The balance of interests in the adjustment of investors' rights and interests in
The adjustment of the investors' rights and interests is a regular content in the reorganization plan, and also a problem involving the basic legal theory of civil and commercial affairs and a cross cutting problem in many fields. This paper analyzes the basis of the company law on the adjustment of the investors' rights and interests, and proposes that the subjects of interest conflicts in the adjustment of the investors' rights and interests in the company reorganization include the original shareholders, the actual controllers, the affiliated enterprises, the equity pledgers, and the creditors who apply to the court to freeze their capital contributions. Through the empirical analysis of the practices of transferring capital reserve to share capital, transferring equity by major shareholders, clearing equity, reserving the part of the original investor's capital contribution and eliminating the pledge right of equity in the practice of investor's equity adjustment and reorganization, and in accordance with the thinking of "legal research from experience to theory", we will make the rules of investor's equity adjustment legal, standardize the content of information disclosure, standardize the audit and evaluation work, market-based price discovery The development trend of legal effect constancy, interest balance and deconstruction is prospected.
Key words: reorganization, investor's equity adjustment, interest balance
The investor's rights and interests adjustment is an important node in the bankruptcy reorganization procedure and an important part of many reorganization plans. It plays a pivotal role in introducing reorganization investors, maximizing the debtor's property value and optimizing the allocation of social resources. The adjustment of investors' rights and interests is a problem involving the basic legal theory of civil and commercial affairs, and is also a cross cutting issue in many fields such as bankruptcy law, company law, property law, civil procedure law and administrative law. In practice, the investor's rights and interests adjustment may adjust the direct or indirect interests of multiple stakeholders. It is necessary to explain the theoretical basis within the legal framework, clarify the rights boundary, balance the conflicts of interests, and standardize the operating procedures, so as to facilitate the stakeholders to rebuild consensus in the reorganization process.
1、 The basis of company law on the adjustment of investors' rights and interests
The company's capital includes the company's equity capital and creditor's rights capital. The equity capital is the sum of the property and capital contributions paid by the company's shareholders to the company for the purpose of investment. The creditor's rights capital is the capital obtained by the company from the creditors according to law and paid off on schedule. Equity capital reflects the ownership, management and control rights of the company under normal operating conditions, and creditor's rights capital reflects the relationship between the debt and creditor's rights of the company and its creditors. The company is a synthesis of multilateral contractual relations, and a contractual network composed of shareholders, creditors, customers, employees and other relevant stakeholders. The process of interest game among various stakeholders is a process of interest distribution and balance, as well as a process of risk management and risk bearing. In the contract network, each entity takes normal profit or income as the interest expectation, and takes bankruptcy as the ultimate testing platform for risk, and carries out business affairs according to law in the market economy environment.
From the perspective of corporate governance, creditor's rights capital transfers the company's right of operation and management, and obtains the right of priority and equity capital in liquidation; Equity capital is entitled to the company's business decision-making, election or appointment of directors and supervisors, asset income, residual property distribution and other rights. Equity capital is more deeply involved in corporate governance than creditor's capital and controls the company. In the case that the company is unable to pay off its due debts, and its assets are insufficient to pay off all debts or it is obviously lack of solvency, the company's control right is transferred from equity capital to creditor's capital, that is, from the company's shareholders to the company's creditors.
1. The reorganization of the company is equivalent to the establishment of the company
As a type of legal person, the company, whether adopting the theory of legal person fiction, the theory of legal person reality or the theory of contract network as the legal principle premise, can be very good at the similarity between the new establishment of the company and the reorganization of the company. Reorganization, English for reorganization and Japanese for "regeneration", refers to the reconstruction debt liquidation system that protects the company from continuing its business, realizes debt liquidation and asset reorganization, extricates the company from difficulties, and moves towards rejuvenation in accordance with the procedures prescribed by the law in the event of the company's insolvency. In other words, under the conditions of reorganization, the company has been "rebuilt" and "regenerated". The reorganization period can be understood as the period during which the legal personality of the company is restricted and restricted by the law. After the completion of the reorganization procedure, it can be recognized that the legal subject of the company, the social existence foundation or the contract subject constituting the company have undergone fundamental changes. The law brought about by such changes has given the company new life, which is the same as the social governance effect achieved by the newly established company subject.
The purpose of the reorganization system is to avoid bankruptcy liquidation of the debtor who has been bankrupt but has the hope of rescue through business reorganization and debt liquidation through the coordination of the interests of all stakeholders, so that its subject qualification can continue and get a new life. The ultimate goal of reorganization has also changed from "eliminating the legal personality of the enterprise" to "promoting the recovery of the debtor". The reorganization involves the game of creditors, debtors, contributors, investors and other parties. After the reorganization, the shareholders, actual controllers, management, assets, debts and personnel of the company have changed compared with those before the reorganization. Even if the original shareholders still hold shares or the main business has not changed, However, at this time, the main body of the company has been distinguished from that before the reorganization by the "liquidation" of the reorganization judicial procedure: the company has reorganized its historical business, cleaned up its debts, and formulated a new business plan for its future development. From a commercial point of view, after the implementation of the company's reorganization plan, the company has been "reborn" in the main body. During the reorganization, the company has carried out creditor's rights declaration, summary and centralized settlement, and established obvious debt risk isolation before and after the reorganization. The debt content, business risk, business plan, social image, cooperation expectation and enterprise value of the company's main body have been completely changed, After the reorganization, the company itself was also given a new development mission.
The reorganization and establishment of the company are equivalent. In the reorganization, the judicial power intervenes in the company with bankruptcy causes, adjusts the interests of all stakeholders, reshapes the consensus of interests of all parties, determines a new business plan with the reorganization plan as the core, clears up the company's liabilities, adjusts the rights and interests of investors, and gives a new life to the company on the verge of bankruptcy, so that a new market subject enters the market competition with equity capital and creditor's rights capital, This is equivalent to the effect of the newly established company and the shareholders giving the newly established company the dominant position in the market according to law. From the perspective of equity capital, under specific circumstances and conditions, reorganization can gather production facilities, market customers, talent team, qualification conditions and other resources required by the company's development as soon as possible in a short time, which will be more favored by investors.
2. The company law basis for the adjustment of investors' rights and interests in the company reorganization
The shareholders of the company get the right to control the company, while the creditors get the priority to distribute the company's property. The two achieve a market-oriented balance in terms of risk and income, division of labor and cooperation, industry and finance, and also achieve a balance in the corporate governance structure and benefit distribution. It can be said that the perfect combination of equity capital and creditor's rights capital, in different stages of the company's establishment, operation, liquidation and bankruptcy, respectively, complies with the standard requirements of commercial law, and constructs the logical system of the company's legal system and the important cornerstone of the strong market vitality of the company's main body.
The second paragraph of Article 186 of the company law of China stipulates that "the remaining property of the company after paying the liquidation expenses, employees' wages, social insurance expenses and legal compensation, paying the taxes owed and paying off the company's debts shall be distributed by the limited liability company according to the proportion of the shareholders' capital contributions, and by the joint stock limited company according to the proportion of the shares held by the shareholders." The shareholders have the right to distribute the company's remaining property on the condition that the company's property still has the remaining property after paying the amount specified by the law. Under the condition of reorganization, if the overall market value of the final debtor is not enough to pay off all debts through the market-based price discovery mechanism, the investor has no remaining property, and the adjustment of clearing the investor's rights and interests in this matter complies with the legal provisions.
3. The adjustment of the investor's rights and interests complies with the provisions of the property law on equity
The real right is the legal premise of the stock right, and the stock right is the legal means to obtain the real right. With the development of the market economy and the development of the capital market, the liquidity of the shares of the limited company and the shares of the joint-stock company is increasingly enhanced. In the process of these transactions, the equity can also be said to be the subject matter of the real right. The equity is included in the adjustment object of the real right law and is an important part of the real right system. In real life, because the value of equity is closely related to the company's intangible assets, special qualifications, scarce resources, core capabilities, etc., equity has exceeded the general things specified in the property law and become the most valuable and dynamic transaction object in the market economy.
Article 67 of China's property law stipulates that "the state, the collective and the private may, in accordance with the law, contribute to the establishment of limited liability companies, joint stock limited companies or other enterprises. If the state, the collective and the private owned immovable or movable property is invested in the enterprise, the investor shall enjoy the rights and perform the obligations of asset income, major decisions and selection of management personnel according to the agreement or the proportion of investment." Article 28 of the property law stipulates that "where the establishment, change, transfer or extinction of property rights is caused by the legal documents of the people's court or the arbitration commission or the expropriation decisions of the people's government, it shall take effect when the legal documents or the expropriation decisions of the people's government take effect."
2、 The subject and content of interest conflict in the adjustment of investors' rights and interests
Key words: reorganization, investor's equity adjustment, interest balance
The investor's rights and interests adjustment is an important node in the bankruptcy reorganization procedure and an important part of many reorganization plans. It plays a pivotal role in introducing reorganization investors, maximizing the debtor's property value and optimizing the allocation of social resources. The adjustment of investors' rights and interests is a problem involving the basic legal theory of civil and commercial affairs, and is also a cross cutting issue in many fields such as bankruptcy law, company law, property law, civil procedure law and administrative law. In practice, the investor's rights and interests adjustment may adjust the direct or indirect interests of multiple stakeholders. It is necessary to explain the theoretical basis within the legal framework, clarify the rights boundary, balance the conflicts of interests, and standardize the operating procedures, so as to facilitate the stakeholders to rebuild consensus in the reorganization process.
1、 The basis of company law on the adjustment of investors' rights and interests
The company's capital includes the company's equity capital and creditor's rights capital. The equity capital is the sum of the property and capital contributions paid by the company's shareholders to the company for the purpose of investment. The creditor's rights capital is the capital obtained by the company from the creditors according to law and paid off on schedule. Equity capital reflects the ownership, management and control rights of the company under normal operating conditions, and creditor's rights capital reflects the relationship between the debt and creditor's rights of the company and its creditors. The company is a synthesis of multilateral contractual relations, and a contractual network composed of shareholders, creditors, customers, employees and other relevant stakeholders. The process of interest game among various stakeholders is a process of interest distribution and balance, as well as a process of risk management and risk bearing. In the contract network, each entity takes normal profit or income as the interest expectation, and takes bankruptcy as the ultimate testing platform for risk, and carries out business affairs according to law in the market economy environment.
From the perspective of corporate governance, creditor's rights capital transfers the company's right of operation and management, and obtains the right of priority and equity capital in liquidation; Equity capital is entitled to the company's business decision-making, election or appointment of directors and supervisors, asset income, residual property distribution and other rights. Equity capital is more deeply involved in corporate governance than creditor's capital and controls the company. In the case that the company is unable to pay off its due debts, and its assets are insufficient to pay off all debts or it is obviously lack of solvency, the company's control right is transferred from equity capital to creditor's capital, that is, from the company's shareholders to the company's creditors.
