INTERNATIONAL SYMPOSIUM “ADVANCED RESEARCH IN ECONOMICS AND BUSINESS MANAGEMENT”,
SEPTEMBER 19, 2025
840
CHINA'S PRE-PACKAGED REORGANIZATION SYSTEM'S
JURISPRUDENTIAL CONSTRUCTION AND INSTITUTIONAL
FUNCTION: A BALANCING PATH BETWEEN OUT-OF-
COURT AUTONOMY AND JUDICIAL INTERVENTION
Xu Yining
Bela us S a e Economic Uni e si y, Mas e o Laws
h ps://doi.o g/10.5281/zenodo.17317678
Abs ac . In esponse o he e iciency de iciency o adi ional judicial-based
eo ganiza ion, China's judicial p ac ice has inno a i ely de eloped a p e-packaged
eo ganiza ion sys em. This essay con ends ha he ju idical ke nel o his sys em is inding a
ine balance be ween he doc ine o p i a e au onomy, which gi es s akeholde s he powe o
ag ee on comme cial solu ions, and judicial in e en ion, which is necessa y o ensu e ai ness
and legal inali y. By ans o ming he unc ion o he cou om being a con olling judge o a
p ocedu al moni o , he p e-packaged eo ganiza ion ool eally p omo es he maximizing o
co po a e escue e ec i eness, p ese es en e p ise alue, and is an excellen heo e ical
accomplishmen in China's new bank up cy egime.
Keywo ds: P e-packaged Recons uc ion, Ju isp uden ial Cons uc ion, P i a e
Au onomy, Judicial In e en ion, Ins i u ional Func ion, Chinese Bank up cy Law.
In oduc ion
Mode n bank up cy law is cha ac e ized mos signi ican ly by a ongoing ension be ween
wo po en ially con lic ing objec i es: maximizing he alue o he deb o 's es a e o e ec ua e
equi able paymen o c edi o s and, whe e easible, keeping he heal hy bu sick business in
ope a ion as an ongoing conce n. The People's Republic o China En e p ise Bank up cy Law,
enac ed in 2006, se s ou a o mal legal amewo k o eo ganiza ion wi h he aim o co po a e
escue. Ne e heless in p ac ice, he adi ional eo ganiza ion p ocess has o en been c i icized
as judicial-cen ic, leading o leng hy implemen a ion imes, high adminis a i e cos s, and
s ipping o he deb o 's ope a ional alue. I is his ine iciency ha s ems om a model whe e
he cou and he cou -appoin ed adminis a o a e he main ac o s h oughou he p ocess,
lea ing li le oom o open ma ke -based nego ia ions be ween he impo an s akeholde s.
I is he e ha p e-packaged eo ganiza ion has eme ged om cou p ac ice as a key
ins i u ional inno a ion. A p e-pack is a hyb id de ice ha balances he con enience o ou -o -
cou es uc u ing nego ia ions wi h he powe o law o an in-cou judicial p ocess. Key
s akeholde s, p ima ily he deb o , p incipal c edi o s, and po en ial in es o s, nego ia e he
condi ions o a eo ganiza ion plan be o e he ac ual commencemen o bank up cy p oceedings.
The p e-nego ia ed plan is hen submi ed o cou o expedi ious app o al, which
comp essed signi ican ly he in-cou phase. This change is a e olu iona y pa adigm shi in he
co po a e escue philosophy o China om a s ic , s a e-con olled model o one ha welcomes
s akeholde consensus and ma ke o ces. This change can be cha ac e ized as a shi om a
judicial app oach o a pa y app oach o he escue o s uggling i ms [2]. This a icle a emp s
o un a el he ju isp uden ial ounda ion o China's p e-pack sys em h ough he a gumen ha
i s essen ial logic is oo ed in he sub le balancing o judicial in e en ion and p i a e au onomy.
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I will i s explo e he heo e ical ounda ion o he p e-pack unde he doc ine o p i a e
au onomy, hen discuss he ede ined judicial unc ion, and inally look a he sys em's essen ial
ins i u ional ac i i ies wi hin he con empo a y ma ke economy.
Ju isp uden ial basis: expansion o p i a e au onomy
The doc inal basis o he p e-packaged eo ganiza ion egime is well- oo ed in he heo y
o p i a e au onomy, which is a guiding p inciple o mode n ci il and comme cial law. I holds
ha ma ke pa icipan s a e bes si ua ed o de e mine hei own in e es s and should be allowed
ee ein o o ganize hemsel es h ough con ac ual a angemen s, wi h he law only s epping in
o gi e e ec o hese a angemen s. The People's Republic o China's Ci il Code i mly
ensh ines his p inciple, emphasizing eedom o con ac and he binding na u e o legally
concluded con ac s [5]. The p e-pack sys em is a s aigh o wa d applica ion o his p inciple
in o he ield o co po a e dis ess.
