On The Mode Of Creditors' Rights Investment And Feasibility Of Debt-to-Equity Swap

Debt-to Equity swap is one of the important measures for state-owned commercial banks to dispose many bad assets, it means that the financial asset management corporations set up by state-owned commercial banks as the subjects of investment to turn the original bad credit loans of commercial banks into the stocks of financial asset management corporations, it's a special model of contribution of corporate capital.Though such system has not been clearly specified into the law level and the stipulations of the modes of contribution are quite different in the new and old company laws of PRC. The new amended Company Law of PRC and Regulations of PRC on Administration of Registration of Companies have made some variations to the model of contribution, no longer strictly limit the models within five types. Except that, Opinions on Several Issues Concerning the Implement of Debt-to Equity were promulgated by the State Commission of Economics and Trade and Central People's Bank on July 30 1999 and Review Regulations on the Plan of Enterprises' Debt-to Equity promulgated by the State Commission of Economics and Trade, Financial Ministry and Central Peoples' Bank on Nov.23 1999 and Notice on Strengthening Management and Standardizing Operation of Enterprises' Debt-to Equity promulgated on Nov. 6 2000by the State Commission of Economics and Trade have made specified operation rules for the issue of debt-to equity swap. Laws in different countries and regions have different provisions on the model of contribution; such different provisions will be elucidated and compared in this dissertation with the purpose of qualifying the legal properness of the model of creditors' rights investment.Debt-to equity swap is a kind of measure to activate the bad assets and eliminate the financial risks, however, if not operated prudently, it faces great risks; and the outcome of the whole process would probably not improve the quality of assets in the whole systems of banks, and it may bring about even greater financial risks. It has significance for China's of debt-to-equity practice through studying these methods In this dissertation the author also analyzes the legal obstacles for the operation of debt-to -equity and puts forward the relevant solutions.