Tongwang Sharing | A Brief Discussion on the Pre-Reorganization Initiation Mechanism
Time:
2023-02-03
Author:
Su Yujun
Source:
Visits:
27
Pre-restructuring refers to the procedure that connects out-of-court restructuring and in-court restructuring. Since the promulgation of the Notice of the Supreme People's Court on Printing and Distributing the Several Opinions on Providing Judicial Guarantees for Improving the Business Environment, courts across the country have combined practical experience and successively promulgated pilot guidelines or rules on the pre-restructuring procedure in order to standardize the application of the pre-restructuring procedure in practice and maximize the institutional advantages of pre-restructuring.
According to the Enterprise Bankruptcy Law of the People's Republic of China and relevant judicial interpretations, Chinese law has clear provisions on the application subject and initiation conditions of the restructuring procedure. As a combination of an out-of-court procedure and an in-court procedure, the pre-restructuring system can naturally refer to the current legal provisions for the restructuring procedure in the part that is transferred to the in-court procedure. However, in terms of the initiation of out-of-court procedures, in the absence of legislative provisions on the pre-restructuring procedure in China, the judicial practice experience varies from place to place, and the relevant provisions also vary. This article takes the initiation link of the pre-restructuring procedure as a starting point and attempts to explore some issues concerning the provisions on the pre-restructuring initiation procedure in the guiding documents issued by local courts.
Looking at the guiding documents issued by local courts, there are roughly two models for the initiation procedure of pre-restructuring in terms of mechanism design. One is the 'application + review' model, that is, the court allows the subject that meets the conditions to file a pre-restructuring application, and the court reviews the materials submitted by it, and if it meets the conditions, it is allowed to enter the pre-restructuring procedure; the other is the 'review + prompt + consent' model, that is, when the court reviews the restructuring application, it finds that the debtor meets the pre-restructuring conditions, it can explain to the applicant and the debtor, and when the applicant and the debtor agree to adopt pre-restructuring and sign the relevant written commitment, the court will allow it to enter the pre-restructuring procedure.
The out-of-court restructuring stage of the pre-restructuring procedure is actually the process of creditors and debtors negotiating a reorganization plan (draft) agreed by both parties under the work of the interim administrator. This process has the nature of private law autonomy, but still requires appropriate intervention by the court. The reason is that the reorganization plan (draft) born in this stage must meet the requirements of the reorganization procedure, and its content must not violate the law. In other words, the reorganization plan (draft) formed in the out-of-court restructuring stage is actually the early formation of the reorganization plan in the reorganization stage, so the court must review this plan (draft) and require it to comply with the relevant laws of the reorganization procedure. On the other hand, the out-of-court restructuring stage also involves relevant legal issues such as the work of the interim administrator, and if there is no appropriate intervention and guidance from the court, the work in this stage will be difficult to play the due institutional effect.
It is based on the above reasons that the court decided that the initiation of the pre-restructuring procedure for the debtor must go through relevant review. Many courts have clarified the conditions for applying the pre-restructuring procedure with reference to the provisions of the bankruptcy law on the conditions for applying the restructuring procedure and in combination with local practical experience. As for the pre-restructuring initiation mechanism, the author believes that pre-restructuring, as a special procedure connecting out-of-court restructuring and in-court restructuring, is one of the important significance for saving enterprises on the verge of bankruptcy is efficiency. Therefore, the provisions on the pre-restructuring initiation mechanism can be relatively loose, that is, it is more desirable to take a combination of the two models as the initiation path.
Firstly, The court should allow the applicant or interested party to express their willingness to take pre-restructuring measures against the debtor, allow them to provide materials that can prove that the debtor meets the conditions, and if the conditions are met, it should agree to enter the pre-restructuring procedure.
Secondly, The court has the space to decide whether to adopt pre-restructuring ex officio. In the case where the applicant or interested party has not filed a pre-restructuring application, if it is found after the court's formal review that the debtor meets the relevant circumstances, after explaining to the applicant and the interested party and obtaining their consent, it can also make a decision to adopt the pre-restructuring procedure.
Finally, If the applicant or interested party has any objection to the court's decision not to enter the pre-restructuring procedure, it should also leave a certain space for it to defend itself, and it can be informed to supplement the sufficient materials to prove its claim and then submit it to the court for review and decision. This not only meets the institutional requirements of the pre-restructuring procedure, but also can be flexibly operated in practice, taking into account the interests of all parties.