Essen ially, a eo ganiza ion plan cons i u es a complex, mul i-pa y con ac which
eshapes he deb o 's inancial and ope a ional a ai s. In he adi ional eo ganisa ion, his
"con ac " is nego ia ed unde he igh con ol o adminis a o and cou . In he p e-pack model,
he hope is ha he bes and mos comme cially sensible solu ions esul om un ammelled
nego ia ions be ween hose pa ies mos immedia ely conce ned. By allowing he deb o , he
c edi o s, and he in es o s o nego ia e eely ou side cou , he sys em bene i s om hei
supe io in o ma ion and comme cial abili y. This in-cou p e-nego ia ion is be e sui ed o
c ea i e and lexible hinking, unencumbe ed by p ecise p ocedu al ime ables and echnicali ies.
In he iew o legal commen a o s, he p e-pack is an ins i u ion ha a emp s o balance he
ension be ween he au onomy o he pa ies and he necessi y o judicial in e en ion [1].
Economically, his model educes subs an ial ansac ion cos s. The pa ies can nego ia e
con iden ially, conside di e en es uc u ing op ions, and each consensus wi hou he publici y
"s igma" and business dis up ions o a o mal bank up cy iling. This consensual p ocess ends o
p oduce supe io esul s, because he esul ing plan is mo e ap o be iewed as equi able and
comme cially easonable by hose equi ed o li e wi h i . The e o e, he ju isp uden ial
cons uc o he p e-pack is no one o c ea ing a no el legal anomaly bu one o accep ing ha
he undamen al p inciples o p i a e law can and should be caused o ope a e in o de o
cons uc a mo e e icien pa h o co po a e escue in which he law pe o ms mo e as a
acili a o han di ec i e agency.
The ole and bounda y o judicial in e en ion: om adjudica o o supe iso
Whe eas p i a e au onomy is he ounda ion o he p e-pack, he s uc u e canno ope a e
e ec i ely wi hou assuming a de ined judicial unc ion o ca y ou . The ou -o -cou wo kou
in isola ion is ulne able o he "holdou p oblem" whe eby a small numbe o objec ing c edi o s
will be able o e o a majo i y-suppo ed es uc u ing plan. Fu he mo e, a p i a e ag eemen
lacks inali y o ju isdic ion o legally bind all he c edi o s and discha ge he ou s anding deb s.
The p e-pack's genius is ha i employs judicial powe o ci cum en hese limi a ions, bu i
in okes a e- hink om a b oad adjudica o all he way back o a speci ic supe iso and
acili a o . This is he na u e o he p esen building and eme ging de elopmen o he sys em in
China [3].
The p ima y in en ion o he judicia y's in e en ion wi hin a p e-pack is no o en o ce
he comme cial condi ions o he sale bu o ensu e he in eg i y and ai ness o he p ocess. The
cou 's unc ion can be desc ibed unde h ee di e en a eas:
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Fi s , Ga ekeeping and P ocedu al O e sigh . The cou ensu es ha he p e-pack p ocess
is ini ia ed p ope ly and ha he necessa y condi ions o law, including adequa e disclosu e o
in o ma ion o all pa ies impac ed by he c edi o s, a e me . I o e s sa egua ds agains
audulen o inside - a o ing plans a he expense o gene al c edi o s.
Secondly, P o ec ion o Vulne able Pa ies. The judicial sys em has a c i ical ole o
p o ec ion o weake o non-ac i e pa ies such as small c edi o s and wo ke s. I examines he
p e-nego ia ed plan o de e mine whe he i is ollowing he absolu e p io i y ule and p o ides
ai and equi able ea men o all classes o c edi o s as s ipula ed unde he Bank up cy Law
[4].
Thi d, Impa ing Legal Finali y. The cen al judicial unc ion is o p o ide he plan ag eed
o be o e ial wi h ull o ce o law. By law sanc ioning he plan h ough a judicial o de , he
cou imposes i upon all c edi o s, including objec ed- o c edi o s, as binding in law. This
"c am-down" powe is a unique aspec o he judicia y and indispensable o he e ec i e
applica ion o any la ge-scale es uc u ing.
Figu e 1—The e ol ing ole o he judicia y in co po a e eo ganiza ion
This adjus men o he judicial ole is a depa u e om he adi ional model whe ein he
cou is hea ily in ol ed in all phases o he p ocess. In a p e-pack, he cou s ays ou o he
business solu ion o be hamme ed ou by he ma ke playe s and ins ead ocuses on gua ding he
ule o law.
