Keywords
Reorganization financing
Mutual benefit debt
Interest balancing
Published : 2026-07-29
Abstract
The Supreme People’s Court has issued the Provisions on Several Issues Concerning the Application of the Enterprise Bankruptcy Law of the People’s Republic of China (III), which defines reorganization financing claims as common benefit debts. The claims of the reorganization financier shall be paid only in priority to ordinary bankruptcy claims, but shall be subordinated to secured claims. However, the practice of judicial reorganization financing has shown that even if the debt of reorganization financing is classified as common benefit debts, it is still not enough to enhance the investment confidence of financiers. To ensure the safety and profitability of financing, restructuring financiers often require their claims to be granted super-priority status, which is clearly established in the US Bankruptcy Code and falls within the DIP (debtor-in-possession) financing regime applicable to bankruptcy reorganizations. Although the practice of reorganization financing in China has shown similar needs to the US DIP financing regime, China’s laws have not yet made a clear response to this. What is particularly crucial is that the positioning of priority in China’s current legal system has been ambiguous for a long time, which has brought fundamental difficulties to the creation of priority in reorganization financing. In view of this, this article attempts to deconstruct the conditions for the existence of financing priority through structural functionalism theory. Based on this, it analyzes the necessity and feasibility of establishing debt priority rights for reorganization financing in China at the current stage.
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