Analysis On The Legal Problems Of Creditors' Interests Protection When Using Debt-to-Equity During Reorganization

Under the current situation of economic reforms,how to rescue the enterprises that still have the potential and value to be continued has become one of the most urgent tasks and immediate missions.Reorganization procedure is an important procedure for saving companies which have operating difficulties.Debt-to-equity swapping is one of the most popular methods which is often used in corporate restructuring.The combination of these two procedure and method have the obvious effectiveness of corporate reorganization,but the reorganization process has strong characteristics of judicial public power intervention,and resolving creditor's rights and debts is not its first task.So,it makes creditors to take greater risks in debt-to-equity swapping and reorganization process.In practice,when debt to equity swap was applied during the reorganization,the interests of creditors sometimes may be damaged.So how to protect creditors' interests during this procedure has become an important topic.Regardless of whether the reorganization procedure is mainly based on the settlement of creditor's rights and debts,the protection of the interests of the creditors should be consistent with the reorganization of the company.The reconstructing of a company needs to rely on the cooperation of creditors.If the interests of the creditor cannot be guaranteed,it will affect the realization of theoriginal purpose of the re-establishment of the enterprise.To sum up,how can we effectively protect the interests of convertible creditors is the answer which is intended to obtain from this article.For this reason,this paper intends to select controversial cases,through the study of the existing cases,to discover the causes of the creditors' interests being damaged,and to consider the root causes of these problems,so as to seek ways to protect the interests of relevant creditors.This article is divided into four parts: introduction,text and conclusion.The main body is divided into four chapters.In the first chapter,Jiangxi Sai-Wei LDK Group reorganization cases have been analyzed to find out the possible causes of damages.The second and third chapters has extended the analysis of causes and tried to find out the root reasons.The fourth chapter has introduced the method of other countries and put forward solutions to deal with the situations.The first chapter mainly analyzed the cases and discussed the reasons which caused the loss of the creditors.Firstly,in the course of the formulation and adoption of the draft reorganization plan,there was potential of ignoring the protection of creditors' interests on the aspects of the selection of the company,methods of transferring shares,equity withdrawal agreement and when the draft of the reorganization plan were passed.Secondly,the information disclosure of the conversion plan or even the reorganization plan is insufficient and inaccurate.The creditors have not obtained enough information,which thus affects its voting and judgment.The second chapter mainly summarizes the second section of first chapter.Actually,the selection of reorganization or conversion companies,the voting of the reorganization plan and mandatory approval,the transfer of shares and the contents of the equity withdrawal agreement are the problems in the process of formulating and adopting the entire draft plan.It is suitable to put into a chapter for in-depth analysis.The existence of some of these problems is not an individual phenomenon in these cases.Due to the existence of deficiencies in the bankruptcy law of our country,there is a lack of operability and post-remediation measures.The third chapter mainly focuses on the in-depth analysis of the problem ofinsufficient and inaccurate information disclosure of the debt to equity swap plan and reorganization plan.In this chapter,the necessity and importance of information disclosure in the process of debt-to-equity conversion and the entire restructuring process are discussed,and the incomplete regulations and provisions of the bankruptcy law in China regarding information disclosure issues are analyzed.According to the chapters above,the fourth chapter will seek for the solutions to deal with the difficult situations through discussing the relevant extraterritorial experience.The interests of creditors can be mainly protected through improving the process of the formulation,voting and adoption of the draft reorganization plan and information disclosure.