No.1 Preface
In recent years, regulators have become increasingly strict in supervising the issue of fund occupation by listed companies. In April 2024, the Shanghai Stock Exchange and Shenzhen Stock Exchange issued new delisting regulations. According to the new regulations, if the balance of non-operating funds occupied by the controlling shareholder and its related parties reaches more than 200 million yuan or accounts for more than 30% of the absolute value of the company's latest audited net assets, and the company is ordered to make corrections by the China Securities Regulatory Commission but fails to complete the rectification within the required time limit, which is usually six months, the company will be suspended for a period of no more than two months. If the company fails to complete the rectification within two months of suspension, it will be subject to a delisting risk warning. If the company fails to complete the rectification within two months after the delisting risk warning, the listed company will be terminated for triggering the regulatory delisting indicators.
On January 28, 2022, the China Securities Regulatory Commission, the Ministry of Public Security, the State-owned Assets Supervision and Administration Commission, and the China Banking and Insurance Regulatory Commission jointly issued the "Regulatory Guidelines for Listed Companies No. 8 - Regulatory Requirements for Funds Transactions and External Guarantees of Listed Companies". The requirements clearly stipulate that illegal and irregularities of fund occupation shall be severely investigated and punished, and those suspected of committing crimes shall be investigated for criminal responsibility in accordance with the law. Upon searching, the possible crimes that the controlling shareholders or actual controllers of listed companies may commit for illegally occupying funds include: duty embezzlement, misappropriation of funds, breach of trust and damage to the interests of listed companies, and illegal non-disclosure of important information.
After the promulgation of the new delisting regulations, more and more listed companies' actual controllers urgently need to solve the problem of non-operational capital occupation in order to avoid relevant criminal penalties, and at the same time avoid triggering the delisting indicators of the regulated category, which would lead to the delisting of the listed companies under their control.
In recent years, Huashang Law Firm has handled many cases of acquisition and bankruptcy reorganization of troubled listed companies. Nearly half of these cases involve the issue of funds being occupied. Our lawyers will combine practical experience to sort out past cases of listed companies resolving the issue of funds being occupied in bankruptcy reorganization and non-bankruptcy reorganization, and summarize the rules for reference by peers.
No.2 Manifestation of Fund Occupation
According to Article 5 [ii] of the Regulatory Guidelines for Listed Companies No. 8 - Regulatory Requirements for Funds Transactions and External Guarantees of Listed Companies, the main forms of occupation of funds by controlling shareholders, actual controllers, and other related parties of listed companies include:
Advance wages, welfare, insurance, advertising and other expenses, bear costs and other expenses for controlling shareholders, actual controllers and other related parties;
Borrowing the company's funds, whether for compensation or not, including entrusted loans to controlling shareholders, actual controllers, and other related parties, except for other shareholders of listed companies who provide funds in the same proportion. The aforementioned "participating companies" do not include companies controlled by controlling shareholders or actual controllers;
Entrusting the controlling shareholder, actual controller and other related parties to carry out investment activities;
Issuing commercial acceptance bills without a real transaction background for controlling shareholders, actual controllers, and other related parties, as well as providing funds in the form of purchase payments, asset transfer payments, prepayments, etc. without consideration for goods and services or in situations that clearly contradict business logic;
Repaying debts on behalf of controlling shareholders, actual controllers and other related parties;
Other methods recognized by the China Securities Regulatory Commission (hereinafter referred to as the CSRC).
No.3 Path for listed companies to solve the problem of capital occupation in non-bankruptcy reorganization
According to Article 21 of the Regulatory Guidelines for Listed Companies No. 8 - Regulatory Requirements for Funds Flows and External Guarantees of Listed Companies, it can be seen that the funds occupied by the controlling shareholders, actual controllers, and other related parties of listed companies should be settled in cash in principle; The liquidation of funds occupied by non-cash assets should be strictly controlled, and it should be evaluated by an appraisal institution with securities qualifications and reviewed by the shareholders' meeting. The assets used for compensation must belong to the same business system of the listed company, which is conducive to enhancing the independence and core competitiveness of the listed company. It must not be an asset that has not yet been put into use or an asset without an objective and clear net book value.
