CHINA Bankruptcy Newsletter
Vol. 2 , No.2 - May 17, 2001
TOPICS THIS ISSUE:
- Aviation Industry Set to Reorganize
- Corporate Law Needs Amendment: Professor
- Government Kicks Out Loss-Making Firm
- ISMM Financial Troubles Will Not Affect World Cup, Says Blatter
Aviation Industry Set to Reorganize
China's aviation regulator, the Civil Aviation Administration of China (CAAC), unveiled a long-awaited plan on April 8 to regroup the ten airlines under its control into three groups. The plan is yet to receive formal approval from the State Council.
The restructure is designed to help the airline industry become more profitable.
The three groups would be Air China, China Eastern Airlines and China Southern Airlines, each of whom would have assets worth around RMB 50 billion £¨US$6 billion£©.
Beijing-based Air China would combine with Chengdu-based China Southwest Airlines and Beijing's China National Aviation Corporation, which hold major shares of Hong Kong Dragonair and Air Macau. The new group would have assets of RMB 56.1 billion £¨US$6.8 billion£©, 118 planes, 20,325 employees and 339 domestic and international flight courses.
Shanghai-based China Eastern Airlines would merge with China Northwest Airlines and the profitable Yunnan Airlines, a group that would boast total assets of RMB 47.3 billion£¨US$5.7 billion£©. It would have 118 planes, 25,109 employees and 437 domestic and international air routes.
Guangzhou-based China Southern Airlines would combine with China Northern Airlines and Xinjiang Airlines, and their combined assets are expected to reach RMB 50.1 billion£¨US$6 billion£©. The group would have the most flight courses with 606 routes, including 512 domestic flights and 94 international flights. It would have 180 planes and 34,089 employees.
Besides the ten airlines, four CAAC-controlled aviation service companies would also be merged.
The Computer Information Centre and Counting Centre under CAAC would be merged into a joint aviation information service centre with total assets of about RMB 5.3 billion (US$640 million).
The China Aviation Oil Corp and Aviation Supplies Import and Export Corp would be combined into a supply centre. It is expected to have RMB 10.6 billion (US$1.2 billion) in assets.
At present, China has 34 airlines operating about 520 planes.
(Source: Xinhuanet)
Corporate Law Needs Amendment: Professor
Prof. Wang Boashu of Tsinghua University proposed that China's six-year-old Corporate Law needs amendment, by introducing more internationally-accepted rules. He made the remark at a law lecture attended by members of the Standing Committee of the National People's Congress (NPC), and which was presided over by Li Peng chairman of the NPC Standing Committee. Wang argued that the bottom line for registered capital, required by the Corporate Law to found a limited company or joint-stock company, is too high for overseas investors if China enters the World Trade Organization (WTO). At present special laws and rules exist for overseas companies operating in China, however once China enters the WTO both domestic and foreign companies will obey the same laws. The registered capital to found a limited company in the production or wholesale sectors in China must be at least RMB 500,000 (about US$60,000), according to the current Corporate Law. Wang also suggested that the law should include clearer items to help improve companies' internal supervision systems. The law should stipulate rules to make it easier for shareholders to exercise their right of supervision, especially when company directors misuse their power. The law should give minority shareholders the opportunity to select directors they trust, in order to protect their interests, as many Chinese boards of directors usually do not include such directors. "Introducing independent directors onto the board may be another solution", Wang said.
The Corporate Law was the first law to formally regulate corporations, and took effect on July 1, 1994.
(Source: Xinhuanet),
Government Kicks Out Loss-Making Firm
China de-listed a company for the first time on April 23, putting into practice the government's warning to remove from the stock market firms which make continuous losses.
Shanghai-listed Narcissus Electric Appliances Co Ltd, based in Shanghai, was the company subject to the de-listing. It had both A and B class shares.
The China Securities Regulatory Commission (CSRC) announced that Narcissus, which had recorded net losses for four consecutive years, was de-listed after its application for a grace period was rejected by the Shanghai Stock Exchange.
The company had already been put under particular transfer £¨PT£© for one year, due to three years of consecutive losses. This meant its stocks could only be traded one day a week.
It was the first PT company to be denied time to turn itself around. This is the last chance for loss-making firms to remain listed.
The CSRC issued rules in February that allow for de-listing, a new penalty for debt-ridden listed companies.
The de-listing of Narcissus means that a new exit mechanism has been established to remove poor-performing stock companies.
While pushing listed companies to perform better, it will also help improve the overall quality of the stock market and bolster its healthy development, a CSRC spokesman said. He also noted that de-listing is not equivalent to bankruptcy.
(Source: China Daily)
ISMM Financial Troubles Will Not Affect World Cup, Says Blatter
The financial difficulties facing the ISMM marketing group will not affect the 2002 World Cup to be jointly hosted by Japan and South Korea, FIFA president Sepp Blatter said on April 24.
Swiss-based ISMM -- International Sports Media and Marketing-- have been ordered into bankruptcy proceedings by a Swiss court. They have appealed against the rejection of their request for a three-month delay to give them time to sort out their financial problems.
Blatter told a news conference that FIFA would make up any financial shortfall resulting from the troubles over ISMM, who through subsidiary ISL Worldwide hold the rights to market the 2002 World Cup. "If there is a shortfall it will not be up to the local organizers but FIFA to take responsibility", he said.
Blatter said that if ISMM were declared bankrupt, FIFA might lose 30 to 40 million Swiss francs but maintained that he was confident that FIFA could recover the losses as German firm Kirch would take over television rights in such an event.
(Source: Xinhuanet)
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