Research On Protection Of Financial Creditor's Rights In Bankruptcy Of Zombie Enterprises

Zombie enterprises are those who are economically unavailable,but kept alive only with aid from the government and banks.The 19 th National Congress of the Communist Party of China proposed that in building a modernized economic system,we must take the supply-side structural reform as the main line,persist in five major tasks: Cutting overcapacity,Reducing excess inventory,Deleveraging,Lowering costs and strengthening areas of weakness.We must work to achieve a dynamic balance between supply and demand by improving the allocation of available resources and increasing high-quality supply.The Central Economic Work Conference in 2018 request,we should vigorously break the void of supply,and take the disposal of the zombie enterprises as an important starting point to promote the solution of excess production capacity.Handling the zombie enterprises according to the law becomes the focus of the recent government work after they put forward the structural reform of the supply-side and five major tasks.The bankruptcy legal procedure refers to the procedure that the debtor's total assets are distributed equitably by the court when the company has the bankruptcy reason.The bankruptcy legal procedure is one of the most effective ways in law for the zombie enterprises to get out of the market and release the production capacity.Financial claim,as the biggest claim among various claims in bankruptcy of zombie enterprises,directly relates to the ordered development of market economy and stability of the whole society.Though the Enterprise Bankruptcy Law has set up many systems to protect creditors aiming at the problem of balanced creditor interests,for example: manager system,credit meeting system,claim satisfaction sequence,bankruptcy reorganization system and so on,moreover,laws and regulations including corporation laws,contract laws and so on have provided legal guarantee for protection on creditors,relevant legislation in China hasn't made clear provisions on financial claims.In addition,due to the insufficiently sound judicial methods as well as self-particularity and policy of zombie enterprises,there are many inadequacies in the protection on financial claim during the disposal of zombie enterprises byrelevant authorities.In terms of the formulation of laws and regulations,laws and regulations on liquidation order of bankruptcy estates,bankruptcy reorganization system and bankruptcy reorganization plan are not sound.The legal security mechanism for compensation priority on bonded claims among financial claims is weak.In juridical practice,problems such as long bankruptcy flow,low enthusiasm of financial creditors to participate in bankruptcy,lack of operability for relevant systems and so on are popular;moreover,problems such as that defects on information disclosure for zombie enterprises is not beneficial for timely right protection of financial creditors;the prohibition of debt-to-equity swap in zombie enterprises make financial claims difficult to be maintained,the policy of priority on employee settlement causes partial cancellation of financial claims,viciously evasion of debts by zombie enterprises may prejudice the fulfillment of financial claims and so on are threatening the safety of financial claims.All these will prejudice the orderly promotion of zombie enterprises governance procedures,or even cause systematic risk in financial industry,as well as affect the stability of national financial order and economic society.Therefore,the fair design on legal systems as well as fair treatment on financial claims in juridical practices are proper meaning of protection of creditors' rights by laws and regulations such as bankruptcy law.Some foreign countries have perfect legal security mechanisms on financial claims.They set up strict satisfaction limits on financial claims,matched with perfect relief approaches.This may give some enlightenment on legislation and judiciary in China,introduce and apply advanced bankruptcy system in legislation in China,promote the development of legal theory and legal practice,construction of rule of law in China.Moreover,countries such as America and Japan suffered serious impairment on economic society brought by zombie enterprises at the end of last century.Their application of legal methods like bankruptcy procedure in solving the problem is also worthy our reference.During the disposal of zombie enterprises with bankruptcy procedures,legislation and judicatory have played an important role in the protection of financial claims.Attention shall be paid to the construction of systems and mechanisms for legislation and judicatory.On judicatory,establish government mode for new type zombie enterprise bankruptcy cases,determine liquidation order for various claims in bankruptcy of zombie enterprises,strengthen legal security mechanisms to guarantee priority on compensation of real rights,perfect relevant systems for bankruptcy reorganization plans of zombie enterprises,perfect systems on rights of bankruptcy cancellation and so on.In judicatory,actively lead financial creditors of zombie enterprises to enter judicial procedures,simplify bankruptcy flow for zombie enterprises and improve compensation rate for financial claims,perfect bankruptcy manager system.Moreover,special attention shall be paid to perfecting internal management and information disclosure systems of financial institutions,the proper application of debt-to-equity swap on financial claims,perfecting the policy on priority for employee settlement in bankruptcy of zombie enterprises,legally enhancing punishment mechanism on debt evasion and so on.