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The speed by which China has moved towards a market economy has not been accompanied by a similar development of its judiciary system. Since the early 1990s, foundational national legislation with a direct effect on firms, such as laws dealing with contract, investment, liability and insolvency have be

In essence, insolvency law is collective debt collection law. By means of a collective procedure, insolvency law seeks to ensure that the going concern value is captured for the creditors. Where the shareholders possess the dominant voice outside of insolvency, in insolvency creditors take over this position and become the economic owners of the company. In three different settings shareholders can interfere with the insolvency process and try to capture all the value in the company or at least leave the creditors with the liquidation value and usurp the going concern surplus. These three settings are (i) shareholders as secured lenders, (ii) shareholders as acquirers out of pre-packs or other asset sales and (iii) shareholders under composition plans. The proposed EU Directive on Preventive Restructuring Frameworks and Second Chance (November 2016) contains measures in the field of composition plans as part of a preventive restructuring. The proposed directive addresses the potential problem that shareholders would usurp the going concern surplus by introducing the Absolute Priority Rule. The proposed directive should be considered a first step in the right direction. It should, however, be realized that the protection offered in the proposed directive could easily be circumvented by a shareholder financing not with capital but with secured shareholder loans. Also, if pre-pack sales or other sale processes do not limit interference by shareholders, shareholders will prefer the route of an asset sale above a restructuring.

Company Law, Insolvency Law, Restructuring Directive ; The article discusses one of the most fundamental aspects of corporate law, namely the interse­ction between company law and insolvency law, with specific regard to the recent EU Directive on Preventive Restructuring (EU 2019/1023, the 'Restructuring Directive' or 'Directive')2. It notes the forthcoming implementation of the Directive in the EU Member States. The key options for implementation of the Directive available to European legislators are introduced, including an option based on company law which, according to the recent LL.D.­dissertation of the co­author, would provide more tools for restructurings than are available under the frame works based on insolvency law. This would create efficient mechanisms in particular for the preventive restructu­ring of solvent companies, but also for the completion of a friendly takeover of a publicly­listed company through a scheme of arrangement under company law. The scheme of arrangement mechanism has also been included in the recently published European Model Company Act. ; Non peer reviewed