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19 results

  • 6 - Approval of Corporate Reorganisation Plans in China

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 172-220

  • Summary

    Chapter 6 focuses on how courts approve corporate reorganization plans that have been voted by affected parties. In particular, this chapter investigates how courts approve consensual reorganization plans that have been voted for by the affected, and, more importantly, how courts conduct the statutory tests before cram-down approving non-consensual reorganization plans that have been voted down by some classes of stakeholders. The empirical data reveal that the cram-down approval is used in about a quarter of the surveyed cases, with the rest resorting to normal approvals. And, in many cram-down approvals, due to a lack of judicial independence, courts violate the bankruptcy rules and unlawfully give a green light to reorganization plans that do not meet the statutory conditions set up by the bankruptcy law.

  • 8 - Conclusion

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 246-248

  • Summary

    This chapter concludes the book, suggesting China establish a private service market for corporate insolvency, to empower creditors, and to fill the gaps in the current legislation so as to strengthen China's market economy.

  • 5 - Value Creation and Distribution in Chinese Corporate Reorganisations

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 128-171

  • Summary

    Chapter 5 considers whether China's new corporate reorganization law preserves going concern value, which is reflected on increased debt recoveries for creditors, and investigates how the two fundamental value redistribution principles, pari passu and absolute priority, are applied. The findings are considerably supportive, since the average debt recovery rate for unsecured creditors has been increased from less than fourtheen per cent in liquidations to twenty-eight per cent in reorganizations, which suggests reorganization significantly preserves going concern value. But greater challenges arise in the use of pari passu and absolute priority, since almost half of the surveyed cases relax pari passu in favour of unsecured creditors holding small amounts of claims, and absolute priority is routinely relaxed in the reorganization of public companies for social stability considerations. This chapter calls for more clarity on the application of these two principles when the law is amended.

  • 2 - Commencement of Corporate Reorganisations in China

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 12-58

  • Summary

    Chapter 2 investigates the general use of China's first corporate reorganization law, shedding light on what criteria or bankruptcy tests China's courts use to select eligible corporate reorganization candidates and which parties are more likely to trigger an in-court corporate reorganization procedure, followed by the findings of court jurisdiction on the existing corporate reorganizations. In particular, the findings in this chapter reveal that the innovative bankruptcy exemption test that is embedded in China's new bankruptcy law is simply shelved in practice, that the vaguely-worded reorganization-for-large-company test is excessively applied, and that a pragmatic survivability test is created by courts so as to choose suitable companies for formal judicial reorganization. Meanwhile, although some sixty per cent of reorganizations are filed by debtors themselves, the political support or endorsement from local government is still essential for a corporate reorganization application to be accepted by a local court. Finally, it is found that about sixty per cent of the reorganizations are heard by courts at the county level, which gives rise to the concern of local protectionism.

  • 3 - Control of Chinese Corporate Reorganisations

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 59-107

  • Summary

    Chapter 3 examines the control models of China's corporate reorganizations. Although China is committed to establishing an insolvency practitioner profession through qualifying lawyers and accountants as bankruptcy administrators, this chapter finds that in about one-third of corporate reorganizations, the court still appoints a local-government-organized liquidation committee as the bankruptcy reorganization administrator, even in the case of the reorganization of privately-owned companies. Meanwhile, the pro-rescue debtor-in-possession model is only applied in less than twenty per cent of the surveyed cases, which suggests that in the majority of corporate reorganizations, it is the bankruptcy reorganization administrator in control. However, an in-depth examination finds that, in fact, it is local government staying in control of most corporate reorganizations, which leads to the assertion of this chapter that China uses a kind of the government-in-possession model in its corporate reorganizations.

