Lu Yi: Evergrandes application for ＂bankruptcy protection＂ is not ＂bankruptcy＂

Source: Hong Kong 01

Author: Lu Yi

Bloomberg quoted court files that Evergrande Group applied for creditors to protect creditors from the US bankruptcy court in Manhattan.Evergrande said in a submitted file to the court that he was seeking recognition of reorganization negotiations on reorganization negotiations in Hong Kong, Cayman and the British Viking Islands.Evergrande Group said that creditors may be reorganized this month to vote and may be approved by the Hong Kong and British Viking Islands Courts in September.Evergrande also proposed that bankruptcy protection hearing was held on September 20.

It can be seen that Evergrande's move aims to protect the impact of US assets from creditors, while reorganization transactions elsewhere.This series of moves marked the official confirmation of the group's overseas reorganization programs in the Hong Kong, the British Virgin Islands and the Cayman Islands.In July, Evergrande was approved by the Hong Kong Special Administrative Region Court of China and will vote on the offshore debt restructuring plan this month.

First of all, it is necessary to understand the two concepts of "bankruptcy" and "bankruptcy protection".The main difference between them is whether they can continue to operate.

"Bankruptcy" means that the company cannot continue to operate because the company cannot repay its debt. The court announced that it will stop business and clean up debt and debt.All business of the company that announces the bankruptcy must be completely stopped immediately. The bankruptcy property custodian will "clean up" the company's assets.

"Bankruptcy Protection" refers to regardless of whether the debtor has the ability to pay for the solvency. When the debtor voluntarily submits to the court or forcibly submitted an application for bankruptcy reorganization to the court, the debtor shall submit an bankruptcy reorganization plan, the period, method, and method of repayment of debt repayment, method, and method of repayment.It may reduce the interests of some creditors and shareholders.This plan is given a certain time to propose it, and then the creditor is passed by the creditor and confirmed by the court, the debtor can continue to open.

"bankruptcy" is the company's stop operation due to debt issues, while "bankruptcy protection" is to prevent the company from stopping operations due to debt problems and giving them certain protection and reorganization opportunities.

Specifically, "bankruptcy protection" usually includes the following aspects:

Stop debt: After the debtor applies for bankruptcy, it automatically generates a "Automatic Stay", which means that all creditors must stop recovering debts, including litigation, enforcement and debt -regusing behavior.This provides the debtor with a chance to breathe in order to formulate repayment plans or carry out asset liquidation in the bankruptcy.

Debt reduction or reorganization: In some cases, debtors can obtain debt deductions through bankruptcy processes, that is, to clear part or all debt.Alternatively, they can re -organize debt and formulate repayment plans in order to repay the debt within a period of time.

Asset protection: The bankruptcy program can allow the debtor to retain some basic necessities and property to maintain the basic standard of living.These protected property is called "Exempt Property".

Repairing priority claims: The bankruptcy process will be repaid first to repay the claims according to the legal order to ensure that different types of creditors are treated fairly when allocating assets.

In short, the "bankruptcy protection" aims to provide a legal way to deal with the debtor to deal with the financial crisis, and at the same time balance the rights and interests between the debtor and the creditors.Different types of bankruptcy programs and chapters may provide different degrees of protection and opportunities.

Why not apply for bankruptcy protection in China?

Why does Evergrande apply for bankruptcy protection in the United States? There are several possible reasons: First of all, Evergrande may worry that its assets in the United States will be sued or detained by its creditors, affecting the implementation of its restructuring plan.Evergrande hopes to use the provisions of Chapter 15 of the US Bankruptcy Law to obtain the recognition and support of the US court's restructuring plan.

Secondly, Evergrande may want to pass a signal to its creditors and investors, showing that it is actively seeking a solution to the debt problem and does not intend to evade responsibility.

Why not apply for bankruptcy reorganization in China? On the one hand, China's bankruptcy reorganization system is not perfect and mature compared to the United States and other countries, and there are some difficulties and problems.

For example, the conditions for bankruptcy reorganization are strict, and the debtor needs to maintain the value and regeneration of regeneration, and can reach or implement a reorganization plan, otherwise it will be directly transferred to the bankruptcy liquidation.The procedure of bankruptcy and reorganization is more complicated. It requires a number of links such as creditors' meetings, court review, and voting voting. It may take a long time and affect efficiency.

The main body of the bankruptcy reorganization is relatively limited. Only the debtor and creditors can apply for reorganization, without the debtor's independent management rights and the creditor committee system like the US bankruptcy law.The effect of bankruptcy and reorganization is relatively limited. Due to the insufficient understanding and support of bankruptcy reorganizations such as market entities, government departments, and judicial institutions, it is difficult to formulate or implement the reorganization plan, and it is difficult to achieve settlement or successfully exiting bankruptcy cases.

On the other hand, the US bankruptcy reorganization system is more complete and mature compared to China and other countries, and there are some advantages and attractiveness.

Chapter 15 of the US Bankruptcy Law allows foreign companies to apply for bankruptcy protection in the United States to handle cross -border bankruptcy cases.The provisions of this chapter are very important for handling bankruptcy cases of multinational companies because it provides a framework that allows foreign companies in the United States to obtain bankruptcy protection similar to American companies.

According to the provisions of Chapter 15, foreign entities can apply for bankruptcy in the United States.This program is similar to the bankruptcy program of local companies, but there are some differences.For example, foreign entities must prove to the court that they have no fraud when applying for bankruptcy protection, and their assets in the United States will be used to pay their debts.

Chapter 15 of the US Bankruptcy Law provides an important legal framework to help handle cross -border bankruptcy cases involving foreign companies.This helps to ensure that creditors and debtors can be treated fairly and transpareively in the bankruptcy cases of multinational companies.

Evergrande has applied for bankruptcy protection in accordance with this regulation to avoid and prevent Evergrande's creditors from file lawsuits or seizure of assets in the United States. This can provide enterprises with more space and energy for asset reorganization and other rescue measures.

In summary, not applying for bankruptcy reorganization in China may be a strategic choice based on specific circumstances. It aims to use the differences and advantages of the legal system between different countries to seeksolution.

Ruixing Coffee also used this method

Evergrande with liabilities exceeding 2 trillion, the news of applying for bankruptcy protection in the US court is quickly fermented.According to Chapter 15 of the US Bankruptcy Law, the charter provides the borrower with an opportunity to propose claims and settle all debts at the same time.Foreign bankruptcy may not be applicable to US debt, but apply for bankruptcy according to the provisions of this chapter. One debtor can declare bankruptcy at the same time in multiple places. This gives individuals or companies the opportunity to get relief immediately in every place where debt is owed.Bankruptcy protection is not the company's future unable to operate or bankruptcy liquidation. It is just a means to continue to operate.

Ruixing Coffee, who has been born back to life, also applied for bankruptcy protection in New York, USA in February 2021 in February 2021.Ruixing Coffee said in a court document that it is negotiating with the company's financial debt reorganization with its stakeholders. All stores in China are still operating and provided services to customers.Influence.At that time, Ruixing Coffee also explained on its official Weibo that applying for bankruptcy protection is an important step in the restructuring plan.Later, Ruixing Coffee in the United StatesIt is actually a good news for bankruptcy protection, so that the road to rebirth of Ruixing is further.