International Experience And Chinese Approach Of The Bankruptcy Prepackaged Reorganization System

Against the background of the independent personality of the company,the emergence of the legal regime of corporate insolvency was originally a "death" treatment for the elimination of the corporate personality.However,both in terms of the history of the development of the company and the evolutionary process of bankruptcy law,the legal regime of corporate bankruptcy does not fully correspond to the ultimate path of "elimination of the company",but has undergone the process of change from complete bankruptcy liquidation to bankruptcy settlement and then to bankruptcy reorganization.Today,modern bankruptcy legislation has gradually evolved to take into account the interests of creditors,debtors,enterprises and other subjects of social interest,which makes bankruptcy reorganization and the prepackaged reorganization mentioned in this article as a bridging procedure to bankruptcy reorganization an important value choice that concerns legislators,enterprises and the judiciary.Bankruptcy prepackaged reorganization means that a company that is unfortunately in a debt crisis but has a rescue value may choose to negotiate with creditors,investors and other stakeholders on its own and apply to the court for bankruptcy reorganization after a recovery plan for the debtor company has been approved by a majority of creditors.After the formal commencement of the bankruptcy reorganization,the court will coordinate the interests of the company,creditors and other parties,and the out-of-court regeneration plan will have judicial enforcement effect,thereby binding all creditors and relieving the debtor company of its difficulties.In terms of the evolutionary process of the bankruptcy law,the basic purpose of the current bankruptcy regime is to rescue companies that are still competitive in the market but are experiencing temporary financial difficulties,restructure their debts,reduce their debt burden and thus continue to maintain their business development.However,the practice of insolvency restructuring has been characterized by extensive judicial intervention,which has limited and weakened the autonomy of creditors and failed to meet the demand of market participants for efficient and low-intervention restructuring negotiations.In practice,there have been attempts and arrangements for out-of-court restructuring in order to avoid insolvency proceedings.However,the lack of rules to guide out-of-court restructuring has resulted in high clamping costs,while the process of out-of-court restructuring is not open and transparent,and creditor free-riding is common.For this reason,as a remarkable phenomenon in the evolution of the corporate system,market participants have tried to use a combination of both bankruptcy reorganization and out-of-court restructuring procedures,which has led to the evolution of the bankruptcy prepackaged organization system,which is the focus of this article.As a mechanism for bridging the gap between out-of-court debt restructuring and judicial bankruptcy reorganization,the bankruptcy prepackaged organization system combines the advantages of both private and public remedies,and has both private autonomy and judicial intervention.Its core function is to encourage troubled enterprises to start reorganization negotiations and finalize reorganization plans as early as possible,as an early effort to regenerate troubled enterprises,and therefore it has certain significance for the construction of the system in China.China’s bankruptcy law has undergone two amendments,the first of which established the system of bankruptcy liquidation and settlement,and the second of which established the system of bankruptcy reorganization.As the practice of judicial bankruptcy reorganization and out-of-court debt restructuring has been hampered,the prepackaged organization system was born out of the need for companies that are temporarily in distress but have the hope of recovery to be protected by the law while pursuing their own remedies.This has given rise to the need for a prepackaged reorganization system in bankruptcy.Regions in China have taken the initiative to experiment and explore local bankruptcy prepackaged reorganization practices based on local market conditions.By collecting and analyzing the practice of bankruptcy prepackaged reorganization of A-share listed companies,it can be seen that there is an increasing number of bankruptcy prepackaged reorganization practices in the market;the prepackaged reorganization process can be triggered in a variety of ways;the trial period for entering the reorganization process is significantly shortened after the prepackaged reorganization process;and the way the bankruptcy prepackaged reorganization process ends may include not only the successful entry into the reorganization process,but also the expiry of the bankruptcy prepackaged reorganization period,which leads to the end of the process and the subsequent delisting of the company.Meanwhile,the practice of bankruptcy prepackaged reorganization has given rise to a number of controversies.Firstly,the necessity and feasibility of the system has been questioned,as the practice of bankruptcy prepackaged reorganization is only a positive exploration and a pilot test within the existing legal framework,lacking clear rules and legal basis.Secondly,the boundaries between the government and court intervention mechanism are blurred,and the practice of the system shows a regulatory tendency,with a government-led and court-led model forming in practice.Thirdly,it is unclear what role the provisional administrator should play in the bankruptcy prepackaged reorganization period.Fourthly,there are problems with the procedural interface,as it is unclear whether the prepackaged reorganization plan can have the legal effect of binding all creditors,and as the bankruptcy prepackaged reorganization is not a necessary procedure to the bankruptcy reorganization,there is uncertainty as to whether the debtor company can enter the bankruptcy reorganization procedure.The bankruptcy prepackaged reorganization in China has been driven by the "bottom-up" market demand and the "top-down" national supply of the system.Supreme People’s Court,the State Council,National Development and Reform Commission and the People’s Bank of China have all advocated the establishment and implementation of bankruptcy prepackaged reorganization,and regional governments and courts have actively issued rules and guidelines on the conduct of bankruptcy prepackaged reorganization proceedings.Therefore,the bankruptcy prepackaged reorganization system is necessary and feasible in China.A market-based,rule-of-law bankruptcy prepackaged organization system should be based on the principle of party autonomy,with the provisional administrator acting as a guide to support the process and the administration and judiciary providing a form of back-up protection.In addition,the bankruptcy prepackaged organization procedure should be open to a wide range of market participants other than the debtor company and creditors,such as the debtor company’s shareholders and strategic investors.Information disclosure requirements should be standardized and regulated in terms of timing,content,procedures,and the obligations and responsibilities of those who are required to disclose information.Finally,the bankruptcy prepackaged organization procedure should be smoothly integrated into the bankruptcy reorganization procedure,and the effectiveness of the prepackaged organization plan should be solidified after entering the reorganization procedure,so that the provisional administrator can continue to act as the administrator in the reorganization procedure,and the debtor company and creditors can find other ways to seek relief if the bankruptcy prepackaged organization fails.