1. The reorganization of the company is equivalent to the establishment of the company
As a type of legal person, the company, whether adopting the theory of legal person fiction, the theory of legal person reality or the theory of contract network as the legal principle premise, can be very good at the similarity between the new establishment of the company and the reorganization of the company. Reorganization, English for reorganization and Japanese for "regeneration", refers to the reconstruction debt liquidation system that protects the company from continuing its business, realizes debt liquidation and asset reorganization, extricates the company from difficulties, and moves towards rejuvenation in accordance with the procedures prescribed by the law in the event of the company's insolvency. In other words, under the conditions of reorganization, the company has been "rebuilt" and "regenerated". The reorganization period can be understood as the period during which the legal personality of the company is restricted and restricted by the law. After the completion of the reorganization procedure, it can be recognized that the legal subject of the company, the social existence foundation or the contract subject constituting the company have undergone fundamental changes. The law brought about by such changes has given the company new life, which is the same as the social governance effect achieved by the newly established company subject.
The purpose of the reorganization system is to avoid bankruptcy liquidation of the debtor who has been bankrupt but has the hope of rescue through business reorganization and debt liquidation through the coordination of the interests of all stakeholders, so that its subject qualification can continue and get a new life. The ultimate goal of reorganization has also changed from "eliminating the legal personality of the enterprise" to "promoting the recovery of the debtor". The reorganization involves the game of creditors, debtors, contributors, investors and other parties. After the reorganization, the shareholders, actual controllers, management, assets, debts and personnel of the company have changed compared with those before the reorganization. Even if the original shareholders still hold shares or the main business has not changed, However, at this time, the main body of the company has been distinguished from that before the reorganization by the "liquidation" of the reorganization judicial procedure: the company has reorganized its historical business, cleaned up its debts, and formulated a new business plan for its future development. From a commercial point of view, after the implementation of the company's reorganization plan, the company has been "reborn" in the main body. During the reorganization, the company has carried out creditor's rights declaration, summary and centralized settlement, and established obvious debt risk isolation before and after the reorganization. The debt content, business risk, business plan, social image, cooperation expectation and enterprise value of the company's main body have been completely changed, After the reorganization, the company itself was also given a new development mission.
The reorganization and establishment of the company are equivalent. In the reorganization, the judicial power intervenes in the company with bankruptcy causes, adjusts the interests of all stakeholders, reshapes the consensus of interests of all parties, determines a new business plan with the reorganization plan as the core, clears up the company's liabilities, adjusts the rights and interests of investors, and gives a new life to the company on the verge of bankruptcy, so that a new market subject enters the market competition with equity capital and creditor's rights capital, This is equivalent to the effect of the newly established company and the shareholders giving the newly established company the dominant position in the market according to law. From the perspective of equity capital, under specific circumstances and conditions, reorganization can gather production facilities, market customers, talent team, qualification conditions and other resources required by the company's development as soon as possible in a short time, which will be more favored by investors.
2. The company law basis for the adjustment of investors' rights and interests in the company reorganization
The shareholders of the company get the right to control the company, while the creditors get the priority to distribute the company's property. The two achieve a market-oriented balance in terms of risk and income, division of labor and cooperation, industry and finance, and also achieve a balance in the corporate governance structure and benefit distribution. It can be said that the perfect combination of equity capital and creditor's rights capital, in different stages of the company's establishment, operation, liquidation and bankruptcy, respectively, complies with the standard requirements of commercial law, and constructs the logical system of the company's legal system and the important cornerstone of the strong market vitality of the company's main body.
The second paragraph of Article 186 of the company law of China stipulates that "the remaining property of the company after paying the liquidation expenses, employees' wages, social insurance expenses and legal compensation, paying the taxes owed and paying off the company's debts shall be distributed by the limited liability company according to the proportion of the shareholders' capital contributions, and by the joint stock limited company according to the proportion of the shares held by the shareholders." The shareholders have the right to distribute the company's remaining property on the condition that the company's property still has the remaining property after paying the amount specified by the law. Under the condition of reorganization, if the overall market value of the final debtor is not enough to pay off all debts through the market-based price discovery mechanism, the investor has no remaining property, and the adjustment of clearing the investor's rights and interests in this matter complies with the legal provisions.
3. The adjustment of the investor's rights and interests complies with the provisions of the property law on equity
The real right is the legal premise of the stock right, and the stock right is the legal means to obtain the real right. With the development of the market economy and the development of the capital market, the liquidity of the shares of the limited company and the shares of the joint-stock company is increasingly enhanced. In the process of these transactions, the equity can also be said to be the subject matter of the real right. The equity is included in the adjustment object of the real right law and is an important part of the real right system. In real life, because the value of equity is closely related to the company's intangible assets, special qualifications, scarce resources, core capabilities, etc., equity has exceeded the general things specified in the property law and become the most valuable and dynamic transaction object in the market economy.
Article 67 of China's property law stipulates that "the state, the collective and the private may, in accordance with the law, contribute to the establishment of limited liability companies, joint stock limited companies or other enterprises. If the state, the collective and the private owned immovable or movable property is invested in the enterprise, the investor shall enjoy the rights and perform the obligations of asset income, major decisions and selection of management personnel according to the agreement or the proportion of investment." Article 28 of the property law stipulates that "where the establishment, change, transfer or extinction of property rights is caused by the legal documents of the people's court or the arbitration commission or the expropriation decisions of the people's government, it shall take effect when the legal documents or the expropriation decisions of the people's government take effect."
2、 The subject and content of interest conflict in the adjustment of investors' rights and interests
1. Original shareholders
Whether the original shareholder's capital contribution is adjusted cannot be determined only by whether the debtor is insolvent or not, and cannot be determined according to the debtor's audit report or evaluation report during the reorganization. On the one hand, due to the objective limitations of the audit work and the limitations of the evaluation method, the debtor's enterprise value cannot be fully determined through the evaluation, especially for some core technologies, high-quality resources and special qualifications, which cannot be determined in terms of law and accounting, But it has unique competitiveness in business; On the other hand, the value of the company is not evaluated, but traded. The price should be found through marketization. On this basis, if the overall value including the company's assets and shell resources is insufficient to pay off all debts, the market value of the original shareholders' equity can be confirmed to be zero.
The adjustment of the investor's rights and interests of the original shareholders of the company shall be different from the controlling shareholders and participating shareholders, the major shareholders and retail investors of the listed company, the shareholders participating in the company's operation and the shareholders not participating in the company's operation. In the practice of the reorganization of Listed Companies in China, the adjustment of investors' rights and interests of controlling shareholders and ordinary shareholders has also been treated differently. Most of the cases have better balanced the interests of creditors and shareholders of listed companies and maintained the order of the capital market. In the reorganization of listed companies, the adjustment of investors' rights and interests has also become the most important support to attract investors.
2. Actual controller
The actual controller refers to a person who is not a shareholder of the company but can actually control the company's behavior through investment relations, agreements or other arrangements. After the equity adjustment of the investors in the reorganization of the company, the equity or agreement as the link will be cut off, and generally the actual controller will lose the actual control over the company.
China's enterprise bankruptcy law does not introduce the concept of "actual controller", but the company law regulates the actual controller. From a positive perspective, the actual controller is often the soul and core figure of the company, as well as the object and trusted person of the substantial investment of equity capital and creditor's rights capital. The actual controller is the center of the company's management team, may also master the company's core technology and core resources, represents the company's brand recognition, and is related to whether the company has restructuring value and can promote restructuring in an orderly manner. The departure of the actual controller may lead to the dissolution of the company's management team, thus making the reorganization objective impossible to achieve.
Article 21 of the company law of the people's Republic of China stipulates that "the controlling shareholders, actual controllers, directors, supervisors and senior management personnel of the company shall not use their affiliated relations to damage the interests of the company. Those who violate the provisions of the preceding paragraph and cause losses to the company shall be liable for compensation." In other words, when the company enters the state of reorganization, if it can be found that the actual controller uses the control right to transfer the interests of the company, it shall bear the liability for compensation to the company. Such creditor's rights of the company to the actual controller during the reorganization shall be included in the debtor's property, and the right to dispose of them shall be vested in the creditors' meeting. In practice, the actual controller usurps the interests of the company by taking advantage of the control convenience, decorrelates the connected transactions, and adopts the methods of anonymous shareholders and equity holding on behalf of the creditors to form the situation of "poor temple and rich Abbot", which damages the interests of creditors. It should also be corrected in the reorganization with the help of the manager's investigation and reorganization audit, so as to realize the balance of interests by focusing on substance over form and pursuing substantive justice.
3. Equity pledgee
In the process of obtaining creditor's rights capital and debt financing, the company and its shareholders generally pledge the company's equity to establish other rights. Equity pledge refers to the establishment of equity pledge to enable the creditor to obtain the security right of the pledged equity. Equity pledge is a kind of right pledge. Article 226 of the property law stipulates that "if fund units or equity are pledged, the parties shall conclude a written contract. If fund units or equity registered by a securities registration and settlement institution are pledged, the pledge right shall be established when the securities registration and settlement institution handles the pledge registration; if other equity is pledged, the pledge right shall be established when the administrative department for Industry and Commerce handles the pledge registration." After the company's equity is pledged, the shareholders have no right to dispose of the equity without the consent of the pledgee.
Under the condition that the company enters the reorganization, whether the reorganization plan can directly adjust the rights and interests of the pledged investors is an important civil and commercial legal issue. According to the basic theory of civil law, the pledge of equity is a security right, which belongs to the subordinate right. The main right is a right that can exist independently without relying on other rights. The subordinate right refers to the right that cannot exist independently but is subordinate to the main right. The slave right is derived from the master right. The master right is invalid and the slave right is also invalid. The slave right is extinguished with the extinction of the master right. Therefore, the slave right cannot exist separately from the master right. The pledge right of equity cannot exist independently from the equity, and the value of equity cannot be determined independently. It must be evaluated according to the company's assets, liabilities and overall resources, and the equity price of the investor must be determined through the market price discovery mechanism and price realization mechanism, and through the legal and market-oriented methods in the reorganization process. If the value of the company's overall assets and all resources is still insufficient to pay off all debts at this time, the company's equity value is zero, and the rights of the equity pledgee are lost due to the clearing of the equity ontology to which the equity pledge right belongs. At this time, in terms of procedure, reorganization is the general execution and liquidation of the bankruptcy procedure, and the bankruptcy law, as a special commercial law, should take precedence over the application of the property law in the equity pledge; In terms of entity, the value of the company's equity is still zero after integrating the company's assets, liabilities and resources, which means that the value of the pledge right based on the equity is also zero, that is, the pledge right has no value.
