Author: Jin Yingbo 2016-12-27

Debt is a specific relationship of rights and obligations that arises between the parties in accordance with the provisions of a contract or laws. The person who enjoys the rights is the creditor, and the person who bears the obligations is the debtor. In a market economy, exchange is the main form, and the conduct of exchange requires people to consciously uphold a principle of honesty and credit, and give the other party a promise of equal benefits. The result of violating credit is the debt problem. With the deepening and promotion of China's enterprise restructuring work, the correct handling of corporate debt issues is increasingly showing its importance. This not only involves the protection of creditors' interests, but also relates to the credibility of the credit principle in the market economy and the seriousness of the debt law.

This article attempts to conduct some discussions on the debt issue in enterprise restructuring, in order to explore the correct methods for enterprises to handle debt in restructuring work.

1、 The relationship between enterprise restructuring and debt issues.

The traditional legal form of enterprise legal persons in China is classified based on traditional forms of ownership, mainly manifested as national ownership, collective ownership, private enterprises, partnership enterprises, joint ventures, and foreign-funded enterprises. Enterprises with different ownership natures also have different treatment. But the market economy adheres to the principles of market entities and divides enterprises according to legal forms. Therefore, for China, one of the important tasks of economic transformation is to transform existing enterprises to meet the requirements of a market economy.

In Chinese law, there are various forms of enterprise restructuring, some of which are carried out through partial or complete transfer of property rights, such as equity acquisition, merger, division, merger, leasing, contracting, etc. Some are carried out through rights conversion, such as debt conversion into equity, and some are authorized through rights separation, such as separation of ownership and management rights. Although various forms of restructuring vary, the changes in enterprise capital, management rights, organizational structure, enterprise property, and business entities involved in the restructuring have directly affected the basis for realizing creditor's rights, which are stable conditions for maintaining creditor's interests. Therefore, the restructuring of enterprises is closely related to debt issues, which involve the fulfillment of debts and also affect the safety of debts. In the process of restructuring, the relationship between the two should be properly handled. On the one hand, debt issues should not bind the feet of restructuring, and on the other hand, the legitimate rights and interests of creditors should not be ignored due to restructuring, and debt should not be openly avoided under the guise of restructuring. We must firmly support the restructuring of enterprises, while also dealing with acts that infringe on national interests and the legitimate rights and interests of creditors through the restructuring process in accordance with the law.

2、 The causes and types of corporate debt occurrence

Chinese enterprises, especially state-owned enterprises, have heavy debts, with a large amount of debt reaching non-performing levels, which has become a basic phenomenon of Chinese enterprises. In essence, the causes and types of debt occurrence are as follows:

1. The debt to banks formed due to the implementation of the loan allocation policy

Before 1983, state-owned enterprises in China mainly implemented a financial allocation system under the traditional planned economy system, resulting in a low asset liability ratio. In order to promote the improvement of enterprise efficiency and enhance enterprise risk awareness, China implemented the "transfer to loan" system in 1983. Enterprises rely on loans to solve their funds, bear the risk of fund utilization through debt, and pay the interest specified by the state. This measure has an incentive effect on enterprises to improve operational efficiency and reduce costs. However, due to the backwardness of China's enterprise management mechanism, untreated old diseases, and the lack of internal motivation in state-owned enterprises, the idea of eating the food of the state and the food of the bank still exists. The implementation of the new system directly leads to a high debt structure, and the high debt owed to banks has become a common phenomenon among Chinese enterprises.

2. Due to various reasons such as poor management, debts to enterprises and other organizations (such as triangular debts) have been formed.

The old system and outdated property rights structure have led to a lack of intrinsic vitality and competitiveness in China's state-owned enterprises. At the same time, the gradual implementation of reforms in China has increased the financial burden on state-owned enterprises, such as the implementation of the profit to tax policy, and the pressure of dual track prices in the market. State owned enterprises no longer enjoy the past glory, forcing their financial situation to worsen, and debt between enterprises has become a common occurrence, Debt troubles and poor corporate management are constantly intertwined, and entrepreneurs defaulting on their debts or even going bankrupt have become a major chronic problem in China's economic development. The phenomenon of triangular debt has further led to a vicious cycle of corporate debt. The debt units of a restructured enterprise often cover almost everything from industry, commerce, banking, taxation, finance, and even individual businesses, contracted operators, and ordinary workers. The scope of debt is also a common phenomenon in corporate debt.

3. The debt formed by raising funds from society and enterprise employees has become a major challenge that affects social stability and does a good job in restructuring work.

Due to poor operating conditions and non-performing assets, some enterprises are unable to obtain sufficient loans from financial institutions such as banks to meet the urgent needs of their operations. The large amount of idle social funds generated by the development of the social economy provides financing channels for these enterprises, including fundraising from within the social scope, internal employees, and borrowing from other units and institutions, These fundraising (borrowing) activities have a wide range and involve a large number of people. Although the procedures are simple and often require a receipt, the fundraising time is short. However, these fundraising activities have high interest rates and short repayment times. In addition, these fundraising activities are attracted by the hard work of various employees and individuals in society, and are lent to enterprises due to high interest rates. Once the enterprise's improper operation affects the repayment of the fundraising funds, it will inevitably lead to a wave of debt collection and even petitioning, Becoming a major event that affects local political life and social stability. Therefore, how to handle this type of debt during the restructuring has become the primary task for governments at all levels, relevant departments, and enterprises.

In addition to the representative types of debts mentioned above, there are still unpaid taxes in the structure of corporate debts, as well as payable but unpaid amounts such as transfer fees, compensation fees, social coordination fees, arrears of employee wages, medical expenses, etc. in the use of land use rights.