The paths for listed companies to solve the problem of capital occupation in non-bankruptcy reorganization mainly include cash liquidation and non-cash asset liquidation.
(i) Cash settlement
Cash settlement is the most direct and effective solution to address the issue of fund occupation by listed companies. In practice, there are mainly two methods: direct settlement by the fund occupying party and settlement by a third party on behalf of the fund occupying party.
Case examples:
| Listed Company | Fund Occupancy Resolution Plan |
| Longjing Environmental Protection (600388) | The balance of non-operating funds occupied by the former controlling shareholder of the listed company and the interest totaled RMB 16,822.35 million, and the former controlling shareholder of the company settled the occupied funds and the interest with the transfer payment received from the transfer of the shares of LongJinEnvironment listed company to foreign countries. |
| Hangzhou High-Tech | The original actual controller of the listed company had occupied the funds of the listed company, after which the principal amount of the funds occupied was paid off through a third party on behalf of the listed company in the amount of RMB 58,033,700,000, and the fees for the occupation of funds were RMB 1,203,200,200,000, amounting to a total of RMB 59,236,900,000. |
Case analysis:
In the cash settlement case, the stock exchange rarely interferes, the fund occupying party and the listed company generally negotiate to resolve the issue. The fund occupying party can negotiate with the listed company on the interest rate of fund occupation. For example, in the Hangzhou High-tech case, the listed company agreed to adjust the interest rate of fund occupation from the original bank loan interest rate of 4.35% to the bank current deposit interest rate of 0.35% for the same period, and the fund occupation interest of 14.954 million yuan was adjusted to 1.2032 million yuan.
(ii) Liquidation of non-cash assets
1.Debt Repayment with Assets
In addition to cash repayment, there are also cases in practice where the funds occupying party or a third party uses its assets to repay the occupied funds. The assets used for repayment typically include equities, real estate, and operating assets.
(1)Equity Repayment: The funds occupying party can use the company equity it holds or that held by a third party to repay the occupied funds.
Case example:
| listed company | Fund Occupancy Resolution Plan |
| Shuzhitui(300038) | Shuzhitui was occupied by its major shareholder for more than 500 million yuan, after which the listed company, the major shareholder and the third party signed a relevant agreement to offset part of the funds occupied by the major shareholder to the listed company with 100% of the equity interest of TongSuite (Wuhan) Network Facilities Investment Company Limited in the amount of RMB 2486.86 million yuan. |
Case analysis:
in the equity debt program, used to offset the funds occupied by the subject equity is basically a controlling stake, offset the subject company will be included in the scope of the consolidated statement of the listed company, this situation will trigger a high degree of concern of the stock exchange, which usually through the issuance of a letter of concern to regulate this way, requiring the listed company to the subject company's name of the important assets of the operating situation, income, technology reserves, The listed company is required to make full disclosure on the operation, income, technology reserve and future performance guarantee of important assets under the name of the subject company.
(2)Real Estate Repayment of Debts
In real estate repayment case, securities exchanges typically pay close attention to the assessment of real estate (including assessment assumptions and processes), its operational status (such as rental income), and whether there are any defects in ownership, in order to ensure the fairness of the amount of funds repaid with real estate.
Case example:
| Listed Company | Fund Occupancy Resolution Plan |
| Huaying agriculture(002321) | The former controlling shareholder of Huaying Agriculture, Huaying Poultry, once occupied funds of nearly RMB 500 million from the listed company. To address this issue of fund occupancy, Huaying Poultry used the ownership of the Huaying Research and Development Center building, which is registered under a third party's name but actually owned and used by Huaying Poultry, to offset approximately RMB 300 million of the occupied funds. |
(3)Inventory Repayment
The funds occupying party can use the inventory it holds or that held by a third party to repay the occupied funds.
