Study On The Protection Of Dissenting Creditors Under The Courts' Cram-down Rule Towards Reorganization Plan

The mandatory approval of the reorganization plan(also called " Cram-down Rule towards Reorganization Plan" or " Cram-down Rule ")embodies the intervention of judicial power in the reorganization of the company.Although it can guarantee that the reorganization system proceeds smoothly,the system of the mandatory approval including the final decision may also result in violations of private rights,especially violating the rights of dissenting creditors.In October 2012,the Supreme People's Court also emphasized in the “Memo of the Symposium on the Review of Bankruptcy and Reorganization Cases of Listed Companies” that judges should “carefully use” Cram-down Rule.The article examines the judicial practice of People's courts applying the mandatory approval of reorganization plans,especially the intensified research on representative cases of sanctions,and combines relevant scholars' review of the Cram-down Rule to reflect on the problems existing in the protection of rights and interests of dissenting creditors in context of the mandatory approval.Meanwhile,combined with the practice of judicial practice in China,the paper learns from some systems designed for the protection of creditors' rights and interests in foreign bankruptcy laws,in particularly the remedy arrangements for dissenting creditors,and put forward relevant recommendations on the protection of dissenting creditors in China.This article is divided into three parts:The first part examines the specific application of the mandatory approval of the reorganization plan from judicial practice.First of all,it outlines the system of reorganization plan,and clarifies that the principle of applying Cram-down Rule should include the principle of minimum acceptance,the principle of absolute priority,the principle of protection of the best interests of creditors,the principle of fairness and justice,and the principle of feasibility;Second,analyze listed companies and non-listed companies comparatively in the reorganization procedure,and figure out whether the application of the mandatory approval meets the aforementioned five principles and addresses the problems exiting in the procedure.Then analyze the implementation of the reorganization plans in these companies,and evaluate whether the application of Cram-down Rule is reasonable or not.From the above cases,sum up and analyze the value consideration of the court's application of the Cram-down Rule.The second part explores the issue of the damage to the rights and interests of dissenting creditors under Cram-down Rule.The paper analyzes the performance of the damages of the dissenting creditors based on the aspects of the objection of opponents of the reorganization plan,for example,the low proportion of debt claims,deferred loss of debt,and the realization of reorganization value are uncertain.The causes of damage to the interests of the dissenting creditors include the existence of conflicts of interest among multi-party entities,unreasonable evaluation of reorganization value,and lack of participation rights in the formulation of reorganization plans.The third part proposes the solutions to protect the rights and interests of dissenting creditors under Cram-down Rule.Based on the performance and reasons of damage towards the dissenting creditors analyzed in the second part,put forward the following suggestions: First,for protecting creditors' right of information,it is suggested to improve the information disclosure system of the reorganization plan and ensure that the creditors formulate the participation in the reorganization plan,which enhance the rationality of the reorganization scheme and make the creditor easier to accept the plan.Second,improve the reorganization mechanism of value evaluation ofthe enterprise.Combining with the situation that enterprises are going through and the opinions of the creditors in the choice of reforming enterprise assets evaluation method,comprehensive analysis of advantages and disadvantages of market approach and income method,choose a better method which reflects the enterprise's going concern value.Third,improve the relief path under Cram-down Rule,establish and improve the mandatory hearing system and reconsideration appeal system,and give relief to the dissenting creditors in advance.Forth and Improving the review and supervision mechanism of the reorganization plan not only examines whether the reorganization plan can meet the needs of reorganization from the content,but also considers the feasibility of the reorganization plan from the execution and supervises the entire execution process.