The equity appreciation after the successful reorganization of the company is not the actual value of the current equity, but the potential future value. It is the spillover effect of the successful reorganization in the future. The effect is actually created by the parties to the reorganization, and has little relationship with the equity pledgee who is not involved in the reorganization. The obligee should not naturally obtain the potential value. It is also in line with the general logic that the equity is regarded as worthless before the successful reorganization (generally before the completion of the reorganization plan). [[1] Zhang Yongjian and Du Jun: on the coordination of equity reduction and equity burden in the bankruptcy reorganization procedure, published in the application of law, 2012, issue 11.]] 1] the recovery of the company's equity value after the reorganization is the result of the successful reorganization. The right to directly adjust the pledged equity in the reorganization procedure should be given. This adjustment can be established in both legal theory and logic. From the perspective of the Pledgee of equity, once the rules of equity pledge are clear, the market entity will respond to and allocate risks according to the established rules, make reasonable commercial interest expectation and correct risk assessment for the equity pledge, take into account the risk of equity value depreciation or company bankruptcy when accepting the equity pledge, and put this part of the review work ahead, so that all parties can clarify their reasonable business expectations and risk boundaries, It is also conducive to limiting the scope of the functions of the bankruptcy law.
4. Creditors who apply to the court to freeze their capital contributions
The shareholders of the company shall apply to the court for freezing their equity due to the debt problem, and the creditors who apply to the court for freezing their capital contributions form interest expectations for the lawful disposal of this part of equity and the repayment of debts. If, in the debtor's bankruptcy proceedings, the capital contribution of the investor, i.e. the shareholder, is reduced or cleared, the interests of creditors who apply to the court to freeze the capital contribution will be greatly affected. At the same time, because the legal documents such as the civil ruling and the notice of assistance in execution, which freeze the capital contribution, have the force of certainty and execution, and are generally not the same court as the court receiving the case of reorganization, or even the higher court of the court receiving the case, the multidimensional values including civil rights and interests, judicial order and document effectiveness need to be maintained, and improper handling may cause confusion.
As a general execution procedure for the benefit of all creditors, the group of creditors in the bankruptcy procedure can be understood as the common applicant in the execution case, and the collective consensus of all creditors is formed through the creditor meeting. The enterprise bankruptcy law is a special law of the civil procedure law. According to the principle that the special law is superior to the common law, the court shall first apply the provisions of the bankruptcy law when trying bankruptcy cases; Where there is no provision in the bankruptcy law, the relevant provisions of the Civil Procedure Law shall apply. If it is allowed to adjust the investor's rights and interests of the debtor in the bankruptcy proceedings, the debtor's enterprise value shall be taken as the overall reference, the creditor's rights capital and equity capital shall be coordinated as a whole, and the debtor's overall market disposal shall be conducted. The adjustment of the rights and interests of the investors in the reorganization procedure cannot be restricted by the fact that the debtor's capital contribution has been frozen by the court. This restriction should be broken through at the legislative level, and the reorganization system should be given stronger vitality, so that more enterprises with hope to be rescued can be reborn. If the creditor of the shareholder freezes the equity, the reorganization procedure shall take precedence over the ordinary execution procedure in terms of legal value. Therefore, in order to implement the reorganization plan, the corresponding amount of equity freezing measures shall be lifted. [[2] Zhang Yongjian and Du Jun: on the coordination of equity reduction and equity burden in the bankruptcy reorganization procedure, published in the application of law, 2012, issue 11.]] 2〕
Value judgment is the core of civil law. As a tool of social governance, civil law is to set corresponding coordination rules for specific types of conflict of interests to achieve its function of organizing social order. [[3] Wang Yi: Principles and methods of civil law, Law Press, November 2009, 1st edition, page 32.] 3] if the debtor's capital contribution or the company's equity is legally frozen by the court, whether the frozen capital contribution or equity can be forcibly reduced or cleared after the debtor enters the reorganization procedure is not only a question of value judgment and interest selection, but also an important issue of legal order. The litigant doctrine and debate doctrine in civil litigation pay more attention to the social standard and the maximization of overall interests in the bankruptcy procedure, and become an important content of "safeguarding the socialist market economic order" in the first legislative purpose of the enterprise bankruptcy law.
3、 An empirical analysis of investor's equity adjustment in practice
The law comes from the living economic reality. [[4] Wang Yanchuan: generation of modern commercial law: transaction model and value structure, Law Press, 1st edition, September 2015, P. 21.] 4] the adjustment of investors' rights and interests in China's judicial restructuring practice has provided sufficient nourishment for theoretical research. It contains our judicial skills and wisdom of rule of law to deal with China's problems, and is also the soil and social foundation for theoretical breakthroughs in future commercial law and bankruptcy law. Commercial law comes from the creation of practical circles, not the invention of legislators. The existing cases completed by innovative practical operators and learned, learned and surpassed by peers will profoundly affect the evolution of law and social development. The enterprise bankruptcy law and reorganization legal system are no exception, and even a typical representative of this situation.
1. Transfer of capital reserve to share capital and transfer of major shareholders: a common path for reorganization of listed companies
Since Zhejiang Haina Technology Co., Ltd. (000925) was the first reorganization case of a listed company in 2007, as of the end of July 2019, 56 listed companies in China have applied for bankruptcy reorganization or been applied for by creditors, of which 51 have been confirmed by the court that the implementation of the reorganization plan has been completed.
(1) In the restructuring plan of Amoy Electronics Co., Ltd. (600057), the adjustment of the investors' rights and interests is that all shareholders transfer their shares of Amoy electronics in a certain proportion. The controlling shareholder transfers 100% of its shares (185209632 shares, which are tradable shares with limited sales conditions), and other shareholders transfer 10% of their shares (24463,03 shares, of which 50306 shares are tradable shares with limited sales conditions). All shareholders transferred 209672669 shares in total.
(2) In the reorganization plan of Guangdong Kingman Group Co., Ltd. (400012), the adjustment of the investor's rights and interests is as follows: non tradable shareholders conditionally transfer about 61.38 million shares of 85% of their total shares to the reorganizer and ordinary creditors; The shareholders of circulating shares transferred about 43.48 million shares of 70% of their total shares to the strategic investors and ordinary creditors introduced by the restructuring party.
(3) In the restructuring plan of Anshan No.1 Construction Machinery Co., Ltd. (600813), the adjustment of the rights and interests of the investors is as follows: all the shareholders transfer their shares of Anshan No.1 Engineering Co., Ltd. free of charge according to the corresponding proportion, of which the non tradable shareholders transfer 80% of their total shares, and a total of about 126.72 million shares are transferred; The holders of tradable shares transferred 65% of their total shares, with a total of 64.74 million shares transferred.
(4) In the restructuring plan of Jiangsu Shuntian Shipbuilding Co., Ltd. (002608), the adjustment of the investor's rights and interests is as follows: Taking the existing total share capital of Shuntian shipbuilding as the base, the capital reserve is converted into shares at the ratio of 13.870379 shares per 10 shares, with a total of 519931200 shares. After the conversion, the total share capital of Shuntian shipbuilding will be increased from 374.85 million shares to 894.7812 million shares, and the converted shares will not be distributed to shareholders, All of them shall be distributed or disposed of by the administrator to the creditors.
(5) In the restructuring plan of Shanghai Chaori Solar Energy Technology Co., Ltd. (002506), the adjustment of the investor's rights and interests is: Based on the existing total share capital, the capital reserve is converted into share capital at the ratio of 19.9165402124431 shares per 10 shares, with a total of 1680 million shares. After the conversion of capital reserve into share capital is completed, the total share capital of Chaori sun will be increased from 843.52 million shares to 252.35 million shares. All investors shall transfer the converted shares for free and the investor shall transfer the Chaori shares. All investors shall transfer the 1680 million converted shares for free.
Whether the original shareholder's capital contribution is adjusted cannot be determined only by whether the debtor is insolvent or not, and cannot be determined according to the debtor's audit report or evaluation report during the reorganization. On the one hand, due to the objective limitations of the audit work and the limitations of the evaluation method, the debtor's enterprise value cannot be fully determined through the evaluation, especially for some core technologies, high-quality resources and special qualifications, which cannot be determined in terms of law and accounting, But it has unique competitiveness in business; On the other hand, the value of the company is not evaluated, but traded. The price should be found through marketization. On this basis, if the overall value including the company's assets and shell resources is insufficient to pay off all debts, the market value of the original shareholders' equity can be confirmed to be zero.
The adjustment of the investor's rights and interests of the original shareholders of the company shall be different from the controlling shareholders and participating shareholders, the major shareholders and retail investors of the listed company, the shareholders participating in the company's operation and the shareholders not participating in the company's operation. In the practice of the reorganization of Listed Companies in China, the adjustment of investors' rights and interests of controlling shareholders and ordinary shareholders has also been treated differently. Most of the cases have better balanced the interests of creditors and shareholders of listed companies and maintained the order of the capital market. In the reorganization of listed companies, the adjustment of investors' rights and interests has also become the most important support to attract investors.
2. Actual controller
The actual controller refers to a person who is not a shareholder of the company but can actually control the company's behavior through investment relations, agreements or other arrangements. After the equity adjustment of the investors in the reorganization of the company, the equity or agreement as the link will be cut off, and generally the actual controller will lose the actual control over the company.
China's enterprise bankruptcy law does not introduce the concept of "actual controller", but the company law regulates the actual controller. From a positive perspective, the actual controller is often the soul and core figure of the company, as well as the object and trusted person of the substantial investment of equity capital and creditor's rights capital. The actual controller is the center of the company's management team, may also master the company's core technology and core resources, represents the company's brand recognition, and is related to whether the company has restructuring value and can promote restructuring in an orderly manner. The departure of the actual controller may lead to the dissolution of the company's management team, thus making the reorganization objective impossible to achieve.
Article 21 of the company law of the people's Republic of China stipulates that "the controlling shareholders, actual controllers, directors, supervisors and senior management personnel of the company shall not use their affiliated relations to damage the interests of the company. Those who violate the provisions of the preceding paragraph and cause losses to the company shall be liable for compensation." In other words, when the company enters the state of reorganization, if it can be found that the actual controller uses the control right to transfer the interests of the company, it shall bear the liability for compensation to the company. Such creditor's rights of the company to the actual controller during the reorganization shall be included in the debtor's property, and the right to dispose of them shall be vested in the creditors' meeting. In practice, the actual controller usurps the interests of the company by taking advantage of the control convenience, decorrelates the connected transactions, and adopts the methods of anonymous shareholders and equity holding on behalf of the creditors to form the situation of "poor temple and rich Abbot", which damages the interests of creditors. It should also be corrected in the reorganization with the help of the manager's investigation and reorganization audit, so as to realize the balance of interests by focusing on substance over form and pursuing substantive justice.