Case example:
| Listed Company | Fund Occupancy Resolution Plan |
| Jingzhengda(002470) | The related party of the actual controller of in, Jingzhengda, once occupied funds of approximately RMB 2.5 billion from the listed company. To partially repay the occupied funds, Nobelfeng used inventory (including brassinolide and foliar fertilizer) to offset part of the occupied funds of the listed company, with the aforementioned inventory valued at approximately RMB 500 million. |
Case analysis: In the inventory liquidation plan, the stock exchange is more concerned about the ownership of inventory and whether the debt-for-service has actually occurred.
(4)Intangible Asset Repayment
The funds occupying party can use intangible assets held by itself or a third party to repay the occupied funds. Intangible assets refer to non-monetary assets that are identifiable and lack physical form, primarily including intellectual property rights, land use rights, and so on.
| Listed Company | Fund Occupancy Resolution Plan |
| Hainan Haiyao(000566) | The related party of the listed company, Chongqing Jinsai, occupied funds of approximately RMB 400 million from the listed company. On June 26, 2023, the listed company entered into a debt repayment agreement with Chongqing Jinsai and Chongqing Sainuo, stipulating that two drug approvals held by Chongqing Sainuo—Shuangcan Huoxue Tongluo Granules (National Medical Products Administration Approval Number: B20020357) and Fengliao Changweikang Oral Liquid (National Medical Products Administration Approval Number: Z20090296)—along with their intellectual property rights (with an assessed value of RMB 53.3342 million) would be used to repay part of the occupied funds. |
| Tiansheng Medicine(002872) | The former controlling shareholder of the listed company, Liu Qun, once occupied funds of approximately RMB 100 million from the listed company. Subsequently, the controlling shareholder used part of the buildings and land use rights registered under a third party's name to offset the occupied funds. |
Case analysis: Compared to other types of assets, intellectual property rights in intangible assets, such as products involved, have not yet been produced in bulk and put on the market, making it difficult to use the income method for valuation. In addition, due to the lack of a publicly effective technology transfer market in China, and due to the differences between technologies, it is also difficult to use the market method for evaluation; If the cost method is used for valuation, the compensation price may be too low for the occupant to accept, so it is rare to use intellectual property rights to compensate for the use of funds in practice.
(5)Debt Repayment with Operating Asset Portfolio or Asset Package
Operating assets refer to assets formed through a company's business activities, such as monetary funds, accounts receivable, inventory, fixed assets, and intangible assets. The funds occupying party can use an operating asset portfolio or asset package registered in its own name or that of a third party to repay the occupied funds.
Case example:
| Listed Company | Fund Occupancy Resolution Plan | |||||
| Jingzhengda(002470) | Nobefung, a related party of the actual controller of the listed company, occupied about RMB2.5 billion of the listed company's funds, and Nobefung transferred its operating assets package to the listed company at a price of about RMB1 billion, which was used to reimburse part of the funds of the listed company occupied by Nobefung. | The land, plant and equipment involved in the operating asset package used for offsetting the funds utilized are mainly based on the following production lines and products (only some of which are listed for reasons of space). | (1) Water-soluble fertilizer plant with two production lines, with a total annual capacity of 400,000 tons, producing water-based fertilizers. | (2) Potassium nitrate plant with two production lines, with a total annual capacity of 250,000 tons, producing potassium nitrate. | (11) Long-acting slow-release nitrogen liquid fertilizer plant with one production line, with an annual capacity of 300,000 tons, producing long-acting slow-release nitrogen liquid fertilizer. | (12) Microbial fertilizer plant with one production line, with an annual capacity of 60,000 tons, producing microbial fertilizers. |
Case analysis:
In the liquidation plan for operational assets, the portfolio or package of operational assets used for compensation typically revolves around the equipment, factories, land, and other assets required for a particular production line or product, encompassing a wide range of asset types. Stock exchanges generally pay attention to whether there is a synergistic effect between operational assets used for debt repayment and the business of listed companies, the necessity of debt-repayment assets for the company's operation and development, and whether they are indeed needed by the company.
