| The 1970s witnessed an unprecedented renovation campaign in the field of bankruptcy law. Following the issuance of the U.S. Federal Bankruptcy Code in 1978 as a substitution of its much-recast version of 1898, the other western countries such as France, Britain, Germany and etc, responded to the U.S move with a stream of new enactments of bankruptcy legislation replacing the then insolvency laws, or with fierce modification made within the then insolvency laws. The reform was targeted at the core area, i.e., setting up and improving the reorganization mechanism. Reorganization, one of the three main processes or mechanisms of bankruptcy operation covering the process of liquidation and settlement, is a mechanism to rescue the debtor so proactively as to rejuvenate the bankrupt enterprise. The introduction of reorganization system to the insolvency law marked out a turn from individual oriented value to community based value and a transition from a winding up centered system to a reconstruction-based system in the real sense. It is by reason of its function of supplying the deficiency with the traditional bankruptcy law that the reorganization is favorably commented on.Nevertheless, none of legal systems is astute enough to arrive at an absolute balance of the interests of the parties concerned. Its strengths come with its weaknesses. It is also the case to the reorganization system whose object of promoting the debtor to revive may result in a prejudice to the creditor's interests. In the view of the debtor, it is of course desirable of postponement or alleviation in payment of the debt due so that it may relieve the debtor from the financial burden and enable him to reorganize the company as soon as possible. However, from the view of point of the creditor, it may be in his best interest to expect the debt to be realized earlier in order to avoid the injury that occurred from the debtor's postponement or alleviation in payment of the debt due. So, is it possibleto reconcile this conflict? If possible, then how? It is these questions that lead the author to his determination to choose this area as the topic of the supposed doctorial dissertation. The author has made clear his contention that the development of reorganization system is dependent of the protection of the creditor's interests, and that the purpose of reorganization can be successfully realized only when the creditor supports the reorganization plan on the basis of adequate protection of the creditor's interests. The dissertation starting with an introductory part and ending in a summary consists of five chapters with about 180,000 words at total.The introductory part puts forward the argument that the reorganization provides a fresh method of getting the creditor effectively protected of his rights and interests. In contrast of other creditors, the corporate creditor will find its interests more susceptible to be injured by reason of the existence of the corporate limited liability. Although the company law and any other general civil laws endeavor to provide the creditor with more shields against the damage of its interests, a company appears to be doomed to the fate that it someday will go bust and the creditor will find his interests at stake. Despite equal opportunity given to all the creditors of being repaid during the bankruptcy liquidation, the result would be that only part of the debt or none of it gets satisfied. Therefore, bankruptcy winding-up is never the best choice for a company's creditor when he is in face of the situation that the obligation fails to be satisfactorily met as expected. The law must supply various options to a creditor to choose in his interest. Compared with the winding up, settlement and ex-court reconstruction, the reorganization has a lot of strengths of its own as well as some limitations of its kind. Nevertheless, corporate reorganization is an ideal model in the view of protection of the creditor's interests if we make a little more efforts in the aspects of the subject matter, reason and process priority of the reorganization to rescuethe company who needs a reorganization and has a high probability of a successful reorganization.Chapter One retraces the history of value evolution in bankruptcy legislation. After an examination of the bankruptcy legislations of different times, the author finds that the value underlying the legislation on bankruptcy did not stay at one fixed stance but undertook different transformations and changes during the different period of history and in different countries even at the same times. Observing it as a whole, we may make out two phases of the evolution: the first is the legislation before introducing exemption clause in the bankruptcy law, the other is after the introduction of the exemption system. For the first phase, the legislature put much emphasis on how to safeguard the creditor from frustration of the right on debt. It is safe to say that the legislation at that phase played a role of the custodian of the creditor's benefits and existed as a means who served the end as aforesaid. The role of the debtor, though changed and improved constantly, did not give the debtor any opportunity to benefit from the bankruptcy process. As a result, the propellant of the bankruptcy process at the early phase was mainly derived form the creditors. The reason for which the creditors initiated a bankruptcy proceeding was to stop other individual creditor from realization