Study On The Legal System Of Distressed Company Financing

Financial Distress means that cash flow is insufficient to compensate for existing debt.This may also be known as financial crisis.In recent years,systems and practices by which companies successfully resolve financial dilemmas through raising capital have become a hot topic in the academic and practical world.Normally,the financial distress of enterprises is not caused by backward production technology or poor management.Market changes,economic recession,or other social risks may cause financial crisis in relatively high-quality companies.Therefore,it is especially important for companies that have continued development value to be given appropriate financial assistance and support in order to get rid of financial difficulties as soon as possible,and to continue to operate and produce.However,there are few studies on the legal system of financing for distressed companies in China,and the integrity of the system is lacking.This is not conducive to the financing of distressed companies.The financing methods that enterprises can usually utilize include restructured equity structure adjustment,pre-reorganization system,DIP financing and debt-to-equity swaps,amongst others.The "Enterprise Bankruptcy Law" in China introduced the reform of the Debtor-in-Possession Financing(DIP system).However,the reform only stipulated the principled issues.The DIP financing system is still relatively vague.Therefore,beginning with the relevant legal foundations,this paper uses the rich theoretical research from abroad and a healthy corporate rescue culture to conduct a research on the law and economics of the financing system of distressed companies during restructuring,and the basic theory of the reorganization system.In conclusion,the financing of distressed companies can be improved through the methods of financing the distressed company,the protection of the security right holders in the financing process,and the strengthening of information disclosure.Also,Under the framework,and in combination with the practice and two types of financing modes,that is,the reorganization financing business and the common debt Financing model,the dilemma that a company faces in the reorganization of its financing system is discussed and related recommendations are made.