Furthermore, the use of a large portfolio or package of operational assets to repay debts may constitute a major asset restructuring for a listed company. Currently, our firm's lawyers have only identified one case where a portfolio or package of operational assets used for debt repayment constituted a major asset restructuring that was approved. This case involves Guangdong Mingzhu (600382), a listed company, whose actual controller and related parties once occupied approximately RMB 1.8 billion of the listed company's funds (non-operational). Subsequently, the actual controller repaid the occupied funds using a portfolio of operational assets owned by a third party under its control. The aforementioned transaction constituted a major asset restructuring.
No.4 Path for listed companies to solve the problem of capital occupation in bankruptcy reorganization
If the listed company itself has already had the reason for bankruptcy and has the value of reorganization, it can choose to solve the problem of capital occupation in the bankruptcy reorganization.
Compared to non-bankruptcy reorganization procedures, there will be more debt repayment resources to solve the problem of capital occupation in bankruptcy reorganization. For example, stocks converted from capital reserves, part of the interests transferred by creditors of listed companies, and funds restructured by investors can all be used as repayment resources.
(i) Conversion of capital surplus into shares to solve the problem of capital appropriation by listed companies.
In bankruptcy reorganization, shares transferred from capital reserves may be used as resources for the listed company to settle its debts, and may also be used to solve the problem of capital appropriation.
The shares transferred from the capital reserve of the listed company are distributed to the existing shareholders, and in the process of distribution, the major shareholders (usually the capital-using parties and their affiliates) and the small and medium-sized shareholders are usually treated differently, with the transferred shares obtained by the major shareholders transferred back to the listed company for the purpose of settling the amount of capital-using payments, or transferred to the reorganization investors, and the portion of consideration paid by such reorganization investors is used to settle the problem of capital-using payments, and the small and medium-sized shareholders are able to retain the corresponding transferred shares on their own. The small and medium-sized shareholders will be able to retain the corresponding transferred shares on their own.
- Capitalization of capital surplus by transferring shares to introduce reorganization investment funds to solve the problem of capital appropriation
In bankruptcy reorganization, a listed company transfers shares from capital surplus to reorganization investors, and the reorganization investors use part of the cash consideration from capital surplus to shares to invest in the listed company to solve the problem of capital appropriation.
Case example:
| Listed Company | Fund Occupancy Resolution Plan |
| Kangmei Medicine(600518) | Kangmei Medicine had solved the problem of capital appropriation by the controlling shareholder in the reorganization. According to the reorganization plan, the reorganization investors were assigned 4,145,296,141 transferred shares, which accounted for 29.90% of the total number of shares after the adjustment of the equity of the contributors and paid the total price of 6.5 billion yuan of the transferred shares, and the funds raised would be partly used for solving the problem of 6 billion yuan of capital appropriation, supporting the listed company to do a good job in the original The funds raised will be used partly to resolve the issue of capital appropriation of RMB6 billion, to support the listed company in the continuous operation of its original main business, to implement the industrial optimization and upgrading plan, and to inject liquidity into the subordinate companies. Part of the proceeds will be used to settle the debts to be settled in cash as stipulated in the Reorganization Plan, including the debts to be settled in cash under ordinary claims, and to pay the expenses required for the implementation of the Reorganization Plan. |
| Caesar Travel(000796) | The reorganization plan shows that the conditions for the financial investor to receive the equity include: to provide funds not exceeding approximately RMB 508 million to be used to resolve the fund occupation on behalf of the controlling shareholders (if the amount of fund occupation to be resolved by the financial investor in the end is less than RMB 508 million, the difference will still need to be paid, i.e., the total consideration for investment will not be adjusted downward), and to be used to pay the reorganization expenses and co-beneficial debts and to settle all kinds of claims in accordance with the provisions of the reorganization plan, for business operations. |
2. Capitalization of capital surplus by transferring additional shares directly to offset the funds appropriation
The capital-using party (controlling shareholder) will transfer the transferred shares to the listed company to solve the problem of capital appropriation without compensation.
