Research Legal Issues Of Subordinated Debt And Hybrid Capital

Based on the practice of subordination and capitalization of debt and along with robust western financial innovation, Subordinated Debt is developed to bring the pari passu doctrine abundant diversification. Its further development at the first decade of the 21^st century leads to a broader legal system - Hybrid Capital, which embraces all related debt-equity inoculated securities and bonds. There's no doubt that Hybrid Capital will gradually substitute by embodying Subordinated Debt as part of its theoretical construction in that its hybrid legal characteristics cover all ingredients of single debt-based Subordinated Debt. The difference of appellation make sense only in their respective implementation of various vehicles for different level of supervisions.In a practical perspective, Subordinated Debt has been widely supporting corporate finance including bank capital and project financing through capital market. As its advanced version, financial vehicles supported by Hybrid Capital has also been broadly recognized and utilized, especially in Bank Capital area with the issuance of new Basel Accord. The identification of Hybrid Capital can be categorized into narrowly and broadly as well. The narrower identification indicates those securities issued by commercial banks, fitting the UT-2 capital, pursuant to the Basel Accord. The wide identification is referred to as "hybrid securities". It's foreseeable that with further legal development, it will be implemented on a more sophisticated and extensive level.This article focuses on comprehensive introduction and critical analysis of Subordinated Debt and Hybrid Capital in diversified areas. And it gives an insightful demystification on the establishment and realization on the products thereof from a perspective of Chinese and western bankruptcy law.This article comprises of five chapters following three logical parts. The first part, which covers Chapter I and Chapter II, reveals the purport and function of definition, legal intension, characteristics and categories of Subordinated Debt and Hybrid Capital on a universal corporate law level. It integrates pertinent legal capsules including Preferred Equity and Convertible Debt under the framework of comparative analysis and probe into them respectively.The second part includes Chapter III and Chapter IV. Chapter III focuses on the establishment and realization of Subordinated Debt and Hybrid Capital. Bankruptcy legal mechanism is also covered by this chapter due to the fact that it regulates directly the realization of the above instruments. Chapter IV focuses on the utilization of Subordinated Debt and Hybrid Capital in the bank and project finance area, proceeding with the analysis of general corporate level utilization, which itself is an independent and parallel fabric thereof.The third part involves Chapter V, which expatiates the legislation and legal practice of Subordinated Debt and Hybrid Capital. This chapter observes carefully the status-quo of Chinese debt market finding that along with further initiation of implementation thereof and the enactment of new bankruptcy law, Subordinated Debt and Hybrid Capital shall evolve into a better full-fledged mechanism. This chapter gives an in-depth analysis to and advises on several major issues in Chinese debt market from a comparative view with observation on foreign bankruptcy law.