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ARTICLE · 31 MARCH 2012

The PRC's Newly Promulgated Swap Measures to Allow Creditors' Conversion into Shareholders

CNPLaw LLP
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The Swap Measures set out the policy framework for the conversion of debt owed by a company into equity in that company.

ChinaFinance and Banking
Chris Ling
Chris Ling

In November 2011, the State Administration for Industry and Commerce ("SAIC") of the People's Republic of China (the "PRC") released the Administrative Measures for the Registration of Debt-for-Equity Swaps (the "Swap Measures") (公司债权转股权登记管理办). These Swap Measures took effect from 1 January 2012.

The Swap Measures set out the policy framework for the conversion of debt owed by a limited liability company established in the PRC, into equity in that company ("debt-forequity swap").

The Swap Measures

The Swap Measures make clear that debt-forequity swaps are permitted in the PRC as a form of non-cash capital contribution to a company registered in the PRC.

The Swap Measures contemplate that the following categories of debt may be swapped into equity:

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