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On the debt-funded feasibility and risk prevention

Author: ShenNa From: www.yourpaper.net Posted: 2010-06-19 12:50:56 Read:
Abstract: The so-called debt funded, funded by investors with its creditor of the company or a third party to the company to offset the monies. Of the Companies Act and related regulations and judicial interpretation of did not give a clear definition, but to a lot of theoretical discussion space. The theoretical basis for debt-funded basis in reality and concluded: debt funded legal feasibility. Second, by drawing on foreign debt funded legislative experience, claims funded eligibility requirements and risk prevention measures related legislative proposals.
Keywords: debt financed; assets credit; claim for; warranty
Abstract: The so-called debt financing means that investors in his company or a third person claim to the company-funded shares. China's Company Law and related regulations and judicial interpretations have not been provided for well-defined. In this paper, it comes to the conclusion according to the theoretical basis for claims and investment based on an analysis of reality: debt financing is feasible legally. Secondly, this paper claims the relevant legislative proposals on the debt-funded fitness requirements and risk prevention measures from foreign investors on the experience of the relevant legislation.
Keywords: debt financing; assets credit; claims; Warranty

The company's capital has been in the process of establishment of the company, the surviving plays an important role, not only the material security is the foundation of corporate property, the company is also to carry out effective operations, or independently assume civil liability guarantee. Academia through said generally funded company invested into the form of a cash contribution and cash cow. Cash contribution to the sponsors or the subscription of new shares directly to the lawful currency units funded in the form of capital contributions in exchange for shares of the Company, is the most important form of the company's capital structure. The cash cow financed by promoters or the subscription of new shares, the transferable property other than money, invested in the form of the price of the Subscription Shares. This paper is to discuss the claims funded funded areas are part of the cash cow.
Non-monetary assets contributed as capital; accordance with the provisions of Section 27 of the Companies Act ":" Shareholders can contribute cash or kind, intellectual property, land use rights, currency valuation and can be transferred by law, legal, administrative regulations do not except for the investment of the property. "Accordingly, we can see that China's contribution requirement recognizes the form of cash cow funded, but requires three conditions that can monetary valuation can be transferred by law, and the laws and regulations are not the exclusion or limitation. Debt funded, the Companies Act and related regulations and judicial interpretation of did not give a clear definition, but to give a lot of theory to explore space. The so-called debt financed, funded by investors with its creditor of the company or a third party to the company to offset the monies. [1] I believe that debt financed has not been restricted by the relevant laws and regulations in China, has a legitimacy; However, due to the special properties of the creditor, as funded debt must meet certain eligibility requirements; and, based on claims uncertainty and risk, also set to prevent the risk mechanism, only with the contribution of certain anti-risk claims is qualified.

The theoretical basis of a debt-funded basis in reality

1.1 theoretical basis: asset credit on capital "value-added" axiological
The asset credit on view: "the decision of the company's credit is not only the capital of the company, on the contrary, the company's assets on the company's credit plays a more important role, not so much the company's credit-based company's capital, but that he is the assets of the company's foundation. "[2]
Legal significance in terms of assets and capital have connotations. Assets total assets and net assets, the the former net assets and liabilities and that the sum of owner input and creditor financing; latter refers to the owner's equity, according to the provisions of the "enterprise accounting system", including paid-in capital, capital reserve, surplus reserve, retained earnings. The investor's original investment in paid-in capital which is the enterprises to set up, the company's capital. [3] Therefore, from the view of the extension of the concept, the assets, including the capital. In addition, the capital is a static amount of net assets is variable. At the beginning of the establishment of the company, they are consistent, in the subsequent course of business, if the company is operating properly, wealth increases, the amount of the net assets will continue to increase, higher than the capital; sufficient to cover losses if the company losses and surplus or profit occurs decrease in net assets is less than the capital. It can be said that the company's capital is just the establishment of the company registered an abstract amount is not any actual assets owned.
The Asset Credit 'capital is just a starting point for the evolution of the company's assets. The responsibility of the company's external commitment property is precisely the company's assets, rather than the company's capital. The amount of the company's assets is the range of company property, liability and solvency, capital company, and can not expand the company's scope of responsibility; small capital company, the company's scope of responsibility can not be reduced. Therefore, from the actual solvency, the company's capital almost is not any legal significance of the parameters, build capital as the core of the entire credit system is mission impossible qualified for the protection of creditor interests and transaction security. [4]
Capital credit 'also believes that capital from the beginning has two functions: First, the value-added features, namely through the operation so that assets expanding wealth increases; debt secured function, that foreign companies bear the responsibility for the guarantee of civil property. But in capital both functions, the value-added features should be basic, main, as long as it is beneficial to the development of the company, with a business value of property as a contribution subject matter, should not be subject to too many restrictions. Capital credit 'overly stressed debt guarantees, therefore, require forms of capital must have strong debt service (such as debt repayment of money significantly stronger than now object funded), which denied the practice has operational contribution in the form of the present matter. In fact, the ultimate responsibility of the property foundation assets rather than capital, but makes many valuable investment resources can not be developed, which undermined investor enthusiasm social investment a waste of resources, but also to some extent caused .
Currently, academics are mostly held assets credit ', said the credit should be based capital credit to the transformation of the asset credit. This means, the past legislative capital contribution in the form make rigid, mandatory limitations provisions lack theoretical support, and actually needed out of tune, you can relax until completely lifted. Since the capital is no longer responsible to the creditor guarantee the mission, the contributions by the shareholders will have the freedom of all kinds of valuable property has funded feasibility, which is respect for party autonomy.
The 1.2 debt funded basis in reality: wealth Claims
A basic property rights of the society can be divided into two categories, namely, property rights and claims; movement of a socio-economic process can be summarized as the mutual conversion between property rights and claims. [5] This is the development from the social point of view, the the supplies barren, and the slow development of the historical era, the social wealth main form of property rights, especially real property, such as the agricultural community land is the most fundamental and important the wealth, while the claims are just a means to achieve real right; while in rich materials, the development of a changing era, the transaction is no longer in direct consumption purposes, become a creditor of the main manifestations of the social wealth, such as the monetary claims of wealth in modern times The most important manifestation. "Claims the original but the means of property rights, but in the modern economic organization claims itself has become the law of life. Claims has not the means to achieve real rights, it has become its own independent economic power in a capitalist economy, the property contract turnover is not so much a real right established based on claims rather as elements of the property claims of the phenomenon. "[6] look at modern society, property rights more performance for the tangible property, intangible property and contract license form claim ownership restrictions, separation and control, more performance for Contractual Obligations rights. We can say that the manifestation of the wealth of society as a whole today is the numerous claims intertwined, the wealth creation of the community as a whole is a birth and death process claims. [7]
Since the debt has become the main manifestations of the social wealth has value, and the assignment of the claim and is already the Civil Laws recognize operational feasibility, which would give the creditor funded to provide a possible. Considered from the point of view of the convenient transaction, due to the claims property performance to one of the expected benefits, such as not directly translate into capital, this means that you must wait until the creditor into the kind or cash can be invested, which really is not conducive to social full and effective use of the wealth, and will inevitably increase the time costs and part of the cost. Discussed above premise, namely asset credit claims funded to be sure, the reality demands errors is a strong argument?
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