3、 Various behaviors of evading debts during enterprise restructuring

At present, the most thorough way to undermine credit in enterprise restructuring is not to rely on debts to evade debts, but to evade debts. The purpose of debt evasion is to embezzle the interests of creditors, turn debts into nothingness, and make creditors only sigh at "debts". The main debt targeted in debt evasion behavior is still the debt of the state, banks, and other enterprises (especially those from other regions), which directly damages the interests of the state, banks, and other enterprises. These behaviors often manifest in the following situations:

1. Shelling measures

That is, through changes in the organization of the enterprise, the original enterprise becomes a shell that loses its solvency, and the effective assets of the enterprise are covertly transferred to another entity, which is used to deal with the debtor. This measure essentially belongs to the legal separation of enterprises, where a debt enterprise is split into two and effective assets are transferred to the newly ceded entity, while the debt remains in the name of the original enterprise, making creditors face a shell enterprise with a reserved name, and all debts become a piece of waste paper. The means of using.

2. Low price transfer

Many enterprises, under the guise of restructuring, transfer their assets or interests through various forms such as mergers, acquisitions, contracting, leasing, and joint-stock restructuring, using low-priced buying and selling methods. This behavior is characterized by obtaining higher value assets at less low prices and indirectly transferring enterprise assets, which is highly confusing and often receives improper support from industry and commerce, evaluation agencies, and relevant departments.

3. False bankruptcy

Bankruptcy, as a special liquidation procedure for debts that cannot be repaid at maturity, is increasingly being used. Especially for state-owned enterprises, bankruptcy is often seen as an important means of reallocating effective resources. However, as bankruptcy is a limited form of repayment and employees should be resettled first, it is often used by some local governments and enterprises to evade debts and transfer assets to achieve the goals of restructuring enterprises. If there are no explicit provisions in the law, it should be handled according to policies, and the restructuring work of enterprises should be incorporated into the track of legalization and standardization, To prevent the embezzlement of state-owned assets and harm the interests of creditors through the opportunity of restructuring.

4. Change the debt bearing entity

At present, in the process of enterprise restructuring, the situation of changing the debt bearing entity without the consent of creditors is more prominent. It uses the opportunity of enterprise restructuring to suspend and evade debts, and often uses administrative documents from relevant departments as the basis for change, public announcements as the form of notification, and often sets unreasonable application deadlines. Its purpose is to replace the original enterprise with a subject with poor repayment ability, in order to achieve the goal of debt evasion.

5. Other forms

If some enterprises do not hire qualified institutions for evaluation during their restructuring, or although they have been evaluated, the phenomenon of high value undervaluation or low value overestimation often occurs with great arbitrariness, and these evaluation reports are often used as the only basis for evaluating the value of enterprise property, which cannot be disputed or modified by creditors.

4、 Based on the law and combined with national restructuring policies, it is a principle that should be followed to correctly handle debt issues in enterprise restructuring.

Due to the particularity of enterprise restructuring and the late start of China's debt law, the General Principles of the Civil Law in 1987 clearly established the concept and basic principles of debt, but did not establish a sound and specific debt law, and the Company Law did not make specific provisions on it. The lag of the legal system makes the disposal of debt in enterprise restructuring lack of systematicness and operability. Although the documents and notices of the competent authorities provide the main rules that can be followed for enterprise restructuring and serve as guidelines for action to a certain extent, they also lack a certain degree of standardization and do not truly solve the problems that cannot be relied on. The author believes that the supplementary application of the two should be a guiding principle for solving debt problems in current enterprise restructuring work.

1. We should adhere to the provisions of laws and regulations such as the General Principles of the Civil Law, the Law on Enterprises Owned by the Whole People, the Company Law, the Regulations on the Conversion of Business Mechanisms, the Regulations on Contracting and Leasing, and so on

2. In the absence of explicit provisions in laws and policies, we should adhere to the principle of starting from reality and measuring whether it meets the standards of "three benefits". If the enterprise restructuring regulations formulated by local governments conflict with central policies and current laws, we should suggest that government departments clean up and modify them in practice to make the relevant documents formulated by local governments legal, fair, and reasonable. We must not only uphold support for restructuring, but also lawfully stop any behavior that infringes on national interests and the legitimate rights and interests of creditors under the guise of restructuring.

3. In the specific restructuring work, a detailed, clear and compliant restructuring process should be established: firstly, the assets of the restructured enterprise should be cleared and verified, and the creditor's rights and debts should be cleared; Secondly, in accordance with the relevant provisions of the "Measures for the Administration of State owned Assets Evaluation," "Interim Measures for Enterprise Mergers," and "Interim Measures for the Sale of Property Rights of State owned Enterprises," social intermediary agencies should be entrusted to publicly bid for situations involving asset auctions, transfers, enterprise mergers, sales, joint ventures, or stock operations, in order to improve transparency and the preservation and appreciation of public assets; Then determine the subject of the original debt, and it must be clear that the transfer of debt (i.e. changing the subject of the debt) should obtain the consent of the creditor, complete the relevant transfer procedures, and notify the mortgagee when the enterprise involving bank mortgage loans is auctioned or transferred. If necessary, the relevant loan contract and mortgage procedures should be re processed; Finally, the procedures for industrial and commercial registration should be improved, and the cancellation, establishment, or change of registration should be handled strictly in accordance with regulations, and the registration should be re registered truthfully. At the same time, as the competent departments for the restructuring work, the Office for Restructuring and the State owned Assets Supervision and Administration Department should strengthen their supervision of the restructuring work of enterprises, effectively stop various illegal and irregular behaviors that infringe on the interests of creditors, and ensure the smooth progress of the restructuring work.