3. Equity pledgee
In the process of obtaining creditor's rights capital and debt financing, the company and its shareholders generally pledge the company's equity to establish other rights. Equity pledge refers to the establishment of equity pledge to enable the creditor to obtain the security right of the pledged equity. Equity pledge is a kind of right pledge. Article 226 of the property law stipulates that "if fund units or equity are pledged, the parties shall conclude a written contract. If fund units or equity registered by a securities registration and settlement institution are pledged, the pledge right shall be established when the securities registration and settlement institution handles the pledge registration; if other equity is pledged, the pledge right shall be established when the administrative department for Industry and Commerce handles the pledge registration." After the company's equity is pledged, the shareholders have no right to dispose of the equity without the consent of the pledgee.
Under the condition that the company enters the reorganization, whether the reorganization plan can directly adjust the rights and interests of the pledged investors is an important civil and commercial legal issue. According to the basic theory of civil law, the pledge of equity is a security right, which belongs to the subordinate right. The main right is a right that can exist independently without relying on other rights. The subordinate right refers to the right that cannot exist independently but is subordinate to the main right. The slave right is derived from the master right. The master right is invalid and the slave right is also invalid. The slave right is extinguished with the extinction of the master right. Therefore, the slave right cannot exist separately from the master right. The pledge right of equity cannot exist independently from the equity, and the value of equity cannot be determined independently. It must be evaluated according to the company's assets, liabilities and overall resources, and the equity price of the investor must be determined through the market price discovery mechanism and price realization mechanism, and through the legal and market-oriented methods in the reorganization process. If the value of the company's overall assets and all resources is still insufficient to pay off all debts at this time, the company's equity value is zero, and the rights of the equity pledgee are lost due to the clearing of the equity ontology to which the equity pledge right belongs. At this time, in terms of procedure, reorganization is the general execution and liquidation of the bankruptcy procedure, and the bankruptcy law, as a special commercial law, should take precedence over the application of the property law in the equity pledge; In terms of entity, the value of the company's equity is still zero after integrating the company's assets, liabilities and resources, which means that the value of the pledge right based on the equity is also zero, that is, the pledge right has no value.
The equity appreciation after the successful reorganization of the company is not the actual value of the current equity, but the potential future value. It is the spillover effect of the successful reorganization in the future. The effect is actually created by the parties to the reorganization, and has little relationship with the equity pledgee who is not involved in the reorganization. The obligee should not naturally obtain the potential value. It is also in line with the general logic that the equity is regarded as worthless before the successful reorganization (generally before the completion of the reorganization plan). [[1] Zhang Yongjian and Du Jun: on the coordination of equity reduction and equity burden in the bankruptcy reorganization procedure, published in the application of law, 2012, issue 11.]] 1] the recovery of the company's equity value after the reorganization is the result of the successful reorganization. The right to directly adjust the pledged equity in the reorganization procedure should be given. This adjustment can be established in both legal theory and logic. From the perspective of the Pledgee of equity, once the rules of equity pledge are clear, the market entity will respond to and allocate risks according to the established rules, make reasonable commercial interest expectation and correct risk assessment for the equity pledge, take into account the risk of equity value depreciation or company bankruptcy when accepting the equity pledge, and put this part of the review work ahead, so that all parties can clarify their reasonable business expectations and risk boundaries, It is also conducive to limiting the scope of the functions of the bankruptcy law.
4. Creditors who apply to the court to freeze their capital contributions
The shareholders of the company shall apply to the court for freezing their equity due to the debt problem, and the creditors who apply to the court for freezing their capital contributions form interest expectations for the lawful disposal of this part of equity and the repayment of debts. If, in the debtor's bankruptcy proceedings, the capital contribution of the investor, i.e. the shareholder, is reduced or cleared, the interests of creditors who apply to the court to freeze the capital contribution will be greatly affected. At the same time, because the legal documents such as the civil ruling and the notice of assistance in execution, which freeze the capital contribution, have the force of certainty and execution, and are generally not the same court as the court receiving the case of reorganization, or even the higher court of the court receiving the case, the multidimensional values including civil rights and interests, judicial order and document effectiveness need to be maintained, and improper handling may cause confusion.
As a general execution procedure for the benefit of all creditors, the group of creditors in the bankruptcy procedure can be understood as the common applicant in the execution case, and the collective consensus of all creditors is formed through the creditor meeting. The enterprise bankruptcy law is a special law of the civil procedure law. According to the principle that the special law is superior to the common law, the court shall first apply the provisions of the bankruptcy law when trying bankruptcy cases; Where there is no provision in the bankruptcy law, the relevant provisions of the Civil Procedure Law shall apply. If it is allowed to adjust the investor's rights and interests of the debtor in the bankruptcy proceedings, the debtor's enterprise value shall be taken as the overall reference, the creditor's rights capital and equity capital shall be coordinated as a whole, and the debtor's overall market disposal shall be conducted. The adjustment of the rights and interests of the investors in the reorganization procedure cannot be restricted by the fact that the debtor's capital contribution has been frozen by the court. This restriction should be broken through at the legislative level, and the reorganization system should be given stronger vitality, so that more enterprises with hope to be rescued can be reborn. If the creditor of the shareholder freezes the equity, the reorganization procedure shall take precedence over the ordinary execution procedure in terms of legal value. Therefore, in order to implement the reorganization plan, the corresponding amount of equity freezing measures shall be lifted. [[2] Zhang Yongjian and Du Jun: on the coordination of equity reduction and equity burden in the bankruptcy reorganization procedure, published in the application of law, 2012, issue 11.]] 2〕
Value judgment is the core of civil law. As a tool of social governance, civil law is to set corresponding coordination rules for specific types of conflict of interests to achieve its function of organizing social order. [[3] Wang Yi: Principles and methods of civil law, Law Press, November 2009, 1st edition, page 32.] 3] if the debtor's capital contribution or the company's equity is legally frozen by the court, whether the frozen capital contribution or equity can be forcibly reduced or cleared after the debtor enters the reorganization procedure is not only a question of value judgment and interest selection, but also an important issue of legal order. The litigant doctrine and debate doctrine in civil litigation pay more attention to the social standard and the maximization of overall interests in the bankruptcy procedure, and become an important content of "safeguarding the socialist market economic order" in the first legislative purpose of the enterprise bankruptcy law.
3、 An empirical analysis of investor's equity adjustment in practice
The law comes from the living economic reality. [[4] Wang Yanchuan: generation of modern commercial law: transaction model and value structure, Law Press, 1st edition, September 2015, P. 21.] 4] the adjustment of investors' rights and interests in China's judicial restructuring practice has provided sufficient nourishment for theoretical research. It contains our judicial skills and wisdom of rule of law to deal with China's problems, and is also the soil and social foundation for theoretical breakthroughs in future commercial law and bankruptcy law. Commercial law comes from the creation of practical circles, not the invention of legislators. The existing cases completed by innovative practical operators and learned, learned and surpassed by peers will profoundly affect the evolution of law and social development. The enterprise bankruptcy law and reorganization legal system are no exception, and even a typical representative of this situation.
1. Transfer of capital reserve to share capital and transfer of major shareholders: a common path for reorganization of listed companies
Since Zhejiang Haina Technology Co., Ltd. (000925) was the first reorganization case of a listed company in 2007, as of the end of July 2019, 56 listed companies in China have applied for bankruptcy reorganization or been applied for by creditors, of which 51 have been confirmed by the court that the implementation of the reorganization plan has been completed.
(1) In the restructuring plan of Amoy Electronics Co., Ltd. (600057), the adjustment of the investors' rights and interests is that all shareholders transfer their shares of Amoy electronics in a certain proportion. The controlling shareholder transfers 100% of its shares (185209632 shares, which are tradable shares with limited sales conditions), and other shareholders transfer 10% of their shares (24463,03 shares, of which 50306 shares are tradable shares with limited sales conditions). All shareholders transferred 209672669 shares in total.
(2) In the reorganization plan of Guangdong Kingman Group Co., Ltd. (400012), the adjustment of the investor's rights and interests is as follows: non tradable shareholders conditionally transfer about 61.38 million shares of 85% of their total shares to the reorganizer and ordinary creditors; The shareholders of circulating shares transferred about 43.48 million shares of 70% of their total shares to the strategic investors and ordinary creditors introduced by the restructuring party.
(3) In the restructuring plan of Anshan No.1 Construction Machinery Co., Ltd. (600813), the adjustment of the rights and interests of the investors is as follows: all the shareholders transfer their shares of Anshan No.1 Engineering Co., Ltd. free of charge according to the corresponding proportion, of which the non tradable shareholders transfer 80% of their total shares, and a total of about 126.72 million shares are transferred; The holders of tradable shares transferred 65% of their total shares, with a total of 64.74 million shares transferred.
(4) In the restructuring plan of Jiangsu Shuntian Shipbuilding Co., Ltd. (002608), the adjustment of the investor's rights and interests is as follows: Taking the existing total share capital of Shuntian shipbuilding as the base, the capital reserve is converted into shares at the ratio of 13.870379 shares per 10 shares, with a total of 519931200 shares. After the conversion, the total share capital of Shuntian shipbuilding will be increased from 374.85 million shares to 894.7812 million shares, and the converted shares will not be distributed to shareholders, All of them shall be distributed or disposed of by the administrator to the creditors.
(5) In the restructuring plan of Shanghai Chaori Solar Energy Technology Co., Ltd. (002506), the adjustment of the investor's rights and interests is: Based on the existing total share capital, the capital reserve is converted into share capital at the ratio of 19.9165402124431 shares per 10 shares, with a total of 1680 million shares. After the conversion of capital reserve into share capital is completed, the total share capital of Chaori sun will be increased from 843.52 million shares to 252.35 million shares. All investors shall transfer the converted shares for free and the investor shall transfer the Chaori shares. All investors shall transfer the 1680 million converted shares for free.
2. Equity liquidation: a common path for the reorganization of limited companies.
(1) In the restructuring plan of thirty-two enterprises including Shanxi Liansheng Energy Co., Ltd., the adjustment of investors' rights and interests is as follows: Liansheng group is currently in a state of serious insolvency. According to the audit report issued by the audit institution, as of the audit base date, the net assets of Liansheng group is -32486446249.39 yuan, which has been seriously insolvent. The investors of Liansheng group have lost all the rights and interests of investors of Liansheng group. Based on the principle of fair adjustment of the rights and interests of all parties, the rights and interests of the investors of 32 companies of Liansheng group are adjusted as follows:
When the new Liansheng investment company is established, all the original shareholders' rights and interests of Liansheng group are lost, and the equity is transferred to the new Liansheng investment company for free, that is, the new Liansheng investment company holds 100% of the equity of 32 companies of Liansheng group. All the creditors of Liansheng group who choose to convert the debt into shares form several limited partnership enterprises. The creditors of the debt into shares become limited partners with their creditor's rights to Liansheng group as capital contribution, and can introduce the cash assets invested by investors as general partners (or limited partners). These limited partnership enterprises hold 100% of the equity of new Liansheng investment company. After these limited partnership enterprises hold 100% of the equity of xinliansheng investment company, the creditor's rights transferred to these limited partnership enterprises as capital contribution shall be exempted from the Liquidation Liability of xinliansheng investment company.
