Debt-for-equity swap registration required

On November 23, the State Administration of Industry and Commerce (SAIC) released the Measures for the Administration of the Registration of the Debt-for-equity Swaps of Companies (公司债权转股权登记管理办法) (the Measures) which will go into effect on January 1 2012.

Though local branches of the SAIC had previously released their own tentative rules to govern debt-for-equity swaps, the Measures are the first ever national-level rules to regulate the administration of registration of debt-for-equity swaps. The government issued the new rules in response to reports that domestic companies were having funding and debt reduction problems.

David Yu, a founding partner of Llinks Law Offices says that though the Measures apply to both domestic and foreign-invested companies, it is still unclear how much in practice they will actually be applied to the latter. “The major governing authority of foreign-invested companies is the Ministry of Commerce, which is not a joint issuer of the Measures,” he said.