Study On Debt-to-Equity Swap System In Reorganization Procedure

Debt-to-equity swap,as an important tool to resolve corporate debt risks and optimize corporate capital structure,is consistent with the purpose of bankruptcy reorganization.This consistency makes the implementation of debt-to-equity swap in the reorganization process plays an important role in rescuing restructured enterprises.Although China has adopted policy support for debt-to-equity swap,the lack of legal basis,especially for debt-to-equity swap in reorganization procedure,makes it difficult for reorganization enterprises to implement debt-to-equity swap in judicial practice.Therefore,debt-to-equity swap in reorganization procedure needs to be solved urgently.This article is mainly divided into five parts to discuss the debt-to-equity swap in reorganization procedure.The first part is about the scope,concept and nature of debt-to-equity swap.Through the analysis of the existing legal and normative documents,the legal requirements and scope of debt-to-equity swap and equity rights in the reorganization process are summarized.The paper also discusses the nature of debt-to-equity swap in the reorganization process and draws a conclusion that the dual attribute view is more reasonable.The second part provides experience and reference for the implementation of debt-to-equity swap in China’s restructuring process by analyzing the relevant laws and regulations of the United States,France and Germany.The third part is the legislation and implementation of debt-to-equity swap in the reorganization process.According to the operation process of debt-to-equity swap in reorganization procedure,this paper sorts out the current legislative situation of debt-to-equity swap in reorganization procedure,analyzes the situation of debt-to-equity swap in reorganization procedure of listed companies and unlisted companies in judicial practice,and summarizes the main characteristics of debt-to-equity swap implementation in reorganization procedure of our country at present.The fourth part is the proposal of debt-to-equity swap in reorganization procedure.The new round of debt-to-equity swap requirements can be realized under the market-oriented operation mechanism,which involves the contradiction between the market-oriented debt-to-equity swap and the enforcement of the reorganization procedure,specifically,whether the debt-to-equity swap plan should be included in the reorganization plan,whether the voting mechanism of the creditors’ meeting is applicable to the debt-to-equity swap plan and whether the mandatory approval system is applicable.Debt-to-equity swap in reorganization procedure involves multi-party interest game,in which the investor plays an essential role as an interest party in debt-to-equity swap in reorganization procedure.The investors in the reorganization procedure include the original investors and the new investors.For the original investors,the Bankruptcy Law only stipulates the voting rules for the group of investors,and its provisions are relatively vague.There is no clear stipulation on the new investor in China’s Bankruptcy Law,which leads to unclear rights and obligations of the new investor and further hinders the realization of debt-to-equity swap in the reorganization process.Therefore,it is necessary to discuss the issue of investors in the reorganization process.In addition,the number of shareholders after debt-to-equity swap has not been stipulated in our country’s laws.At present,in practice,we mainly rely on managers to take various measures to prevent the number of shareholders from exceeding the legal provisions.As for the legal consequences of debt-to-equity swap after the failure of reorganization,China’s relevant laws are not clear,and the legal status of creditors after the failure of share conversion is still controversial.The realization of debt-to-equity swap is a long process.The realization of debt-to-equity swap does not mean the completion of debt-to-equity swap in the reorganization process.Therefore,the issue of equity withdrawal after debt-to-equity swap also needs to be considered.The fifth part is the solution of debt-to-equity swap in the reorganization process.First of all,the author believes that in terms of voting procedures,the debt-for-equity swap plan should be included in the draft reorganization plan,and the debt-for-equity swap in the reorganization procedure still needs to adopt the voting system of the creditors’ meeting,but the compulsory approval system of the court should not be applied.Secondly,for investors,all shareholders should participate in the investor meeting and exercise their voting rights together,and it is more reasonable to adopt the single majority voting rule of the Company Law.At the same time,the legal responsibility of the original investor should be clarified,and the institutional guarantee for reorganization investment should be strengthened.Thirdly,for the number of shareholders after the conversion,the number of shareholders after the debt-to-equity swap should be clearly stipulated through legal provisions.Secondly,the author believes that the original creditor status of the shareholder who changed shares should be restored for the legal consequences of the change of shares after the failure of reorganization.Finally,for the issue of equity withdrawal after debt-to-equity swap,it is necessary to perfect the withdrawal mechanism of equity swap as soon as possible to realize the benign withdrawal of debt-to-equity swap.