Studies On The Relevant Legal Issues Of Bankruptcy Under The Subscription Capital System

The Company Law of 2013 abolished the requirement over minimum registered capital quota and changed from "installment capital system” to "subscription capital system".The reform of capital system did not fundamentally undermine the statutory capital system in the field of corporate law,but instead transferred the legal regulation provided for in corporate law of minimum registered capital and the time limit on capital contributions to the discretion of the company.The reform of the capital subscription system did not exempt shareholders from their obligations and liabilities of capital contributions.Although such reform took place in the field of corporate law,it also exerted a significant effect on the bankruptcy-related legislation,especially in terms of the identification of the causes of bankruptcy,the procedure of call for shareholders’ unexpired capital contributions and the exercise of bankruptcy set-off right concerning shareholders’ subscription.The first paragraph of Article 2 of the Bankruptcy Law stipulates the causes of the bankruptcy as that an enterprise legal person becomes insolvent and its assets are insufficient to discharge all of its debts or it clearly lack the capacity to discharge such debts.Under the actual payment capital system,there will be no problem for the determination of “insolvency” and “its assets are insufficient to discharge all its debts” because all shareholders’ contributions are actually paid when the company is established,and its registered capital will bereflected in the balance sheet.However,under the subscription capital system,the subscribed capital contributions will not be shown in the balance sheet,and a large number of subscribed capital contributions cannot flow into the company due to the period of interest that shareholders have enjoyed.When the company’s operations are confronted difficulties and it cannot pay off all due debts,will the company be recoginized as “insolvency” or “its assets are insufficient to discharge all its debts” in the context of bankruptcy laws? This article analyzes the connotation and extension of“insolvency”and believes that the shareholders’ subscription,as a kind of creditor’rights,is owned by the company which belongs to the company’s assets should be acted as an measurement included in the company’s capability to pay off the debts and determines whether the company constitutes "insolvency" in the bankruptcy law.In the determination of “its assets are insufficient to discharge all its debts”,accounting practice does not take account shareholders’ subscription into “asset” in the balance sheet,but this article put it that shareholders’ subscription should be counted into“assets” by referring to the accounting definition of assets and interpreting it from the perspective of law,regardless that it is due or undue.Based on the interpretation of“insolvency” and “its assets are insufficient to discharge all its debts”,this article reconstructs the causes of bankruptcy,including establishing the dual system of the causes of filing an applicationfor bankruptcy for creditors and debtors.The article trys to seek the way of protecting creditor’s interests after reconstruction of the causess of bankruptcy through the redefinition of “assets” and “debts”,that is the enforcement procedures.Article 35 of Bankruptcy Law stipulates the regulation of accelerating to maturity,which provides the basis for legislation on the basis of the theorey for the expiry of unexpired capital contributions.How to call for the unexpired capital contribution in case of bankruptcy? If there is more capital to be called than all debts that the company has owed,in order to simplify the bankruptcy procedure and reduce the financing costs of the shareholders,it may not be necessary for the shareholders to pay all the contributions.Then how to determine the proportion of calls,and how to design the call-up procedures? In the process of call-up,can shareholders who enjoy creditor’s rights of company exercise their bankruptcy set-off right to offset theirunpaid contributions? On the basis of the integration of existing legal systems and theories,this article draws lessons from the legislative experience of other countries or regions and tries to construct a new capital contribution call-back theory under the subscription system.This article interprets in details the right of offset during the bankruptcy procedure and analyzes and demonstrates the issue that whether shareholders’ contributions can be offset against the claims in bankruptcy based on the comprehensive legislative rules and academic theories.Based on the background of the reform of the subscription capital system in company law,this article analyzes the procedure of bankruptcy under the subscription capital system,the deconstruction of the causes of bankruptcy,the issue on the call capital of unpaid contributions of the administrator and the exercise of the right of set-off in order to draw lessons from the extraterritorial legislation and practical experience and provide some personal suggestions for the improvement of China’s bankruptcy system.This article is divided into three chapters.The first chapter introduces the reform of the capital system and its impact on the bankruptcy legal system.First of all,the article briefly introduces the background and main contents of the reform of the capital system and reviews the reform of the capital system based on the scholars’ different viewpoints.Secondly,the article combines the existing bankruptcy laws and clarifies the challenges posed by the capital subscription system to the bankruptcy system,including the determination of “insolvency” and “its assets are insufficient to discharge all its debts” in the regulation provided for in the Bankruptcy Law,the procedure of call for shareholders’ subscription and the right of offset excercising in bankruptcy proceedings.The second chapter introduces the impact of the reform of capital system on the initiation of bankruptcy procedure,which mainly involves the determination of the causes of bankruptcy,especially the analysis of the capability to pay off in the definition of "insolvency" and the range of “assets”in the definition of“its assets are insufficient to discharge all its debts”.On the basis of the analysis draws a conclusion that shareholders’ subsription should be included in the scope of company’s solvency and company assets.On this basis,this article reconstructs the causess of bankruptcy and tries to find a solution to the protection of creditors afterthe reorganization of bankruptcy,mainly referring to the identification of the causess of bankruptcy.On this basis,this article reconstructs the causess of bankruptcy and tries to find a solution to protect the creditors’ legitimate rights after the reorganization of bankruptcy.The third chapter introduces the impact of capital subscription on the stage of bankruptcy,including the call of shareholder’s capital under bankruptcy and the exercising of the right of offset.First of all,the article explores the basis for making contributions to shareholders and analyzes how to establish the method of calling up shareholders’ contributions under the existing subscription capital system based on the experience gained from other countries’ legislation.Secondly,the article discusses the concept and scope,the subject,process and time of the right of offset during the bankruptcy procedure.The bankruptcy offset right,as an exception of forbidding the individual settlement regulated in the bankruptcy law,aims at protecting the creditor’s claims and simplifying the bankruptcy liquidation procedures.The shareholder’s subsription as a kind of the company’s creditor’s rights,can it be offset the debts that company owes the shareholders? There are some supportive views as well as opposed ones.The article believes that in the principle of not being able to offset,the shareholder’s obligations of contributions can be offset as an exception in exceptional circumstances because of the difference between shareholder’s contributions’ obligations and the ordinary debts,and such right shall be entitled to trustee in bankruptcy.Meanwhile,a fair and reasonable creditors’ rights evaluation mechanism should be established to safeguard the legitimate right of parties.