Reform In China

Based on property economics, contract economics and the modern theory of the firm, this dissertation studies the problem of protecting property rights in corporate reorganization and some rules of corporate reorganization legislation. Corporate reorganization or bankruptcy reorganization is a special economical and legal state in which when a corporate is insolvent because of its mismanagement or some other reasons, in order to continue its operation, the equity structure of the corporation is restructured by reallocating all or part of equity of the reorganized corporation to its creditors and other claimholders. Usually the equity's reallocation is done through a bargaining among all claimholders, which is supervised by a bankrupt trustee or judge. These claimholders include creditors, stockholders, management etc. The objectives of corporate reorganization include (1) the maximization of the value of the reorganized corporation or the going-concern surplus and (2) protecting creditors' contractual rights. This dissertation proves that corporate reorganization is a reallocation of the corporate ownership. In the perspectives of property economics, a firm's debts and stocks are the same property rights forms in nature, the difference between these forms is just the different risk-sharing and payoff scheme. Limited liability and debt contracts determine mutually the risk-sharing and payoff scheme between stockholders and creditors of a corporation. And debt contract is indeed the corporate governance of the contingent ownership reallocation. Defaults cause the distortion between the value structure and ownership structure of property rights. When it happens, the reallocation of corporate ownership is necessary. Corporate reorganization is such a kind of reallocation of corporate ownership to resolve the distortion and resume the incentive effect of property rights. After the reallocation of corporate ownership, the restructuring of a corporation's business structure, capital structure, corporate governance and management becomes possible, and the going concern of a corporation becomes possible. There are two steps in the process of the reallocation of ownership incorporate reorganization. At first, all claimholders abandon their claims. Then the ownership is reallocated among these claimholders according to their priorities and some other rules. Thus some or all creditors become the owners or the holders of new claims of the reorganized corporation and their prebankrupt contractual rights are respected. So the main objective of the reorganization law is to protect the procedure of corporate ownership's reallocation. And these are the problems of property rights. There are 7 chapters in this dissertation. Chapter 1 introduces some related theories. I first define bankruptcy and corporate reorganization. Then I explain the basic contents of property economics and contract economics, clarify some mistakes about the terms "property rights" and "protecting entitlements", and then I put forward some rules used to protect entitlements. Then I analyse the contracting view of the modern theory of the firm. At last I explain some theories of bankruptcy legislation. In Chapter 2, I analyse the nature of corporate reorganization based on the theories of property and the firm. Tranditional literatures view corporate reorganization as a process of corporate ownership's transfer from stockholders to creditors. From the perspectives of property economics, I argue that corporate reorganization is indeed a process of property rights' reallocation after the cancel of all claims against the bankrupt corporation. In Chapter 3, I explain the importance of the reform of corporate governance in corporate reorganization. I argue that an unsound corporate governance may be one of the reasons of corporate bankruptcy, and the going concern of the reorganizated corporation also need a effective corporate governance. I conclude that the reform of corporate governance is pivotal in corpora...