Practical Dilemmas And Improvements Of Pre-Regrouping In Bankruptcy In China

The increasing development of the market economy and the transmutation of bankruptcy concepts have made the use of bankruptcy reorganisation procedures to rescue troubled enterprises an important part of the debtor’s rescue system,but the reorganisation procedures themselves are complex in design and do not meet the diverse market needs."The US was the first country to explore the idea of pre-funding.The United States was the first country to explore the pre-reorganisation model,which was designed to bridge the inherent flaws of reorganisation and facilitate the rebirth of troubled companies.Countries around the world have taken the US pre-restructuring in bankruptcy as a reference model and introduced it locally as a way to improve the deficiencies of their own debtor rescue systems.This article analyses the purpose and legal nature of pre-organisation legislation,as well as policy documents,operational guidelines and judicial cases,and concludes that pre-organisation rules in China are mainly abstract guidelines based on documents.This paper discusses the procedural characterisation and functional alienation of the system.This article analyses the causes of the pre-reorganisation dilemma from two dimensions: procedural characterisation and functional alienation,and the positioning of the functions and nature of pre-reorganisation in different regions deviates from the legislative intent of the Supreme People’s Court,which mistakenly regards pre-reorganisation as an "extra-legal reorganisation".This paper is divided into five parts,with the exception of an introduction and a conclusion.In the first part,we review the concept of pre-reorganization and conclude that pre-reorganization is a hybrid relief system for troubled enterprises that combines in-court and out-of-court procedures;traditional reorganization and out-of-court restructuring do not form a closed-loop management and adjustment mechanism for troubled enterprises,and have certain flaws in their scope of application and targets.Through comparative analysis,we conclude that pre-restructuring has the advantages of solving the clampdown problem and reducing the business impact,which lay the theoretical foundation for the following study.The second part compares the relevant provisions on pre-organisation at the national and local levels,followed by a consolidated analysis of a large number of cases,mainly from the perspectives of conditions for pre-organisation,mode of commencement,period setting,information disclosure and suspension of execution,etc.The final part concludes that the number of bankruptcy pre-organisation cases and the operational guidelines are basically in the same direction,and the specific procedural settings of pre-organisation are basically the same,but there are differences in the procedural contents.The third part uses the findings of the previous study to summarise the practical dilemmas of pre-organisation in insolvency,namely the lack of unified legislative provisions,ambiguous design of specific procedures,unclear responsibilities of participating parties and insufficient supply of supporting mechanisms.The fourth section examines the US,UK and Japan.In the fourth part,the pre-reorganisation systems of the United States,the United Kingdom and Japan are reviewed to understand and learn from the experience and practices of pre-reorganisation in overseas countries,and to draw lessons that can be applied in Chinese practice,such as the need to meet the insolvency requirements for commencement of pre-reorganisation,the need for the parties to lead the entire pre-reorganisation process,the improvement of information disclosure rules and the protection of suppliers’ claims.The fifth partargues that pre-reorganization should have a place in the bankruptcy law system,and proposes countermeasures for the construction of a unified bankruptcy pre-reorganization system in China in terms of additional legislative provisions,unification of specific procedures,clarification of subject responsibilities,and improvement of supporting mechanisms,respectively,with a view to facilitating the regeneration of troubled enterprises.