(2) The adjustment contents of the investor's rights and interests in the reorganization plan of Zhongshun Automobile Holding Co., Ltd. are as follows: the investor's rights and interests are adjusted according to the enterprise market value of Zhongshun Automobile Holding Co., Ltd.: if the debt repayment fund finally provided by the reorganization investor can fully pay off the debts and bankruptcy expenses of Zhongshun Automobile Holding Co., Ltd., the capital contributions of the three investors and the pledge rights set on part of the equity shall be reserved according to the actual amount of the excess funds; If the debt repayment fund finally provided by the restructuring investor cannot pay off 100% of the debts and bankruptcy expenses of Zhongshun company, all three contributors of Zhongshun company will withdraw and no longer enjoy the rights of shareholders.
(3) In the draft reorganization plan of 40 enterprises including Xilin Iron and Steel Group Co., Ltd., the adjustment of the investors' rights and interests is as follows: in order to strive for the success of the reorganization of 40 enterprises including Xilin Iron and steel, in line with the principle of fair adjustment of the rights and interests of all parties, all the rights and interests of Xilin Iron and steel held by Shenzhen brand and Yichun Baijia are reduced to zero; Meanwhile, Shenzhen brand and Yichun Baijia will transfer the equity of Xilin Iron and steel to Jianlong group or a third party designated by Jianlong group in writing.
3. Retention of the original contributor's contribution: individual cases in the reorganization of a limited company
(1) This is a case of successful retention of the original investor's rights and interests. In the reorganization case of Fujian Anxi Tieguanyin Group Co., Ltd. and Fujian Anxi tea factory Co., Ltd., the draft reorganization plan of the two companies obtained a high pass rate of 84.18% of the total claims of the general creditor group and 100% of the total claims of the property secured creditor group. [[5] see: the second typical case of the bankruptcy trial of Quanzhou Court: "the reorganization case of Anshan Railway" turns crisis into opportunity to promote transformation, http://www.qzwb.com/gb/content/2017-09/25/content_5706511.htm , visit date: August 11, 2019.] 5] the manager uses the method of public selection to introduce investors to add 220 million yuan to Tieguanyin group, holding 76.2% of Tieguanyin group's shares, and the original shareholders' shares are diluted to 23.8%. From the public information query, the retention of the original investor's shares is required by the original operation and management team on the one hand, and on the other hand, it may be difficult to deal with the pledge and freezing of the original investor's shares, which can only make the investor obtain absolute control through dilution. However, no matter how part of the original investor's rights and interests can be retained. Anxi tea factory is a wholly-owned subsidiary of Tieguanyin group. The liquidation rate of ordinary creditor's rights in the reorganization is 16% (including the liquidation rate of the part below 100000 yuan is 40%). From the records of industrial and commercial changes, Anxi tea factory's reorganization does not involve the adjustment of the investor's rights and interests; On October 24, 2017, Anxi tea factory changed its directors, supervisors, experience and legal representative. On October 31, 2017, Quanzhou intermediate people's court ruled to confirm that the implementation of the reorganization plan of the two cases was completed. [[6] see: bankruptcy reorganization case of Fujian Anxi Tieguanyin Group Co., Ltd. and its affiliated enterprises, https://www.chinacourt.org/article/detail/2018/03/id/3219511.shtml , visit date: August 11, 2019.] 6〕
(2) It is a case that the original investor's rights and interests are retained in the draft reorganization plan and denied by the court. In June 2014, the people's Court of Ruian City, Zhejiang Province ruled to accept the bankruptcy reorganization case of Wenzhou Sanlian Forging Co., Ltd. in August 2014, the first creditor meeting of Sanlian company passed the reorganization plan by group vote. When reviewing the contents of the reorganization plan, the court found that the equity issue was not mentioned, and the equity structure of Sanlian company was not changed, which did not comply with the relevant provisions of the enterprise bankruptcy law on bankruptcy reorganization. It ruled to reject the application of the administrator for approval of the reorganization plan. Later, the debtor Sanlian company applied to the court for bankruptcy reorganization to bankruptcy settlement and submitted the draft settlement agreement. The court ruled to approve the settlement of Sanlian company. [[7] see: bankruptcy reorganization to settlement case of Wenzhou Sanlian Forging Co., Ltd, http://wzjrb.wenzhou.gov.cn/art/2018/1/26/art_1361206_15331966.html , visit date: August 11, 2019.] 7〕
4. Eliminating the pledge of Equity: a variety of evaluation methods and hearing procedures
On August 21, 2015, the people's Court of Qixia District, Nanjing Ruled according to law that three companies including Nanjing Hengji Concrete Co., Ltd. were reorganized. During the reorganization period, the bankruptcy acceptance date is taken as the base date for evaluation, and the liquidation value method, replacement cost method, market method and other methods are adopted for evaluation. The liquidation rate of ordinary creditor's rights of the three Hengji companies is expected to be 0. The equity of the investors of the three Hengji companies was adjusted to zero, and 100% of the equity was changed to the name of the restructuring investor. During the implementation of the reorganization plan, the equity of Hengji system had been pledged before the bankruptcy acceptance, and it was judicially frozen by several courts such as Nanjing Gulou District People's court, so the reorganization plan could not continue to be implemented. The people's Court of Qixia District, Nanjing convened a hearing for the equity pledgee, and coordinated with the seizure court. After explaining that the actual value of the equity is zero and that the same property and the property seized do not exist or have no value, some of the obligees agreed to give up the formal "rights" on their own, and some of them eliminated the formal "rights" by issuing a civil ruling. [[8] see: Mi Ting, on the boundary of the adjustment of the rights and interests of the investors in the reorganization of limited companies -- from the perspective of the protection of the legitimate rights and interests of the equity stakeholders, http://www.sohu.com/a/296543156_398071 , accessed on August 11, 2019.] 8〕
4、 Prospect of theory and practice of investor's equity adjustment
With the increasing number of reorganization cases in recent years, in addition to the emerging sale type reorganization, the adjustment of investors' rights and interests has become a regular part of the reorganization plan, and this part of the content connects the capital entry path and control interest expectation of the reorganization investors, and has become the nerve center for the smooth implementation of the reorganization plan. China's enterprise bankruptcy law does not have much content on the adjustment of the rights and interests of investors. Article 85 stipulates that "the representatives of the debtor's investors may attend the creditors' meeting to discuss the draft reorganization plan. If the draft reorganization plan involves the adjustment of the rights and interests of investors, a group of investors shall be set up to vote on the matter." Article 87 stipulates that when applying to the court for compulsory approval of the draft reorganization plan, the investors shall be required to pass the draft reorganization plan or the adjustment of the rights and interests of the investors by the draft reorganization plan shall meet the standards of fairness and impartiality. However, from the perspective of judicial practice and theoretical research, there have been many positive explorations on the balance of interests in the adjustment of investors' rights and interests in the reorganization.
(1) In the restructuring plan of thirty-two enterprises including Shanxi Liansheng Energy Co., Ltd., the adjustment of investors' rights and interests is as follows: Liansheng group is currently in a state of serious insolvency. According to the audit report issued by the audit institution, as of the audit base date, the net assets of Liansheng group is -32486446249.39 yuan, which has been seriously insolvent. The investors of Liansheng group have lost all the rights and interests of investors of Liansheng group. Based on the principle of fair adjustment of the rights and interests of all parties, the rights and interests of the investors of 32 companies of Liansheng group are adjusted as follows:
When the new Liansheng investment company is established, all the original shareholders' rights and interests of Liansheng group are lost, and the equity is transferred to the new Liansheng investment company for free, that is, the new Liansheng investment company holds 100% of the equity of 32 companies of Liansheng group. All the creditors of Liansheng group who choose to convert the debt into shares form several limited partnership enterprises. The creditors of the debt into shares become limited partners with their creditor's rights to Liansheng group as capital contribution, and can introduce the cash assets invested by investors as general partners (or limited partners). These limited partnership enterprises hold 100% of the equity of new Liansheng investment company. After these limited partnership enterprises hold 100% of the equity of xinliansheng investment company, the creditor's rights transferred to these limited partnership enterprises as capital contribution shall be exempted from the Liquidation Liability of xinliansheng investment company.
(2) The adjustment contents of the investor's rights and interests in the reorganization plan of Zhongshun Automobile Holding Co., Ltd. are as follows: the investor's rights and interests are adjusted according to the enterprise market value of Zhongshun Automobile Holding Co., Ltd.: if the debt repayment fund finally provided by the reorganization investor can fully pay off the debts and bankruptcy expenses of Zhongshun Automobile Holding Co., Ltd., the capital contributions of the three investors and the pledge rights set on part of the equity shall be reserved according to the actual amount of the excess funds; If the debt repayment fund finally provided by the restructuring investor cannot pay off 100% of the debts and bankruptcy expenses of Zhongshun company, all three contributors of Zhongshun company will withdraw and no longer enjoy the rights of shareholders.
(3) In the draft reorganization plan of 40 enterprises including Xilin Iron and Steel Group Co., Ltd., the adjustment of the investors' rights and interests is as follows: in order to strive for the success of the reorganization of 40 enterprises including Xilin Iron and steel, in line with the principle of fair adjustment of the rights and interests of all parties, all the rights and interests of Xilin Iron and steel held by Shenzhen brand and Yichun Baijia are reduced to zero; Meanwhile, Shenzhen brand and Yichun Baijia will transfer the equity of Xilin Iron and steel to Jianlong group or a third party designated by Jianlong group in writing.
