On December 25, 2020, the Jiangsu Wuxi Intermediate People’s Court approved the restructuring plans of Zhongnan Red Culture Group Equity Co., Ltd. (*ST Zhongnan, 002445, hereafter as “Zhongnan Red Culture”) and terminated its bankruptcy and restructuring procedures. In the bankruptcy reorganization, Zhongnan Red Culture adopted a debtor self-management pattern. JunHe acted as legal counsel for Zhongnan Red Culture, and assisted the company in performing self-management duties including working out a draft plan for the reorganization.
Zhongnan Red Culture incurred a debt crisis because the company bonds of RMB 600 million became due and were difficult to repay. This capital chain rupture caused the complete stagnation of the company's production and operations. Due to the negative net profits in 2018 and 2019, the Shenzhen Stock Exchange issued a delisting risk warning to the stocks of the company. On May 25, 2020, Zhongnan Red Culture initiated the pre-reorganization under the guidance of the Jiangsu Wuxi Intermediate People’s Court. On September 10 and 11, pre-restructuring creditors meetings and investors meetings were held respectively, and the restructuring plan was passed. On November 24, the Jiangsu Wuxi Intermediate People’s Court accepted the application for the reorganization of Zhongnan Red Culture. A month later, Zhongnan Red Culture's reorganization plan was approved by a large number of votes, and was approved by the Jiangsu Wuxi Intermediate People’s Court. “Zhongnan Red Culture's bankruptcy reorganization case” gained recognition as being a case that has taken the shortest amount of time nationwide among cases relating to the reorganization of listed companies. In addition, Zhongnan Red Culture's wholly-owned subsidiary company Jiangyin ZhongNan Heavy Industry Holdings Co., Ltd also implemented bankruptcy reorganization. Its reorganization plan was passed by a creditors meeting on November 18 and was approved by the court on December 25.
Zhongnan Red Culture's bankruptcy reorganization case is an example of a successful application of bankruptcy reorganization for a listed company. This case actively explored and innovated such aspects as defusing the delisting risk, solving the illegal guarantee and occupation of funds by listed companies, and the overall restructuring and pre-restructuring of the parent company and its subsidiary company. This case provides valuable experience as a reference for other listed companies facing a similar situation on how to bailout and resurgence.
The leading partner of this project was YANG, Li.