Research On Absolute Priority Rule In Compulsory Approval Of Reorganization Plan

The Enterprise Bankruptcy Law promulgated in 2006 introduced the Bankruptcy reorganization system for the first time,drawing on the US Bankruptcy reorganization system to a great extent.Therefore,China's Bankruptcy law changed from the enterprise liquidation law to the enterprise rehabilitation law.Bankruptcy reorganization aims at Balancing the interests of creditors,debtors and investors and maximizing social Benefits.Among them,the compulsory approval of the reorganization plan is a judicial intervention that the court intervenes in the reorganization negotiation in the name of safeguarding the public interest and directly adjusts the relevant rights and obligations.It is also an important guarantee to ensure the smooth operation of the reorganization system.However,the court's compulsory approval must also follow certain standards,so as to ensure the fairness and justice of stakeholders in the distribution of corporate restructuring value.The rule of absolute priority is the core rule in reorganization,which establishes the principle standard for the distribution order in reorganization,that is,the rule of absolute priority means that the group with the posteriority repayment sequence cannot get any repayment in advance,unless the group with the prior repayment sequence is fully repaid,such as the ordinary creditor group that has not accepted the reorganization plan is not fully repaid,and the stakeholders group with the behind repayment sequence cannot get any property.The reason why shareholders' rights and interests are given priorityconsideration should be the company's continuous operation and sufficient solvency.Accordingly,shareholders' rights and interests should change with the company's operation.In the case of insolvency or Bankruptcy liquidation of the company,at this time,shareholders cannot obtain the rights and interests that have priority over creditors,i.e.creditors' rights and interests over the company's property are superior to the shareholders of the company.However,in the reorganization,it is unfair to protect the interests of creditors by the liquidation value standard,which hides unfairness in essence.In the reorganization of Bankruptcy,creditors bear the time cost of reorganization and the cost of further expansion of property losses.The reorganization cost faced by creditors is a threat to their original interests.At the same time,the shareholders of the debtor company can have the opportunity to obtain the reservation of the capital contribution interest through the reorganization procedure.The starting of the reorganization procedure should be that the income from reorganization is greater than the cost of reorganization,thus resulting in reorganization surplus.It is necessary to ensure that creditors in reorganization are fairly distributed in the reorganization negotiation game,i.e.the distribution of reorganization surplus is obtained.However,in the case of compulsory arbitration,the liquidation standard is too low to protect the interests of creditors,which makes creditors may not be able to obtain the distribution of the residual value of reorganization even through a successful reorganization process.The resulting dissatisfaction of creditors with compulsory arbitration has become popular.However,in the current Bankruptcy legislation of our country,the Bankruptcy law evades the adjustment of the interests of shareholders and ordinary creditors.Chapter 1 takes the reorganization cases of 13 listed companies and 8 unlisted companies that have been forced to approve by the court as examples.It makes an investigation from the aspects of the objects of forced approval,the adjustment of creditors' rights,the adjustment of shareholders rights and the management plan,etc.It draws a conclusion that there is deviation from the absolute priority rule in China's forced approval of reorganization in practice,and analyzes the reasons for the deviation.First,it can be seen from the analysis of the company's forced approval cases.Even though it has been stressed that the right of compulsory approval shouldbe used with caution,the courts in our country still lack norms in the review of reorganization plans.For the review of reorganization plans,the court's discretionary power is too large and there is some arbitrariness.Secondly,mainly due to the strong intervention of administrative power,the cases of compulsory approval of corporate reorganization show that there is active of local governments,especially when the local government plays the role of the manager's responsible person,the rights and interests of ordinary creditors have been seriously lost,and the intervention of administrative power will interfere with the distribution of the reorganization value of the reorganization company.Finally,it points out the lack of absolute priority rules in China's Bankruptcy law.Through an one-by-one analysis of the second paragraph of Article 87 of China's Enterprise Bankruptcy Law,it is found that China's 2007 Bankruptcy Law introduced the reorganization system Based on Chapter 11 of the United states Bankruptcy Law.Although the absolute priority rules in China's reorganization system absorbed and borrowed the relevant provisions of the United states federal Bankruptcy law,they were not fully reflected in the second paragraph of Article 87 of China's Enterprise Bankruptcy Law.Chapter 2 focuses on the analysis of the theory of absolute priority rules and the value.As China's Bankruptcy reorganization system comes from the US Bankruptcy law,the first section carefully combs the absolute priority rules in the US Bankruptcy law,the US railway Bankruptcy case has triggered the preliminary discussion of the absolute priority rules,and then the Northern Pacific Railway v.Boyd reorganization case has established the US absolute priority rules.When the U.S.Bankruptcy Code was revised in 1978,it was incorporated into the reorganization system of Chapter 11,§1129(B)(2)(B)(ii)of the Bankruptcy code.The rule of absolute priority is self-evident,which is conducive to ensuring the fair distribution of restructuring value,coordinating the cost commitment and benefits of restructuring,and improving the negotiation efficiency of the restructuring parties.At the same time,the U.S.Bankruptcy practice has also conducted a new discussion on the absolute priority rule.It is believed that the absolute priority rule is too rigid and the new value exception should be developed timely.However,it is pointed out that the application of the new value exception is not an overthrow of the absolute priority rule,but a limitedbreakthrough.The new value investment only expanded the distribution scope,increased the reorganization company's capital and strived for the reorganization company to obtain the recovery opportunity.The new value exception not only conforms to the absolute priority rule,but also is desirable for its incentive effect.Chapter 3 discusses the construction of absolute priority rule.The first section of the thesis puts forward the necessity and possibility of constructing absolute priority rules.The second section is to respond to the lack of clear legislation of absolute priority rules in reality and propose two solutions.First,the Enterprise Bankruptcy Law is amended and a provision is proposed to be added to Section 87 to clarify the connotation of absolute priority rules through legislation.At the same time,the provision of new value exception is added on this basis.Second,if the conditions are not yet met,the absolute priority rule can be interpreted through the introduction of relevant judicial interpretations,and the court should ensure that the absolute priority rule is strictly followed in the compulsory approval of the reorganization plan,and pay attention to the issue of whether the shareholders of the company provide new value to the company.The second section proposes that a series of supporting measures such as third-party evaluation,information disclosure,repositioning the role of government,relief for dissenting creditors should be simultaneously improved the application of absolute priority rules.