The Assignment Of The Tax Deductible Value Of The Financial Loss In The Backdoor Listing Reorganization

The existence of the financial loss of an enterprise has the function of reducing its liability to pay enterprises income tax in the future, thereby cut back the cash outflow. This make the financial loss be a kind of asset. However, due to the Prudent Principle of Accounting and the condition of the bankrupt enterprise, the tax deductible value of the financial loss always been overlooked in the accounting measurements. The existence of the tax deductible value of the financial loss is on the premise of the continuity of the bankrupt enterprise, which means,if the enterprise is been liquidated rather than reorganized, then the tax deductible value would be non-existence. In fact, the financial loss is more than a kind of asset, or rights, but also a kind of property, in the legal sense, which could be monetized and transferred with a FMV in the market. So, the assignment of its tax deductible value should never exclude the creditors. However, the reality is that the restructuring side didn’t offer any consideration for the obtainment of this kind of value in the course of the reorganization. As the de facto owner of the enterprise, the ordinary creditors, whose debt is not being warranted, didn’t be fully discharged. They were excluded from the assignment of the value, completely.In my view, the assignment system of the tax deductible value of the financial loss should be reconstructed, the core of which is the assignment to the ordinary creditors, because the debt of other creditors has always been satisfied. However, the ordinary creditors’ proportion of claims is always very low. So to make the assignment system of this value to be fair, we should allocate this value to the ordinary creditors so that we can increase their proportion of claims. To achieve this target, the core is to take advantage of the tax deductible value of the financial loss to raise the ordinary creditors’ proportion of claims. Due to the infeasibility of the amendment to Article 87(2),the only way left is to rely on the discretionary power of the judge. And the criterion of which is to judge whether the ordinary creditors’ proportion of claims in the reorganization is higher than the proportion in the liquidation plus N(N represents the proportion tax deductible value of the financial loss brings to the creditors), if so, the project is reasonable, and if not, the project should not be forcing confirmed. And to find N, we need to have the aid of the assignment of the burden of proof. To be brief, the debtor should bear the initial burden of proof by mean of the information disclosure system to disclose the tax deductible value, and then if the creditor think the tax deductible value of the financial loss should be more, he should prove it.This article is totally divided into five parts:The first part is the introduction, which simply discussed the background and significance of this paper. In this part, the research methods and literature review will also be introduced in this part.The second part, or Chapter 1 mainly discussed the possibility of the financial loss to be a kind property in the legal sense. More specifically, after defining the two concepts of the Tax deductible value of the financial loss and the backdoor listing reorganization, this part discussed the value nature and property nature of the tax deductible value of the financial loss via its transferability and measurability. As a summary, this part concluded that the financial loss is more than a kind of asset, or rights, but also a kind of property, in the legal sense, which could be monetized and transferred with a FMV in the market. So, the assignment of its tax deductible value is very important.The third part, or Chapter 2 mainly discussed the assignment system of the value in the current legal system. This part first explained the meaning of assignment under the circumstance of reorganization and proposed that the essential issue of the current system is that the right and game capability of the ordinary creditors is cleared up, and the tax deductible value of the financial loss becomes the target scrambled privately by the original stockholders and recombination party, while the ordinary creditors is excluded out. This part then introduced three kinds of reorganization, especially discussed the assignment model of the value in the backdoor listing reorganization, and we also briefly outlined the influence of belongingness of the reorganization project’s constituting power. At last, we discussed the reason of the irrationality of the current system. We think that the debt settlement rate and compulsory approval right of the project by the judge, which make the ordinary creditors lack of game capability, lead to the irrationality.The forth part, or Chapter 3 offered a blueprint of reconstruction of the current assignment system. The new system should include the information disclosure system to disclose the tax deductible value, the system to judge the fairness and rationality of the reorganization project. And endow the judge with the discretionary power.The fifth part is the conclusion of this article, which summarize some ideas and thoughts of this paper.