Case example:
| Listed Company | Fund Occupancy Resolution Plan | ||
| Hainan Airport(600515) | Hainan Airport once utilized shares converted from capital reserves in its reorganization to address the issue of capital occupation. The party occupying the funds, as a shareholder of the company, directly and voluntarily transferred the shares that were supposed to be allocated to it back to the listed company. | According to the announcement, the non-operating capital occupation balance of RMB 497,540,750 yuan by related parties was resolved through the transfer of shares by the company's former controlling shareholder and its controlled shareholders to the company. Based on the closing price of RMB 12.91 per share on September 10, 2021, the trading day prior to the announcement of the "Adjustment Plan for Investors' Rights and Interests," approximately 385,391,800 shares were required to be transferred. | According to the reorganization plan, the listed company used the aforementioned reclaimed shares to repay its debts. |
| Gongxiaodaji(000564) | According to the announcement, in order to address the issue of non-operating capital occupation by related parties, the controlling shareholder and its concerted actions, as well as specific related parties, will transfer 5,972,585,400 shares obtained from the capital reserve conversion to the company for resolution (based on the closing price of RMB 2.91 per share on September 15, 2021, the day before the announcement of the "Adjustment Plan for Investors' Rights and Interests"). This transfer can address the losses incurred by the company, as mentioned in the self-inspection report, amounting to approximately RMB 17,380,223,500. | According to the reorganization plan, the reclaimed shares obtained by the listed company can be used for debt repayment to creditors, for attracting future reorganization investors, and for improving the company's sustainable operating capabilities. |
Case Analysis:
In practice, a common approach to solving the problem of capital occupation through capital reserve conversion into share capital involves allocating the converted shares to reorganization investors, who then pay cash consideration to resolve the capital occupation issue. This approach essentially involves the reorganization investors settling the debt with cash on behalf of the debtor.
In addition to this method, there is also a practice where the controlling shareholder (the party occupying the funds) directly transfers the converted shares back to the listed company to address the capital occupation problem. The price for compensating with shares is calculated based on the closing price of the previous trading day before the announcement of the "Adjustment Plan for Investors' Rights and Interests." This scheme essentially involves the debtor settling the debt with assets. The author believes that using shares of a listed company undergoing bankruptcy reorganization to compensate for capital occupation is not inherently flawed. However, due to the significant price fluctuations in the secondary stock market, the pricing of shares used to settle debts in the Hainan Airlines Group's scheme, which was based on the closing price of the previous trading day before the announcement of the adjustment plan, did not provide a "sufficient safety cushion" for the listed company. The practical community widely considers this pricing method to be unfair and potentially detrimental to the interests of the listed company. Currently, aside from the Hainan Airlines Group, the author has not found any other listed companies that have used the method of directly transferring capital reserve-converted shares back to the company to address capital occupation issues during reorganization.
(ii) Transfers of benefits by creditors of listed companies
1. Creditors of the listed company waive their claims on the listed company, and the proceeds obtained by the listed company as a result are used to offset the losses of the listed company caused by the capital appropriation by the majority shareholder
In the course of reorganization of a listed company, if the creditors of the listed company are willing to waive their claims against the listed company, the proceeds obtained by the listed company as a result may be used to resolve the problem of capital appropriation.
