On The Legal Issues Of Creditor's Claims For Equity Swap Of Commercial Banks In Bankruptcy Reorganization

When a company is in debt crisis,especially bankruptcy and reorganization,converting creditor's rights(such as loan principal and interest receivable from commercial banks)into equity will help resolve corporate debt crisis and save valuable companies.It also helps creditors to better realize their claims.It seems to be a win-win solution for creditors and debtors.However,in the theoretical and practical aspects of the creditor's claims for equity swap about commercial banks in bankruptcy reorganization,there are still controversies.For example,what is the legal nature of debt-for-equity swaps in bankruptcy reorganization? Whether the creditor's claims for equity swaps of commercial banks in bankruptcy reorganization require state intervention and its limit? How does the creditor's claims for equity swap of commercial bank apply to the mandatory approval system of the reorganization plan? What kind of shareholder rights does the commercial bank enjoy in the execution of the reorganization plan? And how does the commercial bank withdraw after the completion of the reorganization plan? In view of this,this paper takes the creditor's claims for equity swap of commercial bank in bankruptcy reorganization as the research object,and defines the legal nature of the commercial bank creditor's claims for equity swap in bankruptcy reorganization as the starting point.According to the ‘development-approval-execution-completion',the legal problems that may be faced in the above four stages are analyzed in this paper and legal suggestions are proposed.In addition to the introduction and conclusion,the full paper consists of five parts.The first part: an overview of the creditor's claims for equity swap of commercial banks in bankruptcy reorganization.First of all,according to the general statement,creditor's claims for equity swap refers to the behavior of the creditor's holding of the target corporate creditor's right to the equity investment of the enterprise.At the same time,the development of China's creditor's claims for equity swaps has undergone a transition from a policy-based creditor's claims for equity swap to a market-oriented creditor's claims for equity swap.Secondly,the implementation path of creditor's claims for equity swaps can be divided into three modes: Debt to equity swap,issuing shares to repay debts and combination of stock and debt.Thirdly,for the purpose of withdrawing creditor's rights and controlling bad rates,commercial banks have the economic incentive to implement creditor's claims for equity swaps.Finally,regarding the legal nature of commercial bank creditor's claims for equity swaps in bankruptcy reorganization,it can be evaluated progressively from three levels: first,at the contract law level,the creditor's claims for equity swap agreement is a substitute settlement contract;second,at the company law level,creditor's claims for equity swaps are claims.Capital contribution;Third,at the level of bankruptcy law,creditor's claims for equity swaps adjust the rights of investors to pay off their claims.The second part: the state intervention limit of commercial bank creditor's claims for equity swap in bankruptcy reorganization.The new round of creditor's claims for equity swaps is based on marketization and the rule of law.Marketization means that the implementation of creditor's claims for equity swaps should fully respect the autonomy of the parties,especially the creditors of commercial banks.However,the creditor's claims for equity swaps in bankruptcy reorganization have the dual failures of market failure and government failure.The cause of market failure is the externality of bankruptcy and the short-sighted behavior of all parties involved in bankruptcy and reorganization.And the cause of government failure is excessive government intervention and insufficient supply of public goods.So the appropriate state intervention is needed.The government should improve the supporting systems and policies related to creditor's claims for equity swaps and ensure the smooth implementation of the bankruptcy law.At the same time,under the circumstances that the current legislation and system supply are insufficient,the government can play its social adjustment role through the normalized “relationship between the government and the government” to solve the social problems arising from bankruptcy.The third part: the procedural restrictions of the commercial bank creditor's claims for equity swap in the bankruptcy reorganization plan compulsory approving.The insolvency law excludes individual creditors' individual remedies and applies equal protection to all creditors.Equality is not a form of equality,it is a substantive equality,so there is a priority claim in the bankruptcy law.Although there is no sufficient reason for commercial bank claims to be treated differently,the creditor's claims for equity swap of commercial banks should be restricted by the reorganization procedure,but the interests of commercial bank creditors are eroded in the compulsory approval of the reorganization plan.First,due to the defects of China's current compulsory approval system,the principle of maximizing the interests of creditors has also suffered in the compulsory approval of the reorganization plan.Moreover,the court adopted the principle of formal review of the feasibility of the reorganization plan in the case judgment.Therefore,the due process of creditor's claims for equity swaps needs to be improved.The group of creditors' meetings should be refined,and the rights of dissenting creditors should be effectively protected.At the same time,for the draft of the reorganization plan with higher uncertainty,the debtor or manager should propose an alternative settlement plan.The fourth part: the obstacles to the rights of commercial banks in the implementation of bankruptcy reorganization plan.The implementing agency converts the creditor's rights into the company's preferred stock or common stocks which have both its advantages and disadvantages.At the same time,due to the different interests of the company's original shareholders and commercial banks,there is a heterogeneity phenomenon.So it is necessary to establish supervision mechanisms to balance the interests of the two parties.The overall protection of shareholder rights should be guaranteed,in view of the creditor's claims for equity swaps aimed at improving the governance capacity of debt-ridden enterprises in order to restore their profitability as soon as possible.Firstly,compared with preferred stocks,common stocks are more in line with the value demands of commercial banks.Secondly,in order to make up for the shortcomings of commercial banks in their business management capabilities,appropriate private equity investment institutions can participate in corporate governance.Finally,a two-way constraint mechanism should be established to balance the conflicts of interest between heterogeneous shareholders.The fifth part: the exit dilemma of commercial banks after the completion of the bankruptcy reorganization plan.In the bankruptcy reorganization,commercial bank creditors accept the creditor's claims for equity swap plan is a trade-off,and its foothold still lies in how to achieve exit.However,due to the fact that some bankruptcy and restructuring enterprises have not significantly improved their profitability after the creditor's claims for equity swap,and there are legal obstacles in the diversified exit channels,commercial bank exit difficulties.Therefore,it is necessary to improve the equity withdrawal mechanism of commercial banks.First,it is the fundamental place for the implementation of institutional equity exit that debt-ridden enterprises should ameliorate the governance structure,establish and promote a modern enterprise system,further corporate governance capabilities,and ultimately improve the profitability of enterprises.Secondly,China should rely on multi-level capital markets,improve the equity trading market,and further the efficiency of equity transfer.