Analysis And Evaluation Of Y Company’s Bankruptcy And Reorganization Plan

In June 2007,the Law of the People’s Republic of China on Enterprise Bankruptcy(the "Enterprise Bankruptcy Law")was amended and formally implemented to provide a strong legal backing for the reorganisation of enterprises in bankruptcy.The principle of this law is to protect the interests of creditors and investors to the maximum extent possible.Not only does it give companies in crisis a chance to be reborn,it also helps to improve the structure of China’s capital market.However,there are opportunities and risks,and due to the variability of individual companies and the relevant provisions,bankruptcy restructuring is not universally used and there is no guarantee that it will achieve the desired results.It is worthwhile for academics to continue to explore how a reorganisation system can be used to effectively and scientifically help companies out of difficult situations.Although much academic research has been conducted on this topic,China has not yet had enough experience in developing and widely applying bankruptcy restructuring systems,the area of research is not yet extensive,examples of bankruptcy restructuring enterprises are limited and the application of case study methods needs to be improved.This paper first uses the literature analysis method to sort out and summarise relevant research by scholars at home and abroad.The case study selected Company Y,the first listed company in Zaozhuang City,Shandong Province,to be successfully reorganised in bankruptcy,and its approach of linking the parent company to the reorganisation of its subsidiary reflected a certain degree of innovation.Secondly,the study investigates how Company Y used bankruptcy restructuring to improve its insolvency and unsustainable business situation,and evaluates the strategy and effectiveness of its bankruptcy restructuring plan.The four strategic aspects of the reorganisation are: safeguarding the interests of creditors,maintaining the main business,innovative ways of reorganising associated companies,and the transfer of equity by shareholders.The effectiveness of the restructuring is reflected in improved short-term solvency,increased shareholder wealth and the expectation that Company Y will be relieved of its delisting risk warning.Risks are assessed as: financial risk of debt-to-equity conversion,managerial oversight risk,difficulty in recovering from reputational damage,risk of related party transactions and operational risk of high business concentration.The research basis of this paper is based on the current bankruptcy restructuring system of listed companies in China and related theories,including stakeholder theory,operational value theory and social policy theory.A typical case was selected for the analysis and evaluation of the restructuring proposal,and the corresponding research findings and insights were summarised,concluding that bankruptcy restructuring has the potential to revive a company,that a balance of interests of all parties should be ensured in the restructuring,and that debt-to-equity conversion promotes the sustainable development of the enterprise.Three insights are drawn from the case of Company Y: the development of a tailor-made restructuring plan based on the company’s own circumstances,attention to financial risk avoidance and the need to further improve the current restructuring system.