How to understand the debt-to-equity swap of newly listed companies?

Debt-to-equity swap refers to the conversion of the creditor's rights legally enjoyed by a company established in China into the company's equity. After the creditor's rights are converted into the company's equity, the original creditor obtains the shareholder qualification and enjoys the shareholder's rights according to law. The company shall increase its registered capital and handle the change registration according to law.

legal ground

Article 7 of the Regulations on the Administration of Registration of Registered Capital of Companies

Creditors can convert their legally entitled creditor's rights to companies established in China into company equity. The conversion of creditor's rights into company's equity shall meet one of the following circumstances:

(1) The creditor has fulfilled the contractual obligations corresponding to the creditor's rights and does not violate the prohibitive provisions of laws, administrative regulations, the State Council decisions or the company's articles of association;

(2) Confirmed by the effective judgment of a people's court or an arbitration institution;

(3) During the bankruptcy reorganization or settlement of the company, it shall be included in the reorganization plan approved by the people's court or the settlement agreement approved by the ruling.

Where there are more than two creditors when the creditor's rights are transferred to the company's equity, the creditors shall divide the creditor's rights. Where the creditor's rights are converted into the company's equity, the company shall increase its registered capital.