A Probe Into The Improvement Of The Judicial Relief Mechanism For Corporate Bond Default

In the last few years,the bond market of our country has been flourshing,and its market scale has ranked second in the world,which has played an important supporting role in serving our country’s entity economy and major project construction.However,due to the increasing downward pressure on the economy and supply-side reforms,bond defaults frequently occur and tend to be "normalized." Among them,corporate bonds have the highest default rate.Bond defaults not only harms the interests of bondholders,but also impedes the the bond market’s development.Thus,how to deal with the default of corporate bonds and effectively resolve the risks caused by default of corporate bonds is of vital importance for promoting the healthy development of the bond market and maintaining social stability.In terms of the current status of corporate bond default disposal in China,the role of the judiciary in the disposal of corporate bond defaults has not been fully played out,and the judicial relief mechanism after corporate bond default is still very imperfect.The author believes that this is mainly caused by two reasons: insufficient regulation by superior law and inaccessibility of judicial channels.On the one hand,the bondholders’ meeting system and the trustee system,as important systems for safeguarding the interests of holders,failed to play their due role in the settlement of bond defaults.The determination of the effectiveness of the meeting of holders and its relief,the unclear role of the trustee,the lack of incentives and liability mechanisms,and conflicts of interest all urgently need to be clarified or resolved through legislation;on the other hand,the high cost of breach of contract litigation,the low rate of compensation in bankruptcy litigation,and the conflict of litigation rights between the trustee and the holder have blocked the judicial relief channels for corporate bonds to a certain extent and reduced the effectiveness of judicial relief.Therefore,this article takes the corporate bond default judicial remedy mechanism as the research object,and conducts an in-depth analysis of the current development of the corporate bond market in China and the status quo of corporate bond default handling through the use of literature research,chart analysis,case analysis,and comparative analysis.The current problems in the judicial remedy mechanism for corporate bond default have been summarized and reflected and corresponding suggestions have been put forward.In addition to the introduction and conclusion,there are four chapters in the main body of this article,the main contents of which are as follows:The first chapter talks about the basic concepts in connection with corporate bond default.It mainly solves the meaning and definition of bonds,corporate bonds,and corporate bond defaults.Then,through the use of data analysis,it points out that our country’s bond market and corporate bond market are developing rapidly,but at the same time,in recent years,corporate bond defaults have entered a period of concentrated outbreak,and the scale and number of defaults have also grown rapidly.It is necessary to focus on solving the problem of risk resolution after corporate bond defaults.The second chapter is an introduction to the disposition of corporate bond default.Through case analysis,it summarizes our country’s current corporate bond disposal mechanism after default.At the same time,it reviews the current legal regulations on corporate bonds in China and and pointed out that my country’s current legal regulations on corporate bonds show "too many but chaotic,too many but also missed,too many but repeated".What’s more,there is a serious shortage of legal supply for the handling of corporate bond defaults.The third chapter is the core chapter of this article.Through the use of case analysis,data analysis,and comparative analysis,it points out that the main problems existing in the current corporate bond judicial remedy mechanism are the insufficiency of the upper law and the judicial channels are blocked.On the one hand,the two systems of bondholders’ meetings and trustees run through the issuance,trading and default resolution of corporate bonds.They are the first line of defense to effectively protect the interests of the holders after corporate bonds default.The regulations of the two systems are not perfect.In particular,the lack of a mechanism for determining the validity of the resolutions of the bondholders’ meeting,the unclear role of the trustee,conflicts of interest,incentive mechanisms and accountability mechanisms need to be resolved through legislation;on the other hand,litigation methods need to be further smoothed out of relief channels,especially it is necessary to resolve issues such as the high cost of rights protection for the majority of bondholders,the low rate of compensation in bankruptcy litigation,and the conflict of litigation rights between the centralized prosecution of the trustee and the individual litigation of the holder.The fourth chapter focuses on policy recommendations.First of all,as far as the improvement of the bondholders’ meeting system is concerned,the author believes that the formulation of the rules of the bondholders’ meeting should be regulated and guided to prevent the holders’ meeting from becoming a tool for issuers to manipulate.At the same time,referring to the system design of Chinese company resolutions,the effectiveness of the resolutions of the bondholders’ meeting can be divided into three types: valid,invalid and revocable.The holders can apply for relief to the court with the resolution.Secondly,with regard to the system design of the trustee,the author believes that the trust relationship between the trustee and the bondholders should be clarified from the legislation;the second is to expand the scope of the trustee’s duties and stipulate the prohibition of conflicts of interest.At the same time,the trustee’s scope of powers should be further expanded,and incentives should be provided for the performance of their duties.Third,it is necessary to establish a sound attributable mechanism to draw a red line for the performance of the duties of the trustee.Finally,with regard to the further smoothness of judicial channels,the author believes that it may be possible to reduce the cost of the holders’ breach of contract litigation from three aspects,such as adopting model judgments in a timely manner to divert the complicated and simple cases,improving the terms of the prospectus,and cracking down on evasion of execution.At the same time,the court should adopt a method of distinguishing financial claims and ordinary claims to further increase the holder’s repayment rate.As for the conflict of litigation rights,when the holder sues alone,he should provide evidence that he did not authorize the trustee to sue;and when the holder privately reached a settlement plan with the issuer after the issuer fails to comply with the agreement,the holder can sue based on the settlement plan but should be subject to appropriate restrictions;for the purpose of safeguarding the interests of the majority of bondholders and improving the effectiveness of judicial remedies,when the resolution of the holder’s meeting to entrust a trustee to sue can be revoked,the holder can file a suit in the people’s court in accordance with the aforementioned holder’s meeting’s effective relief mechanism.