of the right on debt ahead of him, to ascertain the debtor's asset to the most, and to guarantee a fair distribution of the assets among the creditors. In respect of the second phase, due to the financial benefits, the exemption mechanism opened an easy channel for the natural person to go bankrupt. Moreover, the rules of free assets and voluntary bankruptcy together with the exemption mechanism accelerated the shift from the creditor-oriented legislation to the debtor-oriented with a due regard to the debtor's interests as one of the cardinal principles of the bankruptcy law. It should be pointed out that the contribution, inter alia, by the settlement mechanism must not be underestimated. As far as abusiness company is concerned, the investor's limited liability is assured, and the benefits arising from the exemption mechanism during the bankruptcy proceedings are incorporated into the corporate law in relation to the limited liability. Under such circumstances, the debtor loses almost all the incentives to start a bankruptcy proceeding, for he may keep his business by reliance on the limited liability protection and does not need to care whether the business goes bust. The creditor is faces with a consequence that no assets are left to meet his right on debt. Therefore, the legislation on bankruptcy is equally concerned about provision of more options to the debtor who hopefully comes to revive his business. The birth of reorganization mechanism just well meets the demand and the reality. The reorganization broadens the narrow room devised for the debtor by the previous bankruptcy law, pays due regard to all the parties possibly adversely affected by the passive elements contained in the former systems, and as a result provides a basis on which the bankruptcy law ultimately serves the community. The reorganization system has made the values underlying the bankruptcy legislation pluralized, and how to harmonize the pluralized values is a challengeable question and so is a starting point for the purpose of this dissertation.The second chapter explores the theoretical basis on which the system of protecting the creditor's interests operates. The author argues that the theoretical basis for the creditor's protection should be the theory of balance of interests. For that, the chapter tries its exploration from the three aspects: first of all, the pivot of the balance, i.e., the identification of the creditor's rights. To sort out the creditor's rights is the first step forward to protection of the creditor. With respect of the corporate reorganization, the creditor's rights may be classified into two main categories: one is the rights already confirmed before the decision of reorganization; the other is the rights to be valid after the decision of reorganization. Those creditor's rights decided by the reorganization arecalled mutually beneficial rights. The creditor of mutually beneficial rights, whom the law has offered adequate protection, can be at any time satisfied of his rights on debt in preference to the other creditors. Therefore, what the dissertation is discussing at length is the question of how to protect the creditor's rights confirmed before the decision of the reorganization. Those rights confirmed before the decision of the reorganization are termed as reorganization rights on debt, which may be further divided into three kinds of rights in the light of the guarantee or preference annexed with, namely, the preferred reorganization right, the guaranteed reorganization right and the non-guaranteed reorganization right. As a continuation of the discussion about the significance and scope of the preferred reorganization rights, the author furthers his discussion in particular about the supporting policy basis for the employee's right on wages due and the state's right on the tax obligations. In respect of the typical guarantees such as charge, lien and mortgage, for there is no doubt over the justification of the guaranteed reorganization rights, the author centers his discussion only on the three areas: assessment of the guaranteed reorganization rights, identification of the reorganization rights guaranteed by the charge with a maximal value, and non-classic guaranteed reorganization rights. Secondly, the dissertation explores the necessity of balance of interests. Finally, the author explores the possibility to fulfill the balance of interests from the prospective of the purposes of the creditor protection and corporate reorganization, and points out that there is conflict but inter-dependence between the creditor protection and corporate reorganization, one serving the cause of the other.Chapter 3 substantiates the process of the creditor protection. It is one of the research focuses of the dissertation. The dissertation holds that reorganization process is a counter-process for the creditor to sustain his interests by means of restraining himself from going too far in order to rescue the debtor. The antithetical relationship between restraint andcounter-restraint is embedded into the making up of the whole reorganization mechanism. The problems, though in different forms and with different orientations, may be grouped into three: one is the initiation of the bankruptcy process, one is the supervision over the process, and the other is the fmalization of the reorganization plan and its implementation. In relation to the initiation of the reorganization process, the dissertation's