3. Retention of the original contributor's contribution: individual cases in the reorganization of a limited company
(1) This is a case of successful retention of the original investor's rights and interests. In the reorganization case of Fujian Anxi Tieguanyin Group Co., Ltd. and Fujian Anxi tea factory Co., Ltd., the draft reorganization plan of the two companies obtained a high pass rate of 84.18% of the total claims of the general creditor group and 100% of the total claims of the property secured creditor group. [[5] see: the second typical case of the bankruptcy trial of Quanzhou Court: "the reorganization case of Anshan Railway" turns crisis into opportunity to promote transformation, http://www.qzwb.com/gb/content/2017-09/25/content_5706511.htm , visit date: August 11, 2019.] 5] the manager uses the method of public selection to introduce investors to add 220 million yuan to Tieguanyin group, holding 76.2% of Tieguanyin group's shares, and the original shareholders' shares are diluted to 23.8%. From the public information query, the retention of the original investor's shares is required by the original operation and management team on the one hand, and on the other hand, it may be difficult to deal with the pledge and freezing of the original investor's shares, which can only make the investor obtain absolute control through dilution. However, no matter how part of the original investor's rights and interests can be retained. Anxi tea factory is a wholly-owned subsidiary of Tieguanyin group. The liquidation rate of ordinary creditor's rights in the reorganization is 16% (including the liquidation rate of the part below 100000 yuan is 40%). From the records of industrial and commercial changes, Anxi tea factory's reorganization does not involve the adjustment of the investor's rights and interests; On October 24, 2017, Anxi tea factory changed its directors, supervisors, experience and legal representative. On October 31, 2017, Quanzhou intermediate people's court ruled to confirm that the implementation of the reorganization plan of the two cases was completed. [[6] see: bankruptcy reorganization case of Fujian Anxi Tieguanyin Group Co., Ltd. and its affiliated enterprises, https://www.chinacourt.org/article/detail/2018/03/id/3219511.shtml , visit date: August 11, 2019.] 6〕
(2) It is a case that the original investor's rights and interests are retained in the draft reorganization plan and denied by the court. In June 2014, the people's Court of Ruian City, Zhejiang Province ruled to accept the bankruptcy reorganization case of Wenzhou Sanlian Forging Co., Ltd. in August 2014, the first creditor meeting of Sanlian company passed the reorganization plan by group vote. When reviewing the contents of the reorganization plan, the court found that the equity issue was not mentioned, and the equity structure of Sanlian company was not changed, which did not comply with the relevant provisions of the enterprise bankruptcy law on bankruptcy reorganization. It ruled to reject the application of the administrator for approval of the reorganization plan. Later, the debtor Sanlian company applied to the court for bankruptcy reorganization to bankruptcy settlement and submitted the draft settlement agreement. The court ruled to approve the settlement of Sanlian company. [[7] see: bankruptcy reorganization to settlement case of Wenzhou Sanlian Forging Co., Ltd, http://wzjrb.wenzhou.gov.cn/art/2018/1/26/art_1361206_15331966.html , visit date: August 11, 2019.] 7〕
4. Eliminating the pledge of Equity: a variety of evaluation methods and hearing procedures
On August 21, 2015, the people's Court of Qixia District, Nanjing Ruled according to law that three companies including Nanjing Hengji Concrete Co., Ltd. were reorganized. During the reorganization period, the bankruptcy acceptance date is taken as the base date for evaluation, and the liquidation value method, replacement cost method, market method and other methods are adopted for evaluation. The liquidation rate of ordinary creditor's rights of the three Hengji companies is expected to be 0. The equity of the investors of the three Hengji companies was adjusted to zero, and 100% of the equity was changed to the name of the restructuring investor. During the implementation of the reorganization plan, the equity of Hengji system had been pledged before the bankruptcy acceptance, and it was judicially frozen by several courts such as Nanjing Gulou District People's court, so the reorganization plan could not continue to be implemented. The people's Court of Qixia District, Nanjing convened a hearing for the equity pledgee, and coordinated with the seizure court. After explaining that the actual value of the equity is zero and that the same property and the property seized do not exist or have no value, some of the obligees agreed to give up the formal "rights" on their own, and some of them eliminated the formal "rights" by issuing a civil ruling. [[8] see: Mi Ting, on the boundary of the adjustment of the rights and interests of the investors in the reorganization of limited companies -- from the perspective of the protection of the legitimate rights and interests of the equity stakeholders, http://www.sohu.com/a/296543156_398071 , accessed on August 11, 2019.] 8〕
4、 Prospect of theory and practice of investor's equity adjustment
With the increasing number of reorganization cases in recent years, in addition to the emerging sale type reorganization, the adjustment of investors' rights and interests has become a regular part of the reorganization plan, and this part of the content connects the capital entry path and control interest expectation of the reorganization investors, and has become the nerve center for the smooth implementation of the reorganization plan. China's enterprise bankruptcy law does not have much content on the adjustment of the rights and interests of investors. Article 85 stipulates that "the representatives of the debtor's investors may attend the creditors' meeting to discuss the draft reorganization plan. If the draft reorganization plan involves the adjustment of the rights and interests of investors, a group of investors shall be set up to vote on the matter." Article 87 stipulates that when applying to the court for compulsory approval of the draft reorganization plan, the investors shall be required to pass the draft reorganization plan or the adjustment of the rights and interests of the investors by the draft reorganization plan shall meet the standards of fairness and impartiality. However, from the perspective of judicial practice and theoretical research, there have been many positive explorations on the balance of interests in the adjustment of investors' rights and interests in the reorganization.
The bankruptcy law is gradually formed, evolved and developed with the social changes. The reorganization system sprouted in the late 19th century. Under the background of the American economic depression and the vicious competition of railway construction leading to the bankruptcy of large-scale railways, the United States courts led the rescue of railway companies. In 1898, the "reorganization clause" was introduced into the bankruptcy law. In 1978, the bankruptcy code was promulgated for the first time not because of the economic crisis. The bankruptcy system moved to a mature development stage, and the bankruptcy legislation of the United States was closely linked with the economic trend of the country. [[9] Liu Fei: a preliminary study of the bankruptcy law of the United States in 1978, master's thesis of China University of political science and law, P. 13.] 9] since the implementation of China's enterprise bankruptcy law in 2007, a large number of reorganization cases have been accumulated in judicial practice. In addition to the conversion of capital reserve into share capital and the transfer of shares by (large) shareholders in the reorganization of listed companies, the reorganization of many limited companies is also very exploratory and conforms to the needs of economic and social development. "By analyzing the judicial documents, we can extract the superb wisdom of the Chinese people in solving problems with Chinese background and explain the deepest mystery of our nation." "We have explored the Chinese judicial wisdom hidden in judicial cases" [[10] Cai Lidong: Internet + judicial reform: smart court construction, https://www.chinalaw.org.cn/Column/Column_View.aspx?ColumnID=1067&InfoID=21909 , visit time: August 12, 2019.] 10] the legal practice in history and reality undoubtedly gave birth to and gave birth to legal theories, and thus became the soil and breeding bed of legal theories; It is also the strong desire and practice orientation to change and improve the actual legal practice, which promotes the improvement and development of legal theory [[11] Yao Jianzong: the concept of legal practice in the Chinese context, published in China Social Sciences, 2014, issue 6, pp. 141-162.]] 11〕。
Through the analysis and research of cases, the wisdom achievements of the collective work of scholars, judges and lawyers in China's bankruptcy reorganization, especially the interest measurement wisdom of the adjustment of investors' rights and interests in the reorganization, is also a kind of "legal research from experience to theory" [[12] Chen Ruihua: on legal research methods, Law Press, April 2017, 1st edition, page 257.] 12〕。 It is necessary to examine the balance of interests in the adjustment of investors' rights and interests in the course of social development and changes. What is needed for the measurement of interests is social consensus. "This consensus is the consensus of human society on the legal order, an abstract consensus, reflected in the consensus of values such as freedom, order, dispute and efficiency, as well as the basic consensus on the level of interests, and also the consensus of human basic norms." [[13] Liang Shangshang: Theory of interest measurement (Second Edition), Law Press, September 2016, 2nd Edition, page 97.] 13] whether from the historical evolution of the bankruptcy system in the United States, the establishment and evolution of the reorganization system, or the change of the concept of bankruptcy rule of law in China, it has profoundly shown that the development of the bankruptcy reorganization system and the regulation of the rights and interests of investors need to constantly break through and grow with the development of society.
In the process of the investor's rights and interests adjustment in the reorganization, the interests of all relevant subjects cannot be protected by the law, and there are direct conflicts between many interests. How to measure these interests has become an important issue to be faced in the reorganization, and it is directly related to the success or failure of the reorganization because of the direct adjustment of equity capital. These norms of interest adjustment need to adapt to the development of social economy and the change of social concepts. It is impossible to have a fundamental method of ranking various interests so that more important interests can be protected and implemented by judges, administrators and lawyers in their work. In fact, in practice, it is necessary to protect the interests of the whole society as much as possible, maintain the balance, harmony or adjustment of interests, which is compatible with the recognition of the interests as a whole. The issue of interest integration is "the adjustment that produces the greatest effect on the whole with the least loss" [[14] [US] Roscoe Pound: Jurisprudence (Volume III), translated by Liao Jianyu, Law Press, 1st edition, February 2007, pp. 248-249] 14〕。
1. Legalization of rules for the adjustment of investors' rights and interests
China's enterprise bankruptcy law has no substantive provisions on the adjustment of investors' rights and interests. Paragraph 1 of Article 92 of the law stipulates that "the reorganization plan approved by the people's court shall be binding on the debtor and all creditors", and does not mention the binding on investors. In contrast, section 1141a of the U.S. bankruptcy code clearly has broad enforcement power against debtors, creditors, shareholders or general partners. Some scholars pointed out that if the reorganization plan is regarded as a contract involving multiple parties, it is more legitimate to stipulate that the reorganization plan has universal binding force on all stakeholders involved than to stipulate that the resolution of the creditors' meeting has universal binding force, and China's bankruptcy law should adopt this. [[15] Qi Ming: misunderstandings and solutions of mandatory adjustment of investors' rights and interests in the reorganization of Listed Companies in China, published in law, 2017, issue 7, pp. 164-173.] 15〕
To adjust the rights and interests of investors in the reorganization, the original shareholders' participation rights shall also be guaranteed in terms of procedures, that is, they are allowed to express their opinions on the contents of the adjustment of the rights and interests of investors in the reorganization plan. The content of Article 85 of China's enterprise bankruptcy law also reflects the recognition of the investors' participation in the reorganization procedure, the prudence of the investors' rights and interests adjustment, and the respect for the consensus reached through negotiation. Article 44 of "IV. reorganization" of the legislative guide on Insolvency Law of the United Nations Commission on international trade law states that: "Some insolvency laws require shareholders to approve a reorganization plan, at least if the debtor's corporate form, capital structure or membership will be affected by the plan. If shareholders are distributed under the plan, they are expected to vote. If shareholders are entitled to vote, they should be provided with the same notice and information as other creditors entitled to vote." [16] Rong Haojun: on the adjustment of investors' rights and interests in the bankruptcy reorganization of small and medium-sized enterprises, http://www.sohu.com/a/283250679_738490 , visit time: August 13, 2019.] 16〕
2. Standardization of information disclosure
As the adjustment of the rights and interests of the investor is a direct adjustment of the original shareholder's equity, which is related to the major property rights of the investor, it must be cautious to transfer or clear the investor's rights and interests, so as to avoid the private rights from being infringed by the public power in the reorganization process, and avoid the possible power rent-seeking and corruption breeding in the reorganization process. It is necessary to strengthen the information disclosure mechanism for the adjustment of investors' rights and interests, refer to the information disclosure intensity of major asset restructuring of listed companies, and regard the adjustment of equity investors' rights and interests and the introduction of restructuring investors as an important part of China's capital market.
