The Insolvency Review: China

Insolvency law, policy and procedure

i Statutory framework and substantive law

The most important legislation in the bankruptcy system in mainland China is the Enterprise Bankruptcy Law of the People's Republic of China promulgated on 27 August 2006 (the 2006 Law), which entered into effect on 1 June 2007, replacing its predecessor, the Enterprise Bankruptcy Law of the People's Republic of China (Trial) passed in 1986 (the 1986 Law). Although the scope of application of the 2006 Law expanded, it still only applies to corporate legal persons. Organisations other than corporates may be liquidated by reference to the application of the 2006 Law, provided that other laws have provisions for their liquidation, and that the liquidation is bankruptcy liquidation. Individuals are still unable to seek relief in mainland China.

Compared with the 1986 Law, new provisions with the 2006 Law include, but are by no means limited to:

  1. enabling organisations other than corporate entities to be liquidated;
  2. in addition to liquidation, two other bankruptcy rescue procedures, reorganisation and conciliation, have been set up, clarifying that the insolvency law has the function of rescuing distressed companies, which is a more important and prioritised function than liquidation;
  3. establishing the central position of the bankruptcy administrator in bankruptcy proceedings;
  4. clarifying the functions of the creditors' meeting and the creditors' committee; and
  5. giving bankruptcy administrators the right to revoke any biased behaviour, such as repayments to individual creditors.

The judicial interpretation by the Supreme People's Court also has significant influence in practice. The power of judicial interpretation by the Supreme People's Court comes from two sources. The first is the Organisation Law of the People's Court of the People's Republic of China. It states that 'judicial interpretation' is the interpretation of the principal application of law in judicial work by the Supreme People's Court.2 The second is the Resolution of the Standing Committee of the National People's Congress on Strengthening Legal Interpretation. It states that the issues concerning the specific application of laws and decrees in court trials are explained by the Supreme People's Court.3 At present, the Supreme People's Court has formulated a number of judicial interpretations for current insolvency law, covering topics such as designation of administrator, remuneration of administrator, issues relating to case acceptance, debtors' property, and the rights that creditors can exercise. Such judicial interpretations are legally binding and can be directly cited in the judgment. In addition, the trial work meetings held by the Supreme People's Court and the minutes of those meetings, including Summary of Minutes of the Symposium on the Trial of Cases concerning Bankruptcy Reorganization of Listed Companies, the Minutes of Bankruptcy Trial Proceedings of National Courts, The Minutes of the National Courts' Civil and Commercial Trial Work Conference, Guiding Opinions (Part II) of the Supreme People's Court on Several Issues of Properly Hearing Civil Cases concerning the COVID-19 Pandemic and etc., has the power similar to judicial interpretation, which explain the bankruptcy jurisprudence and can be cited as legal reasoning in court judgement. Such Minutes of Meeting also has important reference significance for bankruptcy trials and practice.

There have been two developments worthy of mention.

First, according to the 2021 legislative work plan passed in principle by the 78th Chairman of the National People's Congress, the revision of the 2006 Law is a key legislative work. The main person in charge of the National People's Congress has conducted investigations and inspections on the implementation of the 2006 Law in many regions and courts.

Second, there has been a strong call for legislation on individual insolvency law, and the Supreme People's Court and relevant government departments have expressed support for this. As a special economic zone of China's reform and opening up, Shenzhen has legislative power. It has voted and passed the Regulation of Shenzhen Special Economic Zone on Individual Bankruptcy in August 2020, and this has been formally implemented on 1 March 2021. In the regulations, the contents worthy of attention include:

  1. following the 2006 Law, personal bankruptcy procedures are divided into three types: liquidation, reorganisation and reconciliation;
  2. issues such as the designation of administrators and the operation of procedures generally use the 2006 Law as a template;
  3. the debtor's consumption behaviour and property management is restricted during personal bankruptcy procedures;
  4. the setup of strict regulation of bankruptcy fraud and inspection periods for exemption in liquidation; and
  5. the government bankruptcy management department has been established and its responsibilities have been clarified.

In addition to Shenzhen, courts in Jiangsu, Zhejiang and other places are also exploring the centralised liquidation of personal debts in the form of informal legislation, so as to provide opportunities for the rebirth of honest entrepreneurial failures.

ii Policy

In general, society's attitude towards the debt crisis experienced by enterprises has gradually become more rational. The public are open to distressed enterprises being regenerated through insolvency proceedings that can maximise the overall interests of a debtor and its creditors. All aspects of insolvency law are developing rapidly, and the number of bankruptcy cases has been rising fast. For instance, in Zhejiang Province, the number of bankruptcy cases accepted in Zhejiang Province reached 2,373 in 2019, and 3,428 in 2020, a staggering increase. At the same time, the number of bankruptcy administrators, bankruptcy practitioners and scholars engaged in bankruptcy law practice and research has increased significantly. The administrative departments associated with insolvency proceedings have become increasingly concerned about the bankruptcy field, such as the necessary cooperation with bankruptcy judicial activities.

The understanding of insolvency law has also changed, from a unilateral recognition of bankruptcy liquidation under the 1986 Law to its necessary function as a means of rescuing distressed enterprises, which is reflected in the order of Chapters in the 2006 Law – Reorganisation (Chapter VIII) and Conciliation (Chapter IX) are placed before Liquidation (Chapter X). The Supreme People's Court and local courts have repeatedly stressed that the court shall be construed as a 'hospital' for distressed enterprises, and that reorganisation is preferable to liquidation. For example, Article 14 of the Minutes of the National Courts of Bankruptcy Trial Work Conference in 2018 emphasises that the People's Court should review whether or not a debtor has a reorganisation value and consider the possibility of reorganisation based on a debtor's assets, technical processes, production and sales, industry prospects and so on.

From the perspective of the debtor and local government, reorganisation proceedings are favoured by all parties above liquidation proceedings, because the operational value of the enterprise and the value of the intangible assets can be maintained. Up to now, all the bankruptcy cases of listed companies have preferred reorganisation without exception. Large non-listed companies often also choose reorganisation, such as HNA Group (debt scale exceeds 1 trillion yuan).

The most important supporting document for bankruptcy procedures in 2020 is the Regulations on Optimising the Business Environment promulgated by the State Council on 22 October 2019 and which became effective on 1 January 2020. The administrative regulations set out unified regulations and requirements for the optimisation of the business environment within the mainland, which can be used for reference and complement the World Bank's business environment assessment; on the other hand, the second Paragraph of Article 33 stipulates that 'local people's governments at or above the county level shall establish a coordination mechanism for corporate bankruptcy work as needed to coordinate and resolve relevant issues involved in the process of corporate bankruptcy', which promotes the government's support for courts in handling bankruptcy cases. After the promulgation of these Regulations, many provincial, municipal and district governments across the country have issued supporting documents to implement relevant policies in detail. The court also regards improving efficiency and lowering the claim threshold as requirements for handling bankruptcy cases. In general, optimising the business environment