mechanisms in bankruptcy proceedings. For example, while the Company Law includes specific regulations on the disposal of equity and the recovery of capital contributions, there is a lack of corresponding detailed provisions in bankruptcy law. Thus, it is unclear whether administrators can declare shareholder forfeiture or whether deprived shareholders can still file claims in bankruptcy proceedings.
Enhanced shareholders’ rights
Following this amendment, the scope of materials that shareholders can review and copy has been expanded, and it is clarified that they may entrust accounting firms, law firms, and other intermediaries for assistance. Shareholders can now exercise the right of subrogation not only against the company ' s directors, supervisors, and senior managers but also against the equivalent personnel in the company’ s wholly-owned subsidiaries.
This revision provides more comprehensive protection for shareholders’ rights, particularly for small and medium-sized shareholders, while balancing the relationship between shareholders ' rights to information and the interests of the company. In bankruptcy practice, if the bankrupt enterprise is a parent company, the administrator should actively exercise the right to review and copy the information of its wholly- owned subsidiaries, intervening as necessary to determine whether the subsidiaries should be placed into bankruptcy proceedings or continue operations.
Introduction of New Share Categories
The amendments introduce comprehensive regulations for class shares in joint-stock companies, broadening their scope and application. These include extending eligibility to all joint-stock companies, adding diverse share types such as subordinated and restricted transfer shares, and implementing tailored voting rules.
These reforms enhance governance flexibility while establishing new mechanisms for corporate restructurings. In particular, administrators may need to establish distinct voting groups for class shareholders, align voting weights with share priorities, and adhere to company bylaws, provided these do not conflict with laws or reorganization plans. Debt-to-equity conversions may also involve differentiated approaches, such as converting secured debts into preferred shares or creating layered shareholder priorities based on creditor classifications.
Introduction of Non-Par Value Shares
The new amendments introduce provisions for no-par value shares, requiring that at least half of the proceeds from their issuance be included in registered capital. This system allows joint-stock companies to issue no-par value shares regardless of industry or public status. The flexibility to choose and convert between par value and no-par value shares enables companies to adapt to their financial needs.
No-par value shares are especially advantageous for distressed companies, as they bypass the restrictions of par value and discount prohibitions. This flexibility is essential for addressing financing challenges. In practice, distressed companies often convert capital reserves into shares for debt repayment or to attract investment. The new Company Law permits full conversion between par value and no-par value shares, which, combined with capital reserve adjustments or stock splits, could increase the stock supply for reorganization purposes.
Capital Reserves for Loss Offset
The amended Company Law introduces a pivotal change by allowing capital reserves to offset losses— an option not permitted under the previous law. continued on page 30
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