arena covers the reorganization applicant, the reason for reorganization, judicial review and the prevention of abuse of the protective initiatives. Accordingly, the author believes that what is the most important is to single out the companies who are in need of reorganization and in all the likelihood of being rescued from being bankrupt, and to rule out those companies whose reorganization is apparently impossible. The initiation process is the first pass against the creditor protection, and thus is the most important and most significant checkpoint. If the pass is not under tight check, there will be a lot of problems to follow, some of which may lead to a heavy and irrecoverable damage incurred by the creditor. As regards the supervision of the reorganization process, the dissertation has conducted a deepened analysis of the legal status of the company under reorganization, its rights and limitations, the significance of the supervisory body and its duties, and the formation of an autonomous regulatory body and its powers. The author's viewpoint is that there must be an agency responsible for the day to day business of the company under reorganization. The agency may be the company's management or a professional body as the case may be. Basically speaking, the American model that the company is in principle run by the same management except where it is imperative to be run by a professional body, is a model signifying the conception of the debtor reorganizing its bankrupt company and so a model of high success. Secondly, there is a need to set up a supervisory body in charge of the supervision over the company's business. With respect of the fmalization of the reorganization plan and its implementation, the dissertation covers the areas such as the draftsmanand the content, the means of resolution of the plan, its normative approval and compulsory approval and its implementation. The author proposes that the reorganization plan considerably matters as to the interests of the creditor and therefore the process of finalizing the plan should be transparent and open, and the content of the plan must be a result of the creditors' will. To meet the end, the plan must be in accord with the creditor's maximal benefits and in compliance with the principle of equal treatment and absolute priority.Chapter Four explores the balance between collective and individual interests as another. In the course of the reorganization, there is not only a external conflict of interests between the creditor and the other parties concerned but an internal conflict of interests among the creditors. Each creditor hopes to fully and promptly realize his right on debt. Each has a motivation to get satisfied ahead of the other. Similarly, the law on reorganization will try to harmonize the conflict among different parties pursuant to the principle of balance of interests. Automatic freezing, void, and setoff are all the arrangements by the law to reconcile the different interests under conflict. Automatic freezing, which is also called automatic stay, means that once the reorganization process starts all action or proceeding against the debtor's assets will cease automatically. As to the automatic stay, the dissertation puts its emphasis on its basis on which the system come into being, the former legislation, its application, exceptions and its removal. In respect of the right to void, the relevant provisions may be found in the civil law and bankruptcy law. This chapter's discussion covers its theoretical basis, its general conditions and application scope, and two avoidable actions, namely, biased repayment and deceptive repayment, and the other provisions relevant to Chinese bankruptcy law.In Chapter Five, the author offers criticism on the reorganization employed by the mainland companies. Strictly speaking, the mainland has no reorganization system in the modern sense. The provision for thereorganization by the existing enterprise bankruptcy law and those enterprise reconstruction commonly seen in the real life can not be termed as the same thing of the reorganization. Therefore, this chapter mainly discusses the bankruptcy law draft which may come into force soon. None of this, whether of criticism or suggestion, is thoroughly explored except the protection of creditor's rights for it is the theme of the dissertation. The author argues that the introduction of the reorganization system into China is meaningful both in theory and in practice. The relevant provisions by the bankruptcy law draft are disappointedly too simple and too abstract. Despite regard paid by the draft to the creditor protection, there is still much room to get better.Finally, the conclusion reaffirms that it is always a lawyer's persistent pursuit to an effective and successful reorganization since the system came into being. The purpose of the reorganization is to push the debtor to revive and so it is in the public interest. It is a demonstration of the interference with the economy by the public authority, the exercise of which is confined to certain areas and subject to the scope free from any injury to the creditor's interests. Therefore, it may be safe to say that the development of the reorganization goes side by side with the protection of the creditor's rights and interests. Meanwhile, the author hopes and believes that the reorganization system will surely grow and develop in our country. |
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