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Study On Jurisdiction And Law Application Upon Bankruptcy Of Domestic Company In The VIE Structure

Posted on:2020-07-08Degree:MasterType:Thesis
Country:ChinaCandidate:S L ZhangFull Text:PDF
GTID:2416330623454128Subject:Law
Abstract/Summary:PDF Full Text Request
This paper focuses on how to use the rules in the cross-border insolvency system to protect the creditor's legitimate interests to the greatest extent when the domestic entity of the VIE structure goes bankrupt.The analysis part is divided into three logical steps.Firstly,the scope of bankruptcy jurisdiction should include the overseas financing company and WFOE in the VIE structure.Then,the jurisdiction of the VIE structure in the bankruptcy case belongs to Chinese courts.And then,I analyze the applicable law in the bankruptcy case.The deep-going analysis constructs the cross-border bankruptcy processing rules under the VIE structure.The first chapter is about the scope of bankruptcy jurisdiction under the VIE structure.The VIE structure is established to circumvent the industry restrictions of related industries.Protocol control separates the offshore financing company from the actual operating VIE company in the equity relationship,but in fact,the two are still highly connected through WFOE.They are closely linked in management and assets.If not to incorporate the offshore financing company and WFOE into the bankruptcy procedures of VIE company,it will hinder the smooth progress of bankruptcy reorganization or bankruptcy liquidation,which is not conducive to the revitalization of the company and the property rights of creditors.In addition,the bankruptcyprocedure should restrict the debtor and its shareholders from using the VIE structure to damage the interests of the creditors,fully protect the creditor's rights and interests,and integrate existing resources,thus promoting the revitalization of the insolvent company when possible.So offshore financing company and WFOE should be incorporated into VIE company's bankruptcy procedure.As for the path to achieve incorporation,the author learns from the Substantive Consolidation Rule in the US bankruptcy law.Since the creditors of VIE structure are trading based on the overall credit of it,the offshore financing company and the WFOE should be substantive consolidated.After the substantive consolidation is realized,the assets and liabilities of the affiliated enterprises are combined,and their respective liabilities are no longer distinguished.The assets are merged into one fund pool as a single debtor's property to dealt with the liabilities of all affiliated enterprises.The second chapter discusses the attribution of bankruptcy jurisdiction in the VIE structural bankruptcy case after the substantive consolidation.The traditional rules for determining the cross-border insolvency jurisdiction cannot be applied to all situations.Besides,the long-armed jurisdiction is at risk of infringing the judicial sovereignty of other countries.More importantly,traditional jurisdictional standards do not fundamentally resolve the issue of jurisdictional conflicts.Therefore,the author learns from the rules of the Main Interest Center.As for the bankruptcy case of the VIE structure,China is the place where the debtor daily manages its interests,which is usually known to the debtors.Therefore,China is the main interest center of the VIE structure.When the VIE structure is bankrupt,it should be handled as a whole.It is worth noting that the VIE structure has the potential risk of being invalidated for covering illegal purposes in legal form.Although currently the legality of the VIE structure is not clear in China,it will not affect the Chinese courts to take the bankruptcy jurisdiction even if it is found to be illegal in the future.The third chapter discusses which country's law should be used to deal with related issues after the Chinese court has obtained the bankruptcy jurisdiction over the VIE structure.As for the applicable law of procedural issues,the author believes thatChinese law should be applied.As for the applicable law of the substantive issues,the analysis is divided into two aspects-the debtor's property and the creditor's rights,and the latter is divided into the applicable law of the scope determination of creditor's rights and the applicable law of the creditor's rights settlement order.The applicable law of the debtor's property range shall,in principle,adopt the court law,namely the Chinese law.However,the issue of property rights involved should be based on the law of the location of the object.The applicable law of the determination of creditor's rights shall be determined according to the relevant provisions of Chapter6 of the Law on the Application of Foreign-related Civil Relations Law;as for the applicable law of the liquidation order of creditor's rights,the law of the court should be adopted,namely the Chinese law.
Keywords/Search Tags:VIE Structure, Cross-border Insolvency, Substantive Consolidation, the Center of Main Interests
PDF Full Text Request
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