A debtor enterprise with good reasons for bankruptcy may according to its situation apply to the people’s court for pre-reorganization
A debtor enterprise with good reasons for bankruptcy may according to its situation apply to the people’s court for pre-reorganization
[Basic facts]
Company A, the debtor, fell into debt crisis due to erroneous business decisions and other reasons, and could not pay off its debts due, and Company B, the creditor, applied for Company A’s bankruptcy liquidation. During court examination, Company A applied to the court for pre-reorganization. After examination, the court decided on July 8, 2022, to pre-reorganize the company, and appointed by law an interim administrator. The interim administrator, upon appointment, carried out his works according to the law and submitted pre-reorganization work report to the court. Company B, according to the progress of the pre-reorganization works, applied to the court on November 15, 2022, to change bankruptcy liquidation to bankruptcy reorganization. And Company A agreed to reorganize. On November 18, 2022, the court decided to reorganize Company, and appointed the interim administrator as the administrator. On April 6, 2023, the court approved the draft reorganization plan.
[Rationale of the people’s court]
During pre-reorganization, the interim administrator has had extensive communications and consultations with investors, debtors and principal creditors on investment plan, operation reorganization plan, employee resettlement plan, etc., and drafted a pre-reorganization plan. According to the draft plan, a reorganization, in lieu of bankruptcy liquidation, will drastically boost the claim discharge rate and maximize the interests of all creditors. Meanwhile, Company A as a high-tech firm may have its assets put into good use after reorganization, maintain the operation of its core business, exert its advantages to shake off the debt crisis, significantly improve its ability to realize assets, achieve an all-win result for all stakeholders, and make more contributions to the economic development and the social harmony and stability. Company B’s application to the court for the reorganization of Company A met the acceptance conditions, and the court offered its support and decided to accept the application of Company B to reorganize Company A. At present, the court has approved the draft reorganization plan, and terminated the reorganization procedures, and Company A will revive from the execution of the reorganization plan.
[Tips on legal risks]
When it makes any major operation decisions, an enterprise must start from its actual conditions and abstain from setting unrealistic goals, that is the way to steer clear of operation difficulties and, in the worst case, bankruptcy liquidation. When major operation difficulties occur and it cannot save itself, the enterprise should immediately stop loss, seek a suitable path for development, and make use of pre-reorganization and reorganization procedures to realize revival.
