Analysis On The Construction Of Pre-reorganization System In China

Pre-reorganisation has the advantages of both out-of-court debt restructuring and bankruptcy restructuring,which are the two basic methods to resolve the debtor’s debt distress.It has the flexibility and autonomy of an out-of-court restructuring system,while improving the efficiency and success rate of bankruptcy restructuring.The Supreme People’s Court and various ministries and commissions have successively issued documents specifying the need to actively explore and develop a pre-restructuring system in China.Local courts and governments in China have also developed local pre-reorganisation operational guidelines and other regulatory documents in accordance with the actual situation.Depending on the main parties involved in the pre-restructuring process,pre-restructuring can be divided into the following three categories: court-led pre-restructuring,government-led pre-restructuring and party-led pre-restructuring.There are currently no unified legal rules on pre-restructuring in China,which has led to a number of common problems that need to be addressed in judicial practice in various regions: the lack of unified legislation on pre-restructuring may lead to different treatment of different types of cases,the unclear role of relevant subjects,the confusing application of the rules on the protection of the debtor’s property,the system of provisional administrators still needs to be improved and the debtor information disclosure system needs to be established.Drawing on overseas practical experience,the construction of a pre-restructuring system in China may first be regulated through judicial interpretation.In terms of procedural matters,the court and the government should not interfere excessively in a pre-restructuring process that is based on the parties’ own negotiation;the threshold for starting a pre-restructuring process should not be too high to encourage enterprises to save themselves;a strict information disclosure mechanism should be established and debtors should disclose information to creditors and shareholders of the company;as debtors are more aware of the internal situation of the enterprise,they can be assisted by professional supporters such as administrators to As the debtor is more aware of the internal situation of the business,it is possible for the debtor to formulate a draft pre-restructuring plan and file a restructuring application with the court with the help of a professional support person such as an administrator.In other ancillary matters,it is recommended that a professional and impartial pre-restructuring administrator be appointed to assist in the pre-restructuring process and to establish a sound mechanism for the protection of the debtor’s property.