Analogical reasoning is usually called analogy, analogy or analogy. It is based on the similarity or similarity of some attributes of two or two kinds of things, and then deduces the reasoning that their other (some) attributes are also similar or identical. [16] Chen Jinzhao and Xiong Minghui, legal logic (Second Edition), China Renmin University Press, 1st edition, January 2012, P. 150.] 16] from the perspective of the integrity of legal norms and the impact on potential companies, the information disclosure system and the operating rules of major asset restructuring of listed companies can be compared with the information disclosure and operating rules that should be carried out in the reorganization of companies. Major assets reorganization of listed companies will cause major changes in the main business, assets and income of listed companies. From the perspective of capital intervention, shareholder change, business integration and debt liquidation, the transaction opened up by the bankruptcy law is actually a broader and deeper capital market. Therefore, a systematic information disclosure rule system should be established, especially in the field of investor's rights and interests adjustment. It is necessary to strengthen the "prescribed action" of information disclosure and unify the criteria of information disclosure content and format. This is also a measure to prevent and control the willfulness of the manager and the corruption of judicial power in the reorganization, and protect the legitimate rights and interests of the debtor and the original investor in terms of major property rights.
3. Standardization of audit and evaluation
Valuation is the core of the transaction. Strict audit and evaluation procedures have been established in the governance of listed companies. The CSRC, the exchange, the China injection Association and other institutions have special work requirements for the audit and evaluation of listed companies. For example, the China injection association has formulated the working procedures for the audit and supervision of annual reports of listed companies In principle, the valuation institution shall adopt two or more methods for evaluation or valuation. Reorganization involves many adjustments such as business plan, property management, debt liquidation, adjustment of investors' rights and interests, introduction of reorganization investors, etc. the impact on all stakeholders is far greater than that of major asset reorganization. Therefore, the audit and evaluation of debtors should be standardized. Nanjing Hengji Concrete Co., Ltd. and other three companies also adopted three evaluation methods to evaluate the debtor's equity in the process of equity adjustment of the investors in the reorganization case, which are very useful exploration.
4. Marketization of price discovery mechanism
Article 46 of the minutes of the national court bankruptcy trial work conference requires that the information disclosure of bankruptcy reorganization cases should be continuously strengthened. It is necessary to increase the disclosure of the debtor's enterprise information, attract potential investors, promote the free flow and effective allocation of capital, technology, management capacity and other factors, and help the enterprise to restructure and regenerate. In judicial practice, after many companies enter the reorganization procedure and appoint the administrator, the administrator issues the reorganization investor recruitment announcement through "national enterprise bankruptcy and reorganization case information" or other industries, we media and other information platforms to protect the legitimate interests of creditors, employees, debtors and shareholders, realize the optimal allocation of social resources, and promote the reorganization and regeneration of debtors. In practice, the manager generally issues the recruitment announcement after the first creditors' meeting. In some cases, the recruitment announcement is issued immediately after the court accepts the case and appoints the manager.
The manager selects reorganization investors through marketization to maximize the value of the debtor's current stock assets and resources, maintain the debtor's operating value, and select the most powerful investors to participate in the reorganization, so that investors can participate in the investment competition through multiple rounds of bidding, form the final investment price through marketization, maximize the interests of creditors and debtors, and meet the healthy development of the company after the reorganization in the future. After entering the reorganization procedure, the company will find out the overall price of the company through the market competition mechanism. The difference between the price and all the debts of the company will ultimately determine whether the rights and interests of the investors are adjusted, reduced or cleared in the reorganization. That is to say, the final bid of the reorganization investor determines the final rights and interests of creditors, debtors and investors in the reorganization.
5. Constancy of legal effect
In order to ensure the smooth progress of the reorganization and the operation of the adjustment of the investors' rights and interests, paragraph 2 of Article 77 of the enterprise bankruptcy law of China stipulates that "during the reorganization, the directors, supervisors and senior managers of the debtor shall not transfer the debtor's equity held by them to a third party, except with the consent of the people's court." However, the legislation of the bankruptcy law can not fully meet the objective needs of the reorganization in terms of the scope, transfer method and period of the equity transfer subject. In the short term, it can be supplemented by the contents of the reorganization plan, and in the long term, it needs to improve the legislation.
We should pursue the constancy of the investors' equity adjustment in the reorganization, maintain the predictability of the reorganization process, avoid uncertainty and enhance investment confidence. For the equity changes caused by the debtor's shareholders and contributors during the reorganization period and the reorganization execution period (before the completion of the reorganization), whether based on acts or events, active or passive (such as judicial auction), the rights and interests of the contributors adjusted by the reorganization plan shall extend to the new shareholders after the equity changes.
In addition, we should also establish the rules for adjusting the rights and interests of investors under the reorganization system in the enterprise bankruptcy law, which can prevent the preferential application of the provisions of other laws on equity changes, so as to reasonably determine the legal effect system of equity changes. For example, paragraph 2 of article 226 of the property law of China stipulates that "after the equity is pledged, it shall not be transferred, except with the consent of the pledgor and the pledgee through negotiation". This article of the property law restricts the shareholders' intention to transfer the equity in order to prevent the interests of the pledgee from being improperly infringed by the pledgor (i.e. the shareholders) and others. However, The equity reduction in bankruptcy reorganization is not a voluntary transfer in nature, but is more similar to legal transfer in nature. After all, in the legal reorganization procedure, not only the interests of multiple parties check and balance each other, but also the corresponding judicial review procedures are set up, which conforms to the legal principles of fairness and efficiency. The above provisions of the property law have no applicable value in the merger of equity reduction. [[17] Zheng Zhibin and Zhang Ting: shareholders' rights and interests in the company reorganization system, Peking University Press, 2012, pp. 153-154.] 17] the pledgee's refusal to recognize the reduction or nullification of the investor's rights and interests will not affect the effectiveness and implementation of the reorganization plan. The capital contribution reduced or nullified will naturally be lost due to the loss of sovereign interests. The construction of a constant adjustment of the rights and interests of the investors is consistent with the previous discussion that the company reorganization and the establishment of the company are equivalent, so as to avoid the legal status of the newly entered equity capital being challenged or dragged into litigation, thereby harming the enthusiasm of the relevant subjects to apply the reorganization system.
6. Reconciliation of interest balance
(1) The enterprise value is uncertain and needs more flexible rules for the adjustment of investors' rights and interests
In reorganization, accounting technology can be used to audit and evaluate the enterprise value, but from different perspectives, different evaluation methods may be expected. Generally speaking, creditors and shareholders hope to adopt the income method, that is, capitalization or discount of the expected income of the appraised enterprise to determine the overall value of the enterprise, so as to improve the value of the enterprise and make the creditor's rights and capital contributions more compensated; Investors naturally hope to use the liquidation price method or the underlying asset method to evaluate the liquidation value of the enterprise. In addition to the limitations of accounting technical factors and evaluation rules, the value of enterprises is also affected by many factors, such as the macroeconomic situation, market transaction activity, industry breadth, regional business environment, industrial synergy, special qualification pricing, local government attitude, etc., which increasingly presents complexity, asymmetry and uncertainty. If the parties such as creditors, debtors, contributors and restructuring investors agree to retain part or all of the rights and interests of the original contributors, i.e. partially reduce or retain the rights and interests of the original contributors, based on the consensus reshaped by the voting rules of the creditors' meeting, the reorganization should refer to the bankruptcy settlement system for confirmation.
(2) The limited role of the market price discovery mechanism needs to face the problem of how to maximize the interests of all parties in the case of unsuccessful recruitment of restructuring investors
In fact, the reorganization of investor recruitment refers to the core content of auction theory, and establishes an effective price discovery and formation mechanism for commodities that are difficult to estimate their value by means of marketization. Some practitioners even think that in the future, big data algorithms should be used to replace the evaluation link in the judicial price discovery mechanism. [[18] Jiang Yong: Online judicial auction transaction matching and price discovery are the core, http://www.legaldaily.com.cn/zt/content/2016-03/24/content_6538137.htm?node=81092 , visit time: August 14, 2019.] 18] in practice, the phenomenon of judicial auction is frequent, and the zero transaction of "having price but no market" in the market also occurs from time to time. In the reorganization, there is a lack of active responders and powerful subjects in the recruitment of investors,
Through the analysis and research of cases, the wisdom achievements of the collective work of scholars, judges and lawyers in China's bankruptcy reorganization, especially the interest measurement wisdom of the adjustment of investors' rights and interests in the reorganization, is also a kind of "legal research from experience to theory" [[12] Chen Ruihua: on legal research methods, Law Press, April 2017, 1st edition, page 257.] 12〕。 It is necessary to examine the balance of interests in the adjustment of investors' rights and interests in the course of social development and changes. What is needed for the measurement of interests is social consensus. "This consensus is the consensus of human society on the legal order, an abstract consensus, reflected in the consensus of values such as freedom, order, dispute and efficiency, as well as the basic consensus on the level of interests, and also the consensus of human basic norms." [[13] Liang Shangshang: Theory of interest measurement (Second Edition), Law Press, September 2016, 2nd Edition, page 97.] 13] whether from the historical evolution of the bankruptcy system in the United States, the establishment and evolution of the reorganization system, or the change of the concept of bankruptcy rule of law in China, it has profoundly shown that the development of the bankruptcy reorganization system and the regulation of the rights and interests of investors need to constantly break through and grow with the development of society.
