Corporate Governance In Recorganization

The Enterprise Bankruptcy Law of People’s Republic of China(Bankruptcy Law), entering into effect on June1,2007, categorized thebankruptcy cases into reorganization, reconciliation and liquidation.Reorganization means the regime upon which the enterprises that arecurrently insolvent but promising to be revived can be saved from theliquidation. The establishment of the reorganization regime aimed toincrease the efficiency of the market and reduce the chain reaction thatgenerates negative effects as well as the huge social and economic costsof liquidation. The successful application of reorganization is contingenton the corporate governance in a scientific way during the organizationperiod and the optimal allocation of powers and interest between relevantinterest subjects.This thesis, based on the definition of corporate governancecombining with the specific effect of the organization procedure on thecorporate governance, restated the basic regime for corporate governancein organization period, with the aim to facilitate the development ofbankruptcy legal theories and the practice in bankruptcy cases. This thesis is divided into six Parts:The introduction described the value of the organization procedureand significance of this topic. The current debates and scholars focusedon the powers and rights of each particular corporate organ and lacked theoverall analysis for corporate governance.Chapter I reviewed the definition of Corporate Governance ofdifferent perspectives. Most of the definitions are based on the benefitsmotivation and market efficiency of the Economics, withoutincorporating legal principles. This thesis would consider that someabstract issues like the ownership structure, property theories, agent andprincipal, as well as some concrete problems such as internal governance,power equilibrium, and governmental administration are included incorporate governance. The corporate governance in normal state has threelayers, i.e. the control power, internal governance and externalgovernance. The specific nature of the reorganization will affect theinterest structure and the each participant in the corporate governance.Chapter II drew a line within the layer of control power and statedthat the creditors should assume the residual control power of theenterprises, and the shareholders would still enjoy the right to participateto some extent. The reorganization procedure not only restricted theforms of the original rights of the shareholders, but also granted theshareholders the right to apply for the commencement of reorganization procedure, the right to be informed, to supervise and to vote for or againstthe reorganization plan.Chapter III stated the internal governance of the reorganizationprocedure. Firstly, the Creditor’s Meeting shall be the supreme authorityof the internal governance of the corporate and make the significantdecision for the enterprises. The current regulations permit theestablishment of Creditor’s Committee as the standing institution of theCreditor’s Meeting. Secondly, this thesis discussed the trust relationshipbetween the Creditor’s Meeting and the bankruptcy trustee. Thirdly, thisthesis stated the division of power and the trustee and the originalmanagement of the enterprises under trustee model anddebtor-in-possession model. Fourthly, this thesis discussed thetransformation of the rights and obligations of the original managementof the enterprises.Chapter IV focused on the external governance of the enterprises inreorganization, and stated the impact of the court on the corporategovernance and emphasized the restrictions of the court’s discretion.The Conclusion reemphasized the plot of this thesis and reaffirmedthe significance of this study. The corporate governance in reorganizationis a quite complex regime arrangement, involving the interaction andinfluence of a larger number of market participants upon each other. It isof great importance to improve the legislation, deepen the discussion on legal theories and enhance the empirical studies, so as to make use of thereorganization regime to serve the healthy development of the nationaleconomies.