On Balance Of Interests In The Bankruptcy Reorganization

The introduction of Bankruptcy Reorganization to China opens up a new way to help enterprises in plight to revive on the premise of cleaning up debt fairly. This system involves the complex interest relationship with many interest subjects. Creditors, debtors, shareholders, reorganizers (new investors) and other main parties in the reorganization process will have different interest demands, which highlight the conflicts of interest. Reorganization is a process to coordinate and balance multiple conflicts of interest, in which finding a balance point to duly control the interest of all parties is the most important and difficult one. It is crucial to emphasize the balance of interest during construction in order to properly coordinate and balance of the conflicts of interest of the main parties.From an economic perspective, the system of reorganization has a natural defect– externality, which means that the creditors will shift risk. Therefore, it is the balance of interest between creditors and debtors, creditors and investors, creditors and reorganizers (new investors) in consideration of interest relationship of the main parties; while from a social point of view, it can be the value balance between justice and efficiency. Many countries are trying to establish the balance of interest through legislation, but they focus on different ways. This paper is to discuss how to solve the conflicts of interest under the guideline of“win-win cooperation”and find related legal and judicial measures to maximize the interest of all parties on the basis of protection of the enterprises, taking the Chinese judicial practice as the foothold, the interest balancing as the main line and the improvement of practice of Chinese bankruptcy reorganization and legislation as the goal. This paper argues that the balance of interest is not only a sort of balanced state and balancing process, but also a kind of balancing concept of reorganization. During the process of reorganization , conflict of interests is the real shore while harmonization of interests is the ideal other shore ,and the balance of interests constructs the essential bridge while connects the real shore to the ideal other shore. In the legislative and judicial process of reorganization, the balance of interest of all parties should be adhered to with a reasonable boundary between judicial intervention and the autonomy of private law for parties, achieving the multiple targets of rebuilding the value balance of justice and efficiency and ultimately protecting the interest of creditors, and then saving company of the debtors as well as taking the social interest into account through dealing with the balance between different parties.In addition to the introduction section, there are four chapters in this paper.The introduction section explains the concept and content of bankruptcy reorganization, introduces the historical development of Bankruptcy Reorganization, analyzes the balancing mechanism of interest involved in the system of reorganization, and points out the key problem of legislation reform of all countries is to accomplish the interest balance during reorganization.Chapter I discusses the pattern of interest in the bankruptcy reorganization. On the basis of assuring multiple parties of interest of bankruptcy reorganization, it analyzes that the pursuit of diversity and convergence of the main parties forms the priority of social interest, and the pattern of interest which includes the common interest of creditors and debtors, and also creditors and shareholders. The system of bankruptcy reorganization allows main parties to express their demands to build up a platform to achieve their benefits.Chapter II reveals the multi-layer conflicts of interest in the system of bankruptcy reorganization: the interest conflicts between creditors and debtors, creditors and creditors, creditors and shareholders (reorganizers), large shareholders and small shareholders, as well as the conflict between the interest of involved parties of reorganization and social interest.Chapter III analyzes and demonstrates measures of interest in the system of reorganization. From the perspective of judicial decisions, it explains the key points of interest measuring to deal with three different situations: re-application, normal approval and Mandatory approval. Besides, it gives an empirical analysis by a case.Chapter IV explores the balancing point of interest in bankruptcy reorganization, for the achievement of interest balancing during reorganization proceedings. It demonstrates the status and role of the court in the reorganization and put forward some advice on how to pass legislation to achieve static balance of interest through legislation. The reformed legal framework is actually a legal guide of all negotiators, for the negotiation and consultation can help to achieve the dynamic balance of interest of all parties in reorganization.