Case example:
| Listed Company | Fund Occupancy Resolution Plan | |
| China South Culture(002445) | The reorganization plan shows that China South Culture has been occupied with funds of RMB 124,836,807.51, of which the part of the funds that cannot be recovered will lead to losses of Zhongnan Culture, which will be hedged against the losses and gains of Zhongnan Culture by the gains from the debt reduction of Zhongnan Culture in the pre-reorganization and reorganization, including the principal amount of the claims on Zhongnan Culture that the ordinary creditors who have agreed to the pre-reorganization plan and agreed to the draft reorganization plan have renounced, interest, penalties, defaults and other expenses (calculated up to the date of the reorganization), so that such losses can be filled by the gains. (calculated up to November 24, 2020, the date of acceptance of the reorganization), etc., so that the loss can be covered by the gain. | |
| East Sea(002086) | The reorganization plan showed that some creditors entered into the Debt Restructuring and Resolution Agreement with the former controlling shareholders and the listed company, agreeing that the creditors would exempt the claims of the listed company corresponding to the Debt Restructuring and Resolution Agreement, and the exempted amount would accordingly be offset against the equivalent amount of non-operating capital appropriation of the listed company by the former controlling shareholders. | The reorganization investor grants a portion of the acquired conversion shares to creditors who voluntarily use their claims to resolve the issue of non-operating capital appropriation without compensation. |
| Zhongtai Automobile(000980) | The ordinary creditors of Zhongtai New Energy, Zhongtai Auto Sales, Yongkang Zhongtai, Tieh Niu Body, Hangzhou Yiwei and Jie Neng Power, subsidiaries of Zhongtai Automobile, have offset part of the exempted claims of RMB239,147,100 against Tieh Niu Group's fund occupation of the listed company in accordance with the adjustment of the claims and compensation plan of the reorganization plan, and the remaining part of the exempted claims against the contingent risks that the listed company may incur. |
- Distribution of claims for funds appropriation by listed companies to creditors as debt-servicing assets, with creditors recovering the funds appropriation from the party appropriating the funds
The listed company may distribute its claims on the party occupying the funds as debt-servicing resources to its creditors in the reorganization, thus solving the problem of occupying the funds, and the creditors may recover the funds from the party occupying the funds. Usually, the solvency of the party occupying the funds is weaker than that of the listed company, and the creditors of the listed company may have difficulty in recovering their claims, and the creditors of the listed company are actually transferring their own interests to help the listed company to solve the problem of occupying the funds.
Case example:
| Listed Company | Fund Occupancy Resolution Plan |
| Tianxiangtui(300362) | The portion of the claim of each ordinary creditor of less than RMB300,000 (including RMB300,000) shall be fully settled in cash by Tianxiang Environment within the execution period of the reorganization plan in accordance with the law from the date on which the reorganization plan is approved by the court ruling. For the part of the claim of each general creditor of more than RMB300,000, a part of the claim shall be settled by conversion of shares, and the remaining part shall be settled by the receivables of Tianxiang Environment. The part of the claim to be settled by conversion of shares shall be settled in the form of 141 shares of conversion of shares for every RMB100 of general claim. In the process of settlement by conversion of shares, if the number of shares to be distributed to a creditor is not a whole number, the number of shares to be distributed to the creditor will be handled in accordance with the “rounding-up method”, i.e., after removing the number to the right of the decimal point of the number of shares to be distributed, “1” will be added to the single-digit number. For the portion to be settled by receivables, $100 will be distributed for every $100 of ordinary claims, and the receivables shall be the amount of funds appropriated by the Company and/or the receivables from other parties. The amount of the claim to be satisfied by the receivables from Tianxiang Environment to Pro-Huahua Technology shall be the amount of capital occupancy to be repaid by the creditor to Tianxiang Environment in lieu of Pro-Huahua Technology, and the creditor shall have the right to collect the amount from Pro-Huahua Technology on its own. |
| Red Sun(000525) | The total amount of capital appropriation claims receivable by Red Sun shares from the party appropriating funds is RMB2,882,725,856.14. The fund appropriation matter will be resolved by way of distribution to creditors and cash payment in lieu of reorganization of investors. |
- The listed company transfers part of its debt to the party that is occupying the funds, who will repay the creditors of the listed company, thus solving the problem of occupying the funds.
In reorganization, a listed company can solve the problem of capital appropriation by transferring part of its debts to the party appropriating the funds, so that the party appropriating the funds can pay off its debts to the creditors on behalf of the listed company, thus solving the problem of capital appropriation. The result of implementing this scheme is the same as the result of “the listed company distributing the accounts receivable from the party occupying the funds to the creditors as a debt-servicing asset”, i.e., the creditors turn to the party occupying the funds to recover the debt, and thus the creditors are also transferring their own interests.