In the process of the investor's rights and interests adjustment in the reorganization, the interests of all relevant subjects cannot be protected by the law, and there are direct conflicts between many interests. How to measure these interests has become an important issue to be faced in the reorganization, and it is directly related to the success or failure of the reorganization because of the direct adjustment of equity capital. These norms of interest adjustment need to adapt to the development of social economy and the change of social concepts. It is impossible to have a fundamental method of ranking various interests so that more important interests can be protected and implemented by judges, administrators and lawyers in their work. In fact, in practice, it is necessary to protect the interests of the whole society as much as possible, maintain the balance, harmony or adjustment of interests, which is compatible with the recognition of the interests as a whole. The issue of interest integration is "the adjustment that produces the greatest effect on the whole with the least loss" [[14] [US] Roscoe Pound: Jurisprudence (Volume III), translated by Liao Jianyu, Law Press, 1st edition, February 2007, pp. 248-249] 14〕。
1. Legalization of rules for the adjustment of investors' rights and interests
China's enterprise bankruptcy law has no substantive provisions on the adjustment of investors' rights and interests. Paragraph 1 of Article 92 of the law stipulates that "the reorganization plan approved by the people's court shall be binding on the debtor and all creditors", and does not mention the binding on investors. In contrast, section 1141a of the U.S. bankruptcy code clearly has broad enforcement power against debtors, creditors, shareholders or general partners. Some scholars pointed out that if the reorganization plan is regarded as a contract involving multiple parties, it is more legitimate to stipulate that the reorganization plan has universal binding force on all stakeholders involved than to stipulate that the resolution of the creditors' meeting has universal binding force, and China's bankruptcy law should adopt this. [[15] Qi Ming: misunderstandings and solutions of mandatory adjustment of investors' rights and interests in the reorganization of Listed Companies in China, published in law, 2017, issue 7, pp. 164-173.] 15〕
To adjust the rights and interests of investors in the reorganization, the original shareholders' participation rights shall also be guaranteed in terms of procedures, that is, they are allowed to express their opinions on the contents of the adjustment of the rights and interests of investors in the reorganization plan. The content of Article 85 of China's enterprise bankruptcy law also reflects the recognition of the investors' participation in the reorganization procedure, the prudence of the investors' rights and interests adjustment, and the respect for the consensus reached through negotiation. Article 44 of "IV. reorganization" of the legislative guide on Insolvency Law of the United Nations Commission on international trade law states that: "Some insolvency laws require shareholders to approve a reorganization plan, at least if the debtor's corporate form, capital structure or membership will be affected by the plan. If shareholders are distributed under the plan, they are expected to vote. If shareholders are entitled to vote, they should be provided with the same notice and information as other creditors entitled to vote." [16] Rong Haojun: on the adjustment of investors' rights and interests in the bankruptcy reorganization of small and medium-sized enterprises, http://www.sohu.com/a/283250679_738490 , visit time: August 13, 2019.] 16〕
2. Standardization of information disclosure
As the adjustment of the rights and interests of the investor is a direct adjustment of the original shareholder's equity, which is related to the major property rights of the investor, it must be cautious to transfer or clear the investor's rights and interests, so as to avoid the private rights from being infringed by the public power in the reorganization process, and avoid the possible power rent-seeking and corruption breeding in the reorganization process. It is necessary to strengthen the information disclosure mechanism for the adjustment of investors' rights and interests, refer to the information disclosure intensity of major asset restructuring of listed companies, and regard the adjustment of equity investors' rights and interests and the introduction of restructuring investors as an important part of China's capital market.
Analogical reasoning is usually called analogy, analogy or analogy. It is based on the similarity or similarity of some attributes of two or two kinds of things, and then deduces the reasoning that their other (some) attributes are also similar or identical. [16] Chen Jinzhao and Xiong Minghui, legal logic (Second Edition), China Renmin University Press, 1st edition, January 2012, P. 150.] 16] from the perspective of the integrity of legal norms and the impact on potential companies, the information disclosure system and the operating rules of major asset restructuring of listed companies can be compared with the information disclosure and operating rules that should be carried out in the reorganization of companies. Major assets reorganization of listed companies will cause major changes in the main business, assets and income of listed companies. From the perspective of capital intervention, shareholder change, business integration and debt liquidation, the transaction opened up by the bankruptcy law is actually a broader and deeper capital market. Therefore, a systematic information disclosure rule system should be established, especially in the field of investor's rights and interests adjustment. It is necessary to strengthen the "prescribed action" of information disclosure and unify the criteria of information disclosure content and format. This is also a measure to prevent and control the willfulness of the manager and the corruption of judicial power in the reorganization, and protect the legitimate rights and interests of the debtor and the original investor in terms of major property rights.
3. Standardization of audit and evaluation
Valuation is the core of the transaction. Strict audit and evaluation procedures have been established in the governance of listed companies. The CSRC, the exchange, the China injection Association and other institutions have special work requirements for the audit and evaluation of listed companies. For example, the China injection association has formulated the working procedures for the audit and supervision of annual reports of listed companies In principle, the valuation institution shall adopt two or more methods for evaluation or valuation. Reorganization involves many adjustments such as business plan, property management, debt liquidation, adjustment of investors' rights and interests, introduction of reorganization investors, etc. the impact on all stakeholders is far greater than that of major asset reorganization. Therefore, the audit and evaluation of debtors should be standardized. Nanjing Hengji Concrete Co., Ltd. and other three companies also adopted three evaluation methods to evaluate the debtor's equity in the process of equity adjustment of the investors in the reorganization case, which are very useful exploration.
4. Marketization of price discovery mechanism
Article 46 of the minutes of the national court bankruptcy trial work conference requires that the information disclosure of bankruptcy reorganization cases should be continuously strengthened. It is necessary to increase the disclosure of the debtor's enterprise information, attract potential investors, promote the free flow and effective allocation of capital, technology, management capacity and other factors, and help the enterprise to restructure and regenerate. In judicial practice, after many companies enter the reorganization procedure and appoint the administrator, the administrator issues the reorganization investor recruitment announcement through "national enterprise bankruptcy and reorganization case information" or other industries, we media and other information platforms to protect the legitimate interests of creditors, employees, debtors and shareholders, realize the optimal allocation of social resources, and promote the reorganization and regeneration of debtors. In practice, the manager generally issues the recruitment announcement after the first creditors' meeting. In some cases, the recruitment announcement is issued immediately after the court accepts the case and appoints the manager.
The manager selects reorganization investors through marketization to maximize the value of the debtor's current stock assets and resources, maintain the debtor's operating value, and select the most powerful investors to participate in the reorganization, so that investors can participate in the investment competition through multiple rounds of bidding, form the final investment price through marketization, maximize the interests of creditors and debtors, and meet the healthy development of the company after the reorganization in the future. After entering the reorganization procedure, the company will find out the overall price of the company through the market competition mechanism. The difference between the price and all the debts of the company will ultimately determine whether the rights and interests of the investors are adjusted, reduced or cleared in the reorganization. That is to say, the final bid of the reorganization investor determines the final rights and interests of creditors, debtors and investors in the reorganization.
5. Constancy of legal effect
In order to ensure the smooth progress of the reorganization and the operation of the adjustment of the investors' rights and interests, paragraph 2 of Article 77 of the enterprise bankruptcy law of China stipulates that "during the reorganization, the directors, supervisors and senior managers of the debtor shall not transfer the debtor's equity held by them to a third party, except with the consent of the people's court." However, the legislation of the bankruptcy law can not fully meet the objective needs of the reorganization in terms of the scope, transfer method and period of the equity transfer subject. In the short term, it can be supplemented by the contents of the reorganization plan, and in the long term, it needs to improve the legislation.
We should pursue the constancy of the investors' equity adjustment in the reorganization, maintain the predictability of the reorganization process, avoid uncertainty and enhance investment confidence. For the equity changes caused by the debtor's shareholders and contributors during the reorganization period and the reorganization execution period (before the completion of the reorganization), whether based on acts or events, active or passive (such as judicial auction), the rights and interests of the contributors adjusted by the reorganization plan shall extend to the new shareholders after the equity changes.
In addition, we should also establish the rules for adjusting the rights and interests of investors under the reorganization system in the enterprise bankruptcy law, which can prevent the preferential application of the provisions of other laws on equity changes, so as to reasonably determine the legal effect system of equity changes. For example, paragraph 2 of article 226 of the property law of China stipulates that "after the equity is pledged, it shall not be transferred, except with the consent of the pledgor and the pledgee through negotiation". This article of the property law restricts the shareholders' intention to transfer the equity in order to prevent the interests of the pledgee from being improperly infringed by the pledgor (i.e. the shareholders) and others. However, The equity reduction in bankruptcy reorganization is not a voluntary transfer in nature, but is more similar to legal transfer in nature. After all, in the legal reorganization procedure, not only the interests of multiple parties check and balance each other, but also the corresponding judicial review procedures are set up, which conforms to the legal principles of fairness and efficiency. The above provisions of the property law have no applicable value in the merger of equity reduction. [[17] Zheng Zhibin and Zhang Ting: shareholders' rights and interests in the company reorganization system, Peking University Press, 2012, pp. 153-154.] 17] the pledgee's refusal to recognize the reduction or nullification of the investor's rights and interests will not affect the effectiveness and implementation of the reorganization plan. The capital contribution reduced or nullified will naturally be lost due to the loss of sovereign interests. The construction of a constant adjustment of the rights and interests of the investors is consistent with the previous discussion that the company reorganization and the establishment of the company are equivalent, so as to avoid the legal status of the newly entered equity capital being challenged or dragged into litigation, thereby harming the enthusiasm of the relevant subjects to apply the reorganization system.
6. Reconciliation of interest balance
(1) The enterprise value is uncertain and needs more flexible rules for the adjustment of investors' rights and interests
In reorganization, accounting technology can be used to audit and evaluate the enterprise value, but from different perspectives, different evaluation methods may be expected. Generally speaking, creditors and shareholders hope to adopt the income method, that is, capitalization or discount of the expected income of the appraised enterprise to determine the overall value of the enterprise, so as to improve the value of the enterprise and make the creditor's rights and capital contributions more compensated; Investors naturally hope to use the liquidation price method or the underlying asset method to evaluate the liquidation value of the enterprise. In addition to the limitations of accounting technical factors and evaluation rules, the value of enterprises is also affected by many factors, such as the macroeconomic situation, market transaction activity, industry breadth, regional business environment, industrial synergy, special qualification pricing, local government attitude, etc., which increasingly presents complexity, asymmetry and uncertainty. If the parties such as creditors, debtors, contributors and restructuring investors agree to retain part or all of the rights and interests of the original contributors, i.e. partially reduce or retain the rights and interests of the original contributors, based on the consensus reshaped by the voting rules of the creditors' meeting, the reorganization should refer to the bankruptcy settlement system for confirmation.
(2) The limited role of the market price discovery mechanism needs to face the problem of how to maximize the interests of all parties in the case of unsuccessful recruitment of restructuring investors
In fact, the reorganization of investor recruitment refers to the core content of auction theory, and establishes an effective price discovery and formation mechanism for commodities that are difficult to estimate their value by means of marketization. Some practitioners even think that in the future, big data algorithms should be used to replace the evaluation link in the judicial price discovery mechanism. [[18] Jiang Yong: Online judicial auction transaction matching and price discovery are the core, http://www.legaldaily.com.cn/zt/content/2016-03/24/content_6538137.htm?node=81092 , visit time: August 14, 2019.] 18] in practice, the phenomenon of judicial auction is frequent, and the zero transaction of "having price but no market" in the market also occurs from time to time. In the reorganization, there is a lack of active responders and powerful subjects in the recruitment of investors,
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