State Administration for Industry and Commerce, Measures for the Administration of the Registration of Debt-for-equity Swaps of Companies

国家工商行政管理总局公司债权转股权登记管理办法

December 06, 2011 | BY

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Debts have to be appraised for a debt-for-equity swap.

Clp Reference: 2330/11.11.23 Promulgated: 2011-11-23 Effective: 2012-01-01

Promulgated: November 23 2011
Effective: January 1 2012

Applicability: For the purposes of these Measures, the term “debt-for-equity swap” means the act whereby a creditor converts a lawful claim that it has against a limited liability company or a company limited by shares established in China (a Company) into equity of such Company thereby increasing the registered capital of such Company (Article 2).

Main contents: These Measures shall govern the administration of the registration of a debt-for-equity swap if:

(1) in the course of the operation of the Company, the contract debt arising between a creditor and the Company is transformed into equity in the Company, the creditor has performed the contractual obligations corresponding to the claim and the same does not violate laws, administrative regulations, State Council decisions or prohibitory provisions of the Company's articles of association;

(2) a claim confirmed in an effective ruling or judgment of a people's court is converted into equity of the Company; or

(3) during the bankruptcy and restructuring of the Company or during conciliation efforts, the claim included in the restructuring plan approved by the people's court or the settlement agreement approved in a ruling of the people's court is converted into equity of the Company.

If there are two or more creditors of a claim that is to be converted into equity, the creditors shall have divided the claim (Article 4). The total of the valuation of a capital contribution made in the form of a debt-for-equity swap and the valuations of other capital contributions made in the form of non-monetary property may not be greater than 70% of the Company's registered capital (Article 6). A debt-for-equity swap shall be subject to a capital verification by a lawfully-established capital verification institution, which shall issue a capital verification certificate therefor (Article 8).

Related legislation: PRC Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p.21; and Regulations for the Administration of Company Registration (Revised), Dec 18 2005

clp reference:2330/11.11.23promulgated:2011-11-23effective:2012-01-01

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