Analysis o he co e ins i u ional unc ions
Theo e ical building o he p e-pack sys em inds e lec ion in some o he mos
impo an ins i u ional oles ha make co po a e escue wo k be e and con ibu e o a heal hie
ma ke economy. These oles show he p ac ical bene i s o balancing judicial o e sigh and
p i a e eedom.
The p e-pack ini ially wo ks as an In o ma ion Disco e y and Ma ke -Tes ing
Mechanism. The ou -o -cou nego ia ion pe iod se es as a obus sie e. I he deb o can ag ee
o a plan wi h i s majo c edi o s, i is a e y e ec i e signal o he ma ke and o he cou ha
he company has genuine escue alue. A ailu e o each ag eemen , howe e , a he p e-pack
INTERNATIONAL SYMPOSIUM “ADVANCED RESEARCH IN ECONOMICS AND BUSINESS MANAGEMENT”,
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s age can indica e ha he business is unsus ainable and liquida ion is he be e cou se. This
ma ke -based analysis is mo e accu a e and e ec i e han an adminis a i e one by a cou -
appoin ed manage .
Second, he sys em pe o ms e y well in P ese a ion o Going-Conce n Value. Fo mal
bank up cy p ocedu es usually do much damage o a i m's ope a ional alue. The public
announcemen o insol ency will su p ise cus ome s, des abilize supply chains, and lead o he
loss o high- alue pe sonnel—a phenomenon which is known as he "s igma e ec ." By keeping
he in ensi e es uc u ing nego ia ions ou o he public eye and minimizing he ime spen in a
o mal, public bank up cy p ocess, he p e-pack helps he deb o o p ese e he no mal ading
ope a ions, he eby sa ing he in angible asse s and ela ionships ha cons i u e i s going-
conce n alue. This is a key componen in any success ul escue o a sick bu heal hy business
[2].
Thi d, he p e-pack p o ides a supe io amewo k o In e es Coo dina ion and Flexible
Risk Alloca ion. The igid c edi o class and o e equi emen s o he Bank up cy Law [4]
some imes ac as an obs uc ion o c ea i e solu ions. The in o mal and lexible na u e o p e-
pack nego ia ions allows he s akeholde s o c ea e bespoke es uc u ing solu ions ha may no
s ic ly i in o o mal legal boxes. Fo ins ance, complex deb - o -equi y exchanges, mul i-s age
epaymen e ms, and con ingen alue igh s become easie o nego ia e and inco po a e in o a
p e-pack plan. The lexibili y suppo s mo e e ec i e alloca ion o isks and u u e bene i s
among s akeholde s, enhancing he p ospec s o a consensual ou come.
Table 1—Compa ison o Reo ganiza ion Models in China
Fea u e
T adi ional Reo ganiza ion
P e-packaged Reo ganiza ion
P ima
y D i e
Cou and Adminis a o
Deb o and Key C edi o s
Timeli
ne
Long (o en 12-24 mon hs
o mo e)
Sho (in-cou phase can be 2-4
mon hs)
Cos
High (adminis a i e, legal,
and ope a ional dis up ion cos s)
Lowe ( educed cou and
adminis a o ees, less business
dis up ion)
Con id
en iali y
Low (p ocess is public om
iling)
High (nego ia ions a e p i a e un il
iling)
Succes
s Ra e
Mode a e, o en hampe ed
by p ocedu al delays
Gene ally highe due o p e-
nego ia ed consensus
Impac
on Business
Signi ican dis up ion o
ope a ions and s akeholde
ela ionships
Minimal dis up ion; aims o
main ain business con inui y
Conclusion
China's expe imen wi h he p e-packaged eo ganiza ion sys em is a p o ound and
success ul e o mula ion o i s co po a e escue ideology. Shi ing away om a mechanical,
judge-d i en model, i has aken on a mo e ma ke -o ien ed s uc u e ha is heo e ically
cohe en wi h he doc ine o p i a e au onomy, bu p agma ically unde pinned by equisi e
judicial supe ision. The esilience o he sys em lies in s iking an e ec i e balance be ween
hese wo powe s wi h he comme cial acumen o ma ke ope a o s and he o ce o he cou o
p o ide o ai ness and inali y. Such an ins i u ional a angemen has ope a ed e icaciously in
INTERNATIONAL SYMPOSIUM “ADVANCED RESEARCH IN ECONOMICS AND BUSINESS MANAGEMENT”,
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aising he e iciency o eo ganiza ions, p ese ing he alue o oubled en e p ises, and
enhancing ul ima ely he ma ke economy's esilience and dynamism.
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