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Encounter bankruptcy, one of the fifty questions and answers on the practice of restructuring investment.

Published:

2020-10-10

The first question is: what is reorganisation?

Reorganization, that is, bankruptcy reorganization, refers to a legal system specifically aimed at enterprises that may or have reasons for bankruptcy but have the hope of maintaining value and regeneration, through the application of all interested parties, under the auspices of the court and with the participation of interested parties, to carry out business restructuring and debt adjustment, so as to help the debtor get rid of financial difficulties and restore its business capacity.

The purpose of the reorganization system is to save the economic and social value of the enterprise, avoid all kinds of adverse social effects caused by bankruptcy liquidation, and at the same time enable creditors to be paid more than liquidation. Restructuring involves the interests of multiple subjects such as the debtor's investors, creditors, restructuring investors and even the government of the debtor's domicile, which can only be completed with the participation of all stakeholders.

Second question: what are the ways to restructure?

Restructuring methods generally include the original shareholders' self-financing debt service, debt-for-equity swaps, the introduction of restructuring investors, hybrid models, etc., but the introduction of restructuring investors and hybrid models is the most common and effective way.

Advantages of introducing the method of restructuring investors: compared with debt-to-equity swap, all creditors can receive cash settlement at one time instead of long-term equity that cannot be realized, which is more generally accepted by creditors; Compared with the original shareholders' self-financing method of debt repayment, new investors generally have stronger financial strength and no original debt burden, and can introduce debt repayment funds to the maximum extent.

Question 3: What is a restructuring investment?

After determining the investment intention, the restructuring investor uses the court and the administrator to verify the existing debts of the debtor enterprise, lock in the debts, communicate with the creditors on the reduction of the existing debts, verify the assets and operation of the debtor, and calculate the operating conditions and debt solvency of the enterprise after the capital injection and reorganization. Obtaining the support of financial creditors, communicating debt restructuring plans such as long-term loan extension, short-term loan continuation and financing cost control; the same as the original funder to determine the conditions for the transfer of equity, the re-establishment of the debtor's corporate governance structure, the construction of internal control and the path of realization, including the implementation of external conditions such as taxation and local government support.

On this basis, the restructuring investor puts forward the investment plan and the leading manager puts forward the reorganization plan (draft), and puts forward specific plans on the follow-up operation, creditor's rights adjustment and compensation, reorganization and supervision period, corporate governance and the realization of internal control objectives, so as to obtain the approval of the creditors' meeting.

Question 4: What are the categories of restructuring investments?

According to different transaction purposes, it is divided into financial investment to provide financial support to obtain capital return and industrial investment to obtain target enterprise assets and realize long-term income by self-operation; according to different counterparties, it is divided into two categories: providing financial support to restructured enterprises and providing financial support to restructured parties; according to different investment participation methods, it can be divided into creditor's rights investment, equity investment and asset investment, and mixed investments.

Question 5: What are the usual conditions for restructuring investors?

The 1. has a high sense of social responsibility and good business reputation, has no major violations or is suspected of major violations in the past three years, and has not been included in the list of untrustworthy persons subject to enforcement (credibility requirements);

The 2. can pay the consideration required to acquire the corresponding assets within the agreed time, and has sufficient funds for restructuring investment, and can issue the corresponding credit certificate or other performance ability certificate (strength element);

3., if there are relevant provisions on the subject qualification of investors in laws, regulations and regulatory policies, the restructuring investor shall ensure that such requirements (statutory requirements) are met;

4. have industry-related investment experience and management experience and advantages (preferred under the same conditions);

5. have previous experience in restructuring investment or corporate mergers and acquisitions (preferred under the same conditions).

Question 6: What are the ways to determine the restructuring of investors?

According to the practice of bankruptcy reorganization of enterprises in various parts of China, the methods of identifying investors in reorganization proceedings include, but are not limited:

1. debtors or contributors to find restructuring investors on their own, this approach is more common in the pre-reorganization system;

2., the government departments, creditors and other entities recommend the intention to restructure the investors, and the managers carry out consultation and negotiation with them one by one, and finally determine the investors;

3. public recruitment of restructuring investors has gradually developed into the main way for many restructuring enterprises to identify investors.

Question 7: How to determine the restructuring investors through consultation?

1., for the debtor to manage its own property and business affairs, since the debtor has the best knowledge of the business development of the enterprise, in order to improve the efficiency of reorganization, the debtor may give priority to the introduction of reorganization investors through consultation. However, if the debtor is unable to propose a feasible plan for debt settlement and subsequent operations within a reasonable period of time, the administrator shall openly recruit restructuring investors from the public.

2. in the case of the manager is responsible for the management of property and business affairs, in principle, the manager should openly recruit restructuring investors to the public. At the same time, based on efficiency considerations, with the consent of the creditors' meeting or the creditors' committee, the administrator may determine the reorganization investor by consultation in the following circumstances:

1. The debtor and the intended investor have initially formed a feasible debt settlement plan and an adjustment plan for the rights and interests of the investor during the period of pre-reorganization or the debtor's own operation and management;

2. At the time of the acceptance of the reorganization application, the debtor has identified the intended investor, the intended investor has continued to provide co-beneficial funds for the debtor's continued business, the compensation of employee claims, and the debtor has formulated a feasible debt settlement and investor equity adjustment plan;

3. The value of the reorganization may be lost sharply and the reorganization investor needs to be identified as soon as possible;

4. There are other circumstances that are not suitable for public recruitment of restructuring investors, and the consent of the creditors' meeting or the creditors' committee is obtained.

Question 8: What is the recruitment of investors?

Recruiting investors is a general term for disclosing debtor information, disclosing information, and attracting investors to compete for and participate in restructuring investment activities.

Question 9: When will the investor recruitment process be initiated?

If the manager publicly recruits reorganization investors, it shall start in time after the completion of the debtor's audit and asset evaluation; the manager may also start the public recruitment in advance according to the actual situation of the reorganization case. Where a decision is made to reorganize the debtor after the acceptance of bankruptcy liquidation and before the debtor is declared bankrupt, the administrator shall recruit reorganization investors within a reasonable period of time from the date of the reorganization decision. The same applies to pre-reorganization before entering into judicial proceedings and to the pre-reorganization stage before entering into insolvency reorganization proceedings after liquidation.

Question 10: Who recruited the restructuring investors?

According to Articles 70 and 80 of the the People's Republic of China Enterprise Bankruptcy Law, reorganization investors may be introduced by the debtor or administrator through consultation and public recruitment, or may be recommend by creditors.

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