  • 7 - Cross-Border Corporate Reorganisations in China

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 221-245

  • Summary

    Chapter 7 is examining cross-border reorganizations in China on three aspects. First, it considers whether foreign creditors are treated in the same way domestic creditors are treated in corporate reorganizations in China. Second, attention is paid on how a foreign corporate reorganization order can be recognized in China, and especially on whether a foreign corporate reorganization order can stay individual actions against the company's assets located in China. Third, it investigates how a corporate reorganization order issued by a Chinese court can be recognized abroad. According to the findings, this chapter puts an end to the doubt that foreign creditors might be disadvantaged in China's corporate reorganizations. Meanwhile, although China embraces universalism in the bankruptcy statutes, in reality, seeking the recognition of a foreign insolvency order in China is still a remote possibility. By contrast, it may be far easier for a Chinese insolvency order to be recognized abroad, especially in jurisdictions where the UNCITRAL Model Law on Cross-Border Insolvency has been adopted.

  • 4 - Corporate Reorganisation Financing in China

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 108-127

  • Summary

    Chapter 4 casts light on how companies in reorganization seek financing to fund the restructuring. First, it is found that although China's new reorganization law encourages secured borrowing, this mechanism has never been used in practice, partly because there are few free assets left and partly because many court asset-freezing orders are difficult to be removed, as a result of which lenders have little confidence in extending loans, even on a secured basis. Second, unsecured borrowing suffers the ambiguous protection in China's bankruptcy law, and especially its priority over pre-petition unsecured claims is not clear enough to give lenders certainty; and due to the vigorous risk assessment systems of banks in China, reorganization financing from banks is impractical in reality. Third, most reorganization administrators have to find cash internally by selling some assets or collecting receivables. But the bigger picture should not be forgotten, since most China's corporate reorganizations are company sales, and it is the company buyer who injects cash to revive the company's business through and after the reorganization procedure.

  • 1 - Introduction

  • Zinian Zhang, University of Leeds
  • Book: Corporate Reorganisations in China
  • Published online: 21 September 2018
  • Print publication: 11 October 2018, pp 1-11

  • Summary

    This chapter gives a brief account of the history of China's bankruptcy law and of the main features of China's new corporate reorganisation law. After outlining the structure of this book, this chapter describes the methodology of where and how the data are collected.

Corporate Reorganisations in China
  • An Empirical Analysis
  • Zinian Zhang
  • Published online: 21 September 2018
  • Print publication: 11 October 2018
  • The first comprehensive empirical study on corporate bankruptcy reorganizations in the second largest economy, China, investigating the formal corporate restructurings handled by China's courts between 2007 and 2015. The data and analysis presented in the book provide a unique lens from which China's newly-enacted Chapter 11-styled corporate reorganization law, both in the books and in practice, can be understood and from which the interaction between business and state in dealing with corporate bankruptcies in China could be better comprehended. This book benefits from the author's ten-year business law practice in China, and his insights on China's judicial and political system considerably enrich the arguments. In particular, this book sheds light on commencement of bankruptcy reorganizations, control models, corporate reorganization financing, value distribution, approval of reorganization plans and cross-border reorganizations under the China Enterprise Bankruptcy Law of 2006.

  • Corporate Reorganization Reform in China: Findings from an Empirical Study in Zhejiang

  • Zinian ZHANG, Roman TOMASIC
  • Journal: Asian Journal of Comparative Law / Volume 11 / Issue 1 / July 2016
  • Published online by Cambridge University Press: 20 May 2016, pp. 55-85

  • In 2006, China enacted its first rescue-oriented Enterprise Bankruptcy Law with the aim of establishing its corporate rescue culture. But the corporate reorganization procedure that is at the heart of the new bankruptcy law has not been used frequently. It is appropriate to ask why the use of China’s new corporate rescue law has been so low. Meanwhile, in the existing corporate reorganizations under the 2006 Law, most debtors were excluded from the reorganization process, so that the Chinese new debtor-in-possession model, which seems to be a desirable control format, was largely shelved. Why so? This article explores these two issues through the use of empirical data collected from Zhejiang, a province with a significantly larger number of reorganizations than most other Chinese provinces.