The Commercial Law System Study On The Financing Rescue Of Companies In Financial Distress

In recent years, academics and practitioners are very concerned about the hotissues into the theory and practice of the company in financial distress. Financialdistress is a serious deterioration of the company’s financial position to reach thebrink of bankruptcy of the state. Company in financial distress not only affects thecompany’s normal operations, but also to the economic interests of our shareholders,and the negative social impact is significant. Therefore, it is particularly important forthe continued operation of the value of the company to take timely and effectivefinancing, to encourage and even help out of financial distress as soon as possible inorder to resume operations. However, there is a relatively small legal systeminvolving financing system of financially distressed companies, and no systemrequirements, but the plight of the company’s financing legal system conducive to afundamental solution to the plight of the company as soon as possible.There are some feasible ways of financing for financially distressed companies,such as in DIP financing, pre-reforming system, the refinancing of the debt-equityswap, equity restructuring, senior management, acquisition, issue new shares, theissuance of bonds. Within the framework of the commercial legal system,"Bankruptcy Law" mainly regulates DIP financing system and pre-reforming system.It occupy an important position in China’s new bankruptcy law to set the priority of asecurity right to get DIP financing for the company in financial distress. The greatestsignificance of the pre-reforming system is to win favorable financing for thecompany in financial distress which entered bankruptcy proceedings and to obtaininitiative to arrange means of financing. Within "Company Law" adjustment range,the debt-equity swap is the main way of companies in financially distress to obtainfinancing. It is legal protection for this financing to play a role to solve the fundeddebt-claims legitimacy problems, the proportion of funded debt problems anddebt-equity swap equity exit mechanism. In addition, the ownership structureadjustment financing, management buyout of the senior management compensationincentives also are an important way for financially distressed companies to obtaineffective financing, which can encourage the existing shareholders a further injectionand attract new shareholders’ investment. Within the scope of the "Securities Act", itis necessary to improve China’s securities market financing for financially distressed companies to provide more convenient capital market channel.