Debt review in California court suspended through personal bankruptcy.
Editor’s note: This article comes from WeChat public account “Prism” (ID: lengjing_qqfinance) Author | Kanglu , Production | Prism Tencent Xiaoman Studio, Released with permission.
On November 25, 2019, Jia Yueting, founder of Faraday Future (FF), held a creditors meeting at the FF headquarters in Los Angeles, USA.
In October 2019, Jia Yueting announced his application for personal bankruptcy and reorganization in the United States, stating that he will transfer all assets, including his FF shares, to creditors through a creditor trust, which is controlled and managed by the creditor committee and trustee. . After the plan is completed, Jia Yueting will no longer hold any equity in FF.
“I gave up everything to ensure the success of FF.” Jia Yueting also stated in the statement that “the remaining guaranteed debt will be repaid in full as soon as possible, and finally the dream of the automotive industry revolution will be realized.” On August 29 In the statement, FF had stated that Jia Yueting had successively repaid more than 3 billion US dollars of domestic debt through various methods in the past two years.
On the day of November 25th, while many Chinese creditors went to Chongyang to Los Angeles, one of Jia Yueting’s creditors, Chris Cogburn, an attorney of Shanghai Laotian Asset Management Company’s law firm Kobre & Kim, did not rush to the scene. He told Prism that his client was not invited, “Even if my client is invited, I think we have no reason to attend (the creditors’ meeting) other than helping other creditors understand the truth.” / p>
Chris Cogburn pointed out that the so-called “creditors ‘meeting” is not a “creditors’ meeting” under Article 341 of the Bankruptcy Law, but a creditor’s communication meeting proposed by Jia Yueting. , But we feel that (the bankruptcy restructuring plan proposed by Jia) is not good for creditors. ”
“The purpose of the plan is to allow creditors to waive their claims in exchange for the possibility of debt repayment in the future. In fact, a company lingering on the edge of bankruptcy has only a very small chance of improving its business and completing its listing. If The downturn in FF business means that creditors who have given up their claims will have nothing to gain. “Chris Cogburn told Prism that Jia Yueting’s bankruptcy application is not good for Chinese creditors because of language and geographical differences.
Since the end of last year, Shanghai is lazyAsset management companies carry out cross-border debt collection by initiating litigation in California courts. Laotian believes that in addition to FF’s equity, Jia Yueting also concealed a large amount of property through others and launched related investigations. Laotian’s attorney obtained the support of the California court in August 2019, requesting Jia Yueting to appear in Los Angeles for the debtor’s review of his personal property. However, since Jia Yueting applied for personal bankruptcy protection on October 14, the lazy debt collection legal procedures have been suspended. Chris Cogburn said that Jia Yueting’s personal bankruptcy protection was being revoked and that debtor review would resume if court support was obtained.
Jia Yueting confirmed that a formal creditors’ meeting (341 hearing) will be held on December 6.
Records of some conversations:
1. Faraday Future Headquarters will hold a creditors meeting to discuss the bankruptcy restructuring proposal proposed by the company’s former CEO Jia Yueting. Did you attend the meeting and why?
Chris Cogburn: If you’re talking about a conference in California today, it’s not a formal “creditors’ meeting” required by bankruptcy law, but a communication event Jia Yueting tried to persuade creditors . As far as I know, Jia Yueting did not invite my client (Shanghai Laozai). Even if my client is invited, I think that we have no reason to attend except to help other creditors understand the truth.
Also, my client has been informed of Jia Yueting’s bankruptcy restructuring proposal. I think at today’s meeting, Jia Yueting tried to persuade creditors to accept his plan, but we think that it is not a good plan for creditors.
2. What does it mean that this is not a formal creditor meeting?
Chris Cogburn : According to Article 341 of the Bankruptcy Law, creditors can ask questions of debtors, which is called a creditors meeting or meeting of creditors. According to what I have learned, the vocabulary used in today’s meeting at the invitation is the creditor conference. In short, it is not a formal step in the bankruptcy process. The formal creditor’s meeting time is determined by the court, and creditors do not need to cross the ocean to attend, and remote voting is also possible.
3. Any comments on Jia Yueting’s reorganization plan? He proposed to put all the FF shares he held in a trust for debt repayment.
Chris Cogburn : The question is a letter from Jia YuetingThe bracket structure will not be effective before the FF IPO. The purpose of the plan is for creditors to waive their claims in exchange for the possibility of debt repayment in the future. In fact, a company lingering on the brink of bankruptcy has a very small chance that the business will turn around and go public. If the FF business does not turn around, it means that creditors who have given up their claims will get nothing.
4. Apart from acquiring FF shares, is there any way for creditors to recover their debts? Are there any other assets available for debt service?
Chris Cogburn: In fact, we are already conducting evidence collection in the debt collection process. My client believes that Jia Yueting hid a large amount of property through others, through other established enterprises or faked others. We hope to confirm this through a third party or himself. (On August 21, Lazy Choi had the support of the California court and required Jia Yueting to appear in Los Angeles to accept the debtor’s review of his personal property, but Jia Yueting was not present.) After Jia Yueting’s application for personal bankruptcy, the debtor review process was suspended. Once the court agrees with us to reject the bankruptcy application, the debtor review process will resume.
5. Based on the differences between Chinese and American legal systems, what do you think are the benefits and difficulties of Jia Yueting’s application for bankruptcy in the United States?
Chris Cogburn: First of all, you do n’t need to become a U.S. citizen to file for bankruptcy in the United States. In the case of Jia Yueting, I think the only legal difficulty lies in how the court reasonably rules over the claims of more than 100 creditors, especially when most of the creditors are Chinese or Chinese companies.
As for the benefits of Jia Yueting’s filing for bankruptcy in the United States, I think first of all, it is related to his attempt to release potential debt. He basically filed for bankruptcy three days before attending the debtor’s review. In addition, I think the American legal system is generally more friendly to debtors.
6. In China, there will be a list of “trustees executed” (commonly known as the Lao Lai list), which will limit the high consumption of the trustees. Is there a similar measure in the United States that addresses “there is a performance but not a legal obligation to enter into force”?
Chris Cogburn: Simply, it doesn’t. This is one of the reasons I think the United States is becoming more friendly to debtors in general. Consumption involving the transfer of assets may be restricted in the United States, but a list of untrustworthy persons is not published and consumption restrictions are not implemented.
Our biggest concern is that the term “creditor participation”, one of the safeguards for the US bankruptcy system, has been abused. Most of Jia Yueting’s top 20 creditors are in China. The documents communicated by Jia Yueting in the US bankruptcy application were in English. For hisFor Chinese creditors, there may not be fluent English, and they do not know and are familiar with the legal system here, so there may be obstacles to “creditor participation”.
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