On The Improvement Of The Protection For Small And Medium Investors In The Bankruptcy Reorganization Of Listed Companies

Small and medium investors,as investors in the securities market,are the basis for the existence of public companies,therefore,investor protection is an integral component of the capital market system.Bankruptcy reorganization,as an important legal process for listed companies to deal with the distress,should also follow this rule.The analysis of the existing 60 cases of listed companies survived by reorganization shows that the interests of small and medium investors have been violated in the bankruptcy reorganization process.The protection of small and medium investors in the bankruptcy reorganization of listed companies has become an important issue.Chapter ? analyzes the current situation of the protection for the small and medium investors of the listed companies during the bankruptcy reorganization procedures.The first section starts from two typical cases and analyzes the situation where the interests of small and medium investors have been violated in specific cases.The second section discusses an empirical study on the aforesaid 60 cases.For the method of equity adjustment and transfer,it is the trend that more companies turn the capital surplus into increased capital to gather the capital for equity transfer,instead of directly equity transfer,in which small and medium investors always transfer less equity than controlling shareholders.In terms of the procedural interests of small and medium investors,there are also some problems,e.g.the insufficient information disclosure and irrational voting system.Therefore,the existing practice shows that the protection method of small and medium investors in listed companies' bankruptcy reorganization needs to be adjusted.Chapter ? establishes the theoretical basis for protecting small and medium investors during the bankruptcy reorganization of listed companies.The first section proposes the legal basis for protecting small and medium investors.First,the legislative value of bankruptcy reorganization requires the protection of small and medium investors.Unlike traditional bankruptcy concept which protects the interests of creditors only,the concept of the bankruptcy reorganization emphasizes the protection of the overall interests of the society.The listed companies,as public companies,have a large number of small and medium investors,the interests of which are the essential part of the interests of the society.Secondly,small and medium investors have the right to participate in the distribution of the reorganization premium.According to the reasons for bankruptcy,in the case that the company "has the obvious possibility of losing its solvency",at this time,the company's assets are greater than its liabilities,and the shareholders' equity is positive.Part of the reorganization premium is obtained from the original shareholders' equity.Therefore,small and medium investors should enjoy the right to participate in the redistribution of the premium;in the case that the company is already insolvent,the shareholders' equity is negative.However,in the context of the existing securities system,the "shell resource" of listed companies are still scarce resource.The value of "shell resource" is not reflected in the balance sheet,but it cannot be ignored.This part of scarce resource is exclusive to the original investors.Therefore,small and medium investors should participate in the distribution of reorganization premium.The second section presents economic and policy considerations for protecting small and medium investors.First,the game process of the bankruptcy reorganization requires the protection of small and medium investors.Corporate bankruptcy reorganization is a process of profit distribution and game.The premise of participating in the game is adequate information disclosure,which corresponds to the protection of small and medium investors' right to know.It is not only the protection of the small and medium investors,but also a way to reach to the reorganization plan that is more rational.Second,the sustainable development of the securities market requires the protection of small and medium investors.Due to the large number of small and medium investors in listed companies,failure to properly protect them will lead to intense conflicts in the bankruptcy reorganization,which is not conducive to the stable development of the securities market and the society.Therefore,protecting small and medium investors is a requirement for the sustainable development of the securities market,a requirement for increasing investors' confidence to the securities market,and a requirement for social stability as well.The protection of small and medium-sized investors in the process of the bankruptcy reorganization of listed companies should not be blind and disorderly.Chapter III specifies the position and limits of this protection.The first section analyzes the comparative position of the protection.Within the investors,on the one hand,based on the principle of equal rule,different types and nature of investors should formulate different equity adjustment programs.Compared with the large shareholders who have more control over the company's operations,as for small and medium sized investors,less equity should be transferred.On the other hand,based on the principle of fault liability,if the controlling shareholder of a listed company violates the rules,such as the appropriation of company assets and illegal guarantees,they should transfer more equity as a punishment.When taking the position of other reorganization participants,we cannot blindly emphasize that the interests of small and medium investors are superior to the interests of other participants.Instead,we should improve the procedural rights of small and medium investors in the bankruptcy reorganization process based on the principle of benefit balance.It is important to unblock the channels of participation of small and medium investors,protect the right of know and expression of them and enable small and medium investors to fully play with other stakeholders as well.The second section analyzes the limits of protection.For the protection of small and medium investors,we should learn from the principle of absolute priority.For example,the protection of small and medium investors should not ignore the interest structure formed by reorganization participants before bankruptcy,and we should focus on guiding their positive motivations for participating in the reorganization.On this basis,it is also acknowledged that the creditors are reasonable to a certain extent in giving some benefits to small and medium investors.Chapter ? puts forward the specific construction method of the protection,which is divided into two parts,the substantive rights and the procedural rights.For the substantive rights,it is important to pay attention to the differences among investors in order to implement the "fair and just" equity adjustment.Small and medium shareholders and large shareholders,including controlling shareholders,have different control rights to the company,while shareholders with more control rights should bear greater responsibility for the failure of the company's operation,so they should bear a higher proportion of equity transfer.In addition,it is important to implement the punitive adjustment to the controlling shareholders who held illegal behavior that damaged the company.This punitive adjustment should be equal to the fault,and it should be clearly stated in the reorganization plan,and be questioned by the small and medium investors.In terms of procedural rights,it mainly includes the improvement of the right to know and the right to express.First,the information disclosure system should be adjusted.For the improvement of the information disclosure before the voting of the reorganization plan,we can learn from the pre-procedures of information disclosure instructions in the United States.That is,the formulator of the reorganization plan fully explained the information disclosure in the form of a hearing before the vote of a reorganization plan.On this basis,specific content should be disclosed for small and medium investors,according to which such investor can bring out questions.Second,the voting system should be adjusted.In terms of voting on the reorganization plan,online voting can be combined with voting rights collection,for which the investment service center can be introduced,so that the will of small and medium investors can be concentrated and effectively expressed.At the same time,a small and medium sized investor group can be set up for voting within the investor group.At the operational level,the criteria for approval by the group of investors can be added to "the approval of more than two-thirds of voting rights held by participating small and medium sized investors",or the small and medium sized investors' voting results can be counted separately,and the result of which can be reported to the securities regulatory department.So that the securities regulatory department can fully consider the protection of small and medium sized investors when meeting with the court.Besides,after the vote,a hearing procedure can be added before the court's approval,so that the opinions of the opposition voters can have the final feedback channel.