Studies In Legal Mechanisms For Rescuing Distressed Firms

To establish effective legal mechanisms aiming at debtors' continual existence,to rescue firms in financial difficulties avoiding their bankruptcy, and furthermore,to protect creditors' interests and social stability,is an important subject in global law field,especially in bankruptcy law field. Now,all countries and districts have gradually established Reorganization system as judicial rescue procedure,and Workouts system which is a Non-judicial rescue procedure.But the above mechanisms get into difficulties more and more with their playing important roles,and cannot satisfy the needs that diversification of firms in financial difficulties demands multi legal mechanisms.That is the case in China.So, institutional improvement and development is necessary.The article aims at institutional improvement,has the clue of considering both fairness and efficiency,and of connection judicial intervene with private autonomy.Summarizing former mechanisms,then analyzing deeply Pre-packaged plan,the article tries to supply new approach for rescuing troubled companies.The whole article includes five chapters apart from introduction and conclusions.The first chapter is about general theories of rescuing troubled companies.By analyzing essence,history,and theoretical basis of rescuing troubled companies,and confirming central ideas,value objects,and principles of rescuing mechanisms,and further analyzing and evaluating standard of former and new mechanisms,the article believes that the central idea of rescuing mechanisms is to create more values for creditors and other interest-relative persons than values in bankruptcy.And that the principal value objects of rescuing mechanisms are to realize maximum of debtors' assets,to protect all creditors' rights fairly,and to resolve financial difficulties in time.And that resolving distressed firms should maintain the following principles:advantages to corporation rejuvenation,fairness,and efficiency.The second chapter is about judicial rescue procedure of distressed firms:Reorganization.Studying Reorganization system,and analyzing value and barrier of judicial rescue procedure,is the basis of further study to new legal rescue mechanism.The article holds that Reorganization system has following values:to rescue distressed firms through legal procedures,to balance multi-interests by "justice" and "democracy",and to make farewell maximum of all creditors by "collectiveness",and to enhance effectiveness.Reorganization system plays its role by taking following measures:preserving debtors' assets,managing business affairs, participating of creditors,protecting creditors' interests,and making reorganization plan,etc.But Reorganization system has its defects.From the view of law,it confines people's autonomy because of obvious judicial intervene,and it imbalances people's interests to soma extent because of excessive protection to debtors.From the view of economy,it leads to bad influences resulting from high financial cost,delay in time,and publicity, besides,it results in lots of waste of judicial resources.The third chapter is about non-judicial rescue procedure of distressed firms:Out-of-court debt restructuring.Studying Workouts system,and analyzing meaning and defects of non-judicial rescue procedure,is the basis of further study to new legal rescue mechanism.The article holds the opinion that legal essence of Workouts is debt change by private agreements,which is special contract apply and relief method of credit,and has the basis of debt restructure and assets restructure.Workout has following values:protecting creditors and rescuing debtors by their autonomy,and realizing interests maximum at less costs.But Workout has its drawbacks difficult to conquer,which are as follows:Not to prevent effectively individual creditor from claiming repayment and not to avoid "free-riding problems",to lead to severe "holdout problems","information asymmetry problems",and inequality of opportunities.Contradiction between fairness and efficiency in Workouts is more obvious than that in Reorganization system.Workout has independent value,but it cannot replace judicial reorganization,and cannot apply to all firms' rescuing.We should seek more efficient rescuing mechanisms.The forth chapter is about combination of judicial rescue and non-judicial rescue:Pre-packaged Reorganization,which is new scheme in future rescuing of troubled companies.The article supports that Pre-packaged Reorganization has following characteristics:creditors and debtors have got into agreements on reorganization plan,and demands creditors to vote the plan;putting forward reorganization plan with bringing forth reorganization procedure;reorganization plan agreed by majority of creditors before applying reorganization procedure is bound to all creditors. Compared with Reorganization and Workouts,Pre-packaged Bankruptcy adopts advantages of the both mechanisms,and avoids their both defects. Pre-packaged Bankruptcy Reorganization to firms rescue has following values:to make all creditors' farewell maximum,and give consideration to both fairness and efficiency by combining judicial rescue procedure with non-judicial rescue procedure,by combining private autonomy with judicial intervene,by less transaction costs,and by "collectiveness".With the development of Pre-packaged Reorganization,mechanisms for rescuing troubled companies becomes diversified.The fifth chapter is about mechanisms' future development for rescuing troubled companies in China.Analyzing,summarizing,and evaluating Chinese legislature and practice of Reorganization and Workouts, demonstrating distressed firms in China are confronted with the same institutional distress,and the same demands of institutional development. The article puts forward that it is necessary and possible to establish Pre-packaged Bankruptcy in Chinese legislature,and that Pre-packaged Bankruptcy should be taken as an institutional choice of a mechanism's future development for rescuing troubled companies in China.Establishing Pre-packaged Bankruptcy in Chinese legislature should get to two purposes: one is to maintain good results from Workouts,to make it convenient for all parties to take informal negotiation mechanisms.Two is to bind those minor creditors and shareholders who object to reorganization plan from Workouts.And referring to international experience,considering our country's current bankruptcy legislature and practice,the article designs specific executive procedures.