Research On The Legal Issues Of Market-Oriented Debt-to-Equity Swap In Bankruptcy Reorganization Procedure

In order to meet the requirements of "reducing leverage and debt" put forward by The State Council,market-oriented debt-to-equity swaps have effectively increased financing supply and greatly reduced the debt burden of restructuring enterprises on the verge of bankruptcy since the pilot in 2016.The market-oriented debt-equity swap should follow the market-oriented and legalized principles,but there are some deficiencies in the relevant legal attributes,specific system design,as well as the institutional provisions on equity management and exit,which need to be further refined.This paper takes the procedural node of bankruptcy reorganization as the main line,and discusses the prominent legal issues in the implementation of market-oriented debt-to-equity conversion in bankruptcy reorganization from three perspectives: static formulation and dynamic implementation of debt-to-equity conversion plan in bankruptcy reorganization and disposal of shareholders’ equity after equity conversion.The first chapter defines two breakthroughs in policy-based debt-to-equity swaps,which lays a good institutional foundation for the implementation of market-oriented debt-to-equity swaps.The first is that commercial banks use asset management companies to carry out debt-to-equity swaps.The second is the creditor’s rights investment into the legal way of investment.This paper discusses the feasibility of applying market-oriented debt to equity in bankruptcy reorganization from two aspects of theory and practice.The legal attribute of debt-equity conversion in bankruptcy reorganization is defined as debt contribution,and the Enterprise Bankruptcy Law should be applied before the Company Law.At the same time,it distinguishes the debt-equity swap from the related confusing concepts.The second chapter puts forward specific suggestions on the difficulties existing in the process of making debt-equity swap plan in bankruptcy reorganization.It is clear that security claims,construction funds and workers’ claims can be converted into shares under the premise of voluntary creditors,while tax claims and late fees are absolutely prohibited from being converted into shares.Creditors who can carry out debt-to-equity swap shall be provided with diversified means of repayment of creditor’s rights and be given adequate options;When there is a conflict between the number of creditors who choose to convert to equity and legal restrictions,limited partnership and other platforms can be set up to avoid restrictions.Chapter three puts forward specific suggestions on the difficulties existing in the implementation of debt-to-equity swap plan in bankruptcy reorganization.Further optimize the approval procedure of restructuring plan by setting up separate voting procedure of debt-equity swap plan,compulsory approval hearing procedure and hiring experts;After the voting plan is passed and the equity transfer is completed,whether the rights can continue to claim to other joint and several debtors should be considered in combination with the repayment rate of partial creditor’s rights of the equity transfer;At the same time,eligible enterprises should be encouraged to issue preferred shares and implement cumulative voting system to protect the interests of minority shareholders.Chapter four analyzes the risks of equity disposal of shareholders after stock transfer and puts forward specific suggestions.After the failure of the reorganization plan,for the Stockholders who have completed the industrial and commercial registration,their equity can not be converted back into creditor’s rights;In order to further guarantee the smooth withdrawal of shareholders,we should improve the company’s equity buyback,avoid "clear shares and real debt",and at the same time unblock the channels of equity transfer.