Studies On The Legal Problems Of Debt-to-Equity Swap

Debt-to-Equity Swap means that the state-owned commercial banks turn the bad credit assets into the stocks of financial asset management corporations. After many years'development of theory and reality, as a new form of asset operation, the Debt-to-Equity Swap is triggered by the Central Committee of the Party and the State Council to eliminate the finacial risks, relieve the debts'burden of enterprises , make the state-owned enterprise shake off poverty in three years. In order to exploit the bad credit assets which are formed under the old system to activate the bad loan of banks and to relieve the debt'burden of enterprises, the Debt-to-Equity Swap is settled down by our country in the form of policy as the best way to solve practical problems. Within the period of enforcement, the Debt-to-Equity Swap will encount many sophisticated problems which are not discussed before including legal problems. These problems need the serious study. The whole thesis is divided into three chapters: Chapter One presents the operating mechnism of Debt-to-Equity Swap. Firstly, the author gives the definition . Debt-to-Equity Swap means that the creditors and debtor sign a contract to turn creditors'right into shareholders'right in order to eliminate the original relationship of credits and debts. Basing on this sense , the author analysizes commercial Debt-to-Equity Swap and policy Debt-to-Equity Swap respectively, then points out that the policy Debt-to-Equity Swap is only used for the State Council to deal with bad assets of financial institutions and for the state-owned enterprises to shake off poverty. Secondly, the author introduces the origin of Debt-to-Equity Swap, gives a picture about the ways to solve the bad assets of banks . Debt-to-Equity Swap is chosen as the best way to solve the practical problems. Thirdly, the author explains the operating procedure of Debt-to-Equity Swap. It includes establishing the financial asset management corporation with legal status, selecting the enterprise to carry out Debt-to-Equity Swap, the commercial bank transferring the creditors'rights to the financial asset management corporation in the form of contract, the financial asset management corporation qitting the shares. By doing so ,we will have a macro-understanding about Debt-to-Equity Swap, then finds out the problems to encahnce the practical functions of Debt-to-Equity Swap. Chapter Two discuss the legal obstructions which might be encountered in the function of Debt-to-Equity Swap and the ways to overcome them. Debt-to-Equity Swap ,as the method to solve the bad assets of banks, is settled down in the form of policy. It will confront many legal obstructions. First of all, it's the problem that whether the creditors'right in Debt-to-Equity Swap could be used as investment or not. Although our country's Corporation Law lists five investing models, by the teleogical method of expanding interpretation and taking the convertible bond as reference, the creditors'rights in Debt-to-Equity Swap can be used as investment .Secondly, it is the problem of registered capital enrichement. In the process of turning the creditors'rights into the shareholders'rights, the creditors use their rights as the investment for the debtors, the corporations'assets do not have any evident changes. But the registered capital will be increased greatly.It will conflict with the regulation that registered capital should be payed and collected fully. The author provides two possible solutions from the aspects of good and bad creditors'rights. Thirdly, it is the problem of reinvestment restriction. By the method of positivism investigation, the author clears the wrong understanding that Debt-to-Equity Swap breaks through the reinvestment restriction. Debt-to-Equity Swap is just one of the ways to solve the bad assets of banks, meanwhile its small amount doesn't break through thedefined investment amount regulated by the Corporation Law. In the end , it's the problem of warranting effect which mainly refers to the effect of general warrant in the process of transferring creditors'rights under common conditions and under the condition of maximum hypothecation. The author thinks that it can be overcomed by the judicial interpretation of the Supreme Court. Chapter Three studies the reform of our country's corporate capital system from the aspect of Debt-to-Equity Swap. The corporate capital system of our country lies in the capital trust which reflects the enough protection of the creditors'profits and the trading safety. In this chapter, the author examines the capital trust at first. After analysis, the author concludes that the corporate capital can't reflect the corporation's trust. So the creditors'profits can not obtain enough protection with expected results. The assets of corporations could be regarded as the base of paying the debts. The corporation should lay its foundation on asset trust. The corporate capital system should be designed according to the protection of the corporate asset. Secondly, the author examines the investment models abroad from the aspect of creditors'rights investment, then suggests the Corporation Law should broaden the investment models in order to allow the shareholders and promoters to invest with the creditors'rights leaving enough spaces for the parties to consult with each other. Thirdly, the author discusses the problem of reinvestment restriction. After reviewing and criticizing the reasons for reinvestment restriction, the author proposes that it is quite unnecessary to use legal regulationa to restrict the corporation's reinvestment. In some sense, the restriction confines the development of corporations and harms the resource disposition under the condition of market economy. The Corporation Law of our country should eliminate the reinvestment restriction to leave enough spaces for the parties. Fourthly, the author discusses the problem of whether the system of forced assessment should...