Case example:
| Listed Company | Fund Occupancy Resolution Plan | |
| Hunan Baiyin(002716) | From March 13 to August 21, 2020, the listed company, the party occupying the funds and the creditors of the listed company entered into the Conditionally Effective Debt Transfer and Shareholders' Repayment Agreement, which stipulates that: from the date of the People's Court's decision to accept the Company's judicial reorganization, the Company's subject debt to creditors will be transferred to the party occupying the funds (controlling shareholders) for repayment on behalf of the Company, and the Company will no longer be responsible for repaying the creditors in respect of the subject debt. On the date of transfer of the subject debt to the fund-occupying party (controlling shareholder), the amount owed by the Company to the fund-occupying party (controlling shareholder) in respect of the subject debt and the amount owed by the fund-occupying party (controlling shareholder) to the Company for an equivalent amount of occupied funds were offset against each other, and it was regarded that the fund-occupying party (controlling shareholder) had satisfied the occupied funds to the Company for an equivalent amount to the subject debt. | On November 5, 2020, the Chenzhou Intermediate Court accepted the application for reorganization of the Company by Futeng Construction and ruled that the Company entered into reorganization proceedings. All of the above debt transfer agreements took effect and the issue of non-operational occupation of the Company's funds has been resolved. |
- Creditors of listed companies settling their claims against listed companies for funds appropriation
Creditors of the listed company use their claims against the listed company to repay the funds occupied on behalf of the funds-expropriating party, thus solving the problem of funds occupation, and the problem of funds occupation will be solved after the repayment is completed, and at the same time, creditors of the listed company will obtain the right of recovering the funds from the funds-expropriating party. As mentioned above, this scheme is also a transfer of interests by the creditor.
Case example:
| Listed Company | Fund Occupancy Resolution Plan |
| Keditui(002770) | The balance of the appropriation of the listed company by the Keditui is RMB 1,433 million (RMB 1,732 million if the reduction of RMB 299 million by the Keditui is added back). Currently, the total principal and interest of the listed company's financing liabilities amount to approximately $1.57 billion, which will be acquired by the reorganization investors and then settle the occupancy amount on behalf of the Cody Group by means of a debt-for-debt swap. |
- Creditors of subsidiaries of listed companies assign their claims on subsidiaries of listed companies to the fund-occupying party at no cost, and the fund-occupying party offsets its fund-occupying payment to the listed company against the claim, thus resolving the fund-occupation issue
In this case, the creditors of the listed company's subsidiaries assign their own interests and transfer their claims to the capital-using party at no cost, so as to solve the capital-using problem.
Case example:
| Listed Company | Fund Occupancy Resolution Plan |
| Aoruide(600666) | The controlling shareholder of the listed company had made non-operating fund appropriation of the listed company in the total amount of RMB357,571,473.35 in principal and interest. Subsequently, the creditors, subsidiaries of the listed company, the controlling shareholder and the listed company entered into a multi-party ''Debt Offset Agreement'', pursuant to which the creditors agreed to transfer their claims on the subsidiaries of the listed company in the aggregate amount of RMB229,818,100 to the controlling shareholder at nil consideration for the purpose of offsetting the RMB229,818,100 funds utilized by the controlling shareholder on the listed company. |
Case Analysis: Theoretically, it is not necessary to solve the problem of capital appropriation of listed companies through the transfer of interests by creditors of listed companies in bankruptcy reorganization, but according to the past cases, it can be seen that creditors of listed companies are easily unwilling to transfer their own interests in non-bankruptcy reorganization.
After the listed company enters into bankruptcy reorganization procedure, the creditors are willing to transfer part of their interests mainly for the following reasons: firstly, transferring part of their interests can obtain other compensation, such as the case of Orient Ocean; secondly, the creditors are worried that if their unwillingness to compromise results in the failure of the reorganization plan to pass, leading to the delisting of the listed company or even entering into the bankruptcy and liquidation procedure, the amount of their claims to be settled will be even less.
(iii) Reorganization of investor replenishment
In the bankruptcy reorganization of a listed company, the reorganization investor, in order to solve the problem of capital appropriation of the listed company, will choose to underwrite to make up for the capital shortfall that exists in the remaining non-operating capital appropriation.
