Reorganization Of Assets In Accounting, Research And Analysis Of The Legal Issues

Reorganization is the significant change legal or economic structure beside a corporation's daily operations, including the change of legal structure, liability reorganization, share purchase, assets buy, merger, discreteness and so on. Mergers and Acquisitions (M&A) is an important pattern of reorganization. There are various ways of acquisition, such as purchase assets or share by assets, purchase share or assets by share and the mixture of all the ways above. Though all the ways above can make a M&A project succeed, in practice the application of ways of acquisition are different in different circumstance and tax, law, cost and such the like are all the consideration in choosing of acquisition project. As a result, it is an important premise that design and choose the appropriate acquisition project according to the actual situation of a company to make M&A come through.Investment bank is a non-banking financial institution that engages in security issue, underwriting, trading, business reorganization, M&A, investment analysis, venture capital, project financing and so on, which is the primary financial intermediary in capital market. As the most important intermediary in the process of assets reorganization, the investment-bank take responsibilities such as program designing, executing and material declaration to SEC. Together with the accounting firm, law firm and appraiser firm, investment bank carries out the due diligence to the company, analyses and solves the issues that relate to finance, law, accounting and such the like in the process of reorganization, which satisfy the request of SEC about business assets reorganization and make the project succeed.Guan Hao Gao Xin is a public company whose stock code is 600433. In its reorganization project GHGX purchase 100 percent stock ownership of Guan Long Zhi Ye which belongs to the same group with GHGX. And in this project CITICS and Jing Tian&Gong Cheng are the intermediaries conducting the project which is prepared at the beginning of April 2010 and starts at July. At December the 22th, the reorganization project of GHGX is passed by SEC and published to the public soon after. The program designing of GHGX reorganization project involves two key issues that are purchasing object and mode of payment. The object that GHGX purchases can be assets or stock ownership of GLZY, and the mode of payment can be assets or shares. As a result, the program could be any one of the follows, purchasing stock ownership by assets or shares and purchasing assets by assets or shares. The selection of program above relate to several considerations such as the cost, tax planning, the sophistication of audit, exemption of immunity offer obligation etc. And the final program is purchasing stock ownership by cash which is the comprehensive outcome according to the consideration above.In the operation of this project, the shareholder China National Paper-Industry Investment Corporation suggest that GLZY make up the loss over the past years by registered capital and then distribute the profit of 2011, which is disputed by the relevant parts. According to the audit reports of ZZZJ, by the end of 2009, the loss of GLZY had rose to 3 thousand million yuan, while its profit in the first half year of 2010 is 660 million yuan. The plan CNPIC put forward is a quick way to take back its own cash flow, meanwhile it is available for GHGX to ease its burden and maintain good fame in public. It is an general mode to make up loss by registered capital, however, in China, there are no distinct laws about whether this behavior is viable or not. Since some domestic public companies had used this way in practice, it is not impracticable that companies make up loss by registered capital. In the business operation, it is necessary to notice creditor before making up loss by registered capital to protect their interest.The assets reorganization project involves many questions such as program designing, making up loss by registered capital, profit distribution that are about finance and law, and the process of solving which is a process of gaming by all the stakeholders:in practice, as an intermediary, its target is not only to help companies succeed in reorganization but also to guarantee its own fairness, independence, legality. And as a company, its target is completing the project by the lowest cost and satisfying the request of shareholders and board of directors. While as the regulator, besides auditing the project whether it achieves the standard of assets reorganization, also, It should supervise the legality and security of the project. It is undeniable that in China, the basic construction such as accounting and law is not matching capital market, which is reflected in many aspects:whether the way of making up loss by registered capital is legal or not and whether the intermediaries like accounting firms or law firms can keep their fairness, independence and legality instead of being affected by the company. Knowing the basic constructions of capital market and improving them step by step will contribute to the development of China's capital market and will help shape a good market circumstance, which is very important to the process of internationality of China.