Case example:
| Listed Company | Fund Occupancy Resolution Plan | ||
| East Sea(002086) | The reorganization plan of the listed company shows that the problem of non-operational capital appropriation of the listed company will be solved through debt exemption and cash settlement by reorganization investors. Part of the creditors voluntarily exempted from the claims on the listed company, the exempted amount of the original controlling shareholders of the listed company the same amount of non-operational funds occupation, the remaining part of the reorganization investors in accordance with the proportion of the investment to make up for the cash. | In addition, the reorganization plan shows that the execution period of the reorganization plan is three months from the date of the court's decision to approve the reorganization plan; the criteria for the completion of the execution are:......;5. In accordance with the provisions of this reorganization plan, the reorganization investors have made full payment of their investment, and the transferred shares allocated to the reorganization investors have been fully withdrawn and deposited into the securities account designated by the administrator account ....... | The author understands that the investment payment of the reorganization investor includes the fund-occupation payment which it has settled in cash, and the cash of the reorganization investor to settle the fund-occupation payment shall be paid within the period of execution of the reorganization plan. |
| Aoruide(600666) | The reorganization plan of the listed company shows that the total number of transferred shares is 1.840,989,360 shares, and the reorganization investors will be conditionally transferred not less than 1.5 billion shares, and the remaining transferred shares which are not transferred by the reorganization investors will be canceled by the administrator. The conditions for the reorganization investor to accept the transfer of shares include: payment of cash consideration, which shall be used exclusively for the repayment of debts, payment of reorganization expenses and replenishment of the company's liquidity in accordance with the provisions of this reorganization plan; the reorganization investor shall additionally make up for the purchase price corresponding to the transfer of additional shares that the controlling shareholders and other obligors for performance-based compensation shall have transferred but not yet transferred; and the reorganization investor shall settle the controlling shareholders' unresolved capital appropriation by means of cash. | In addition, the reorganization plan shows that the implementation period of the reorganization plan for the reorganization plan was approved by the Harbin Intermediate Court ruling for two months from the date of approval; implementation of the completion of the standard:......... reorganization investors to solve the problem of controlling shareholders of the funds occupied in cash has been paid to the administrator's account ....... | In this case, the reorganization plan clearly will reorganization investors to pay cash to solve the problem of capital appropriation to the account of the administrator as one of the criteria for the completion of the reorganization of the implementation of the standard, it can be seen that, reorganization investors should be in the implementation of the reorganization plan within the period of time to pay to solve the problem of capital appropriation. |
Case Analysis: The main purpose of a reorganization investor to participate in the bankruptcy reorganization of a listed company is to obtain the control of the reorganized listed company at a lower price, and the resolution of the historical problems of the listed company will help the reorganization investor to obtain and maintain the “shell value” of the listed company, so as long as it is within the affordable range of the reorganization investor, the reorganization investor will usually Therefore, as long as it is within the affordable range of the reorganization investor, it will usually try its best to help the listed company to solve the problem of capital appropriation.
No.5 Conclusion
According to the cases of listed companies solving the problem of capital occupation in recent years, it can be seen that listed companies usually adopt cash repayment, debt-for-equity swaps, or debt-for-equity swaps to solve the problem of capital occupation in non-bankruptcy restructuring. For cash liquidation plans, stock exchanges rarely interfere; For the plan of using assets to offset debts, the stock exchange will pay special attention to the specific circumstances, valuation process, and fairness of the assets; For the debt-for-debt plan, the stock exchange will pay special attention to the authenticity of the funds used to compensate for the claims of the debt and whether the listed company may continue to be pursued for debt recovery.
In the process of bankruptcy reorganization, listed companies can solve the problem of capital occupation by using all the ways that can be used to solve the problem of capital occupation in non-bankruptcy reorganization, as well as by taking advantage of the institutional advantages of reorganization, such as converting shares, transferring interests to creditors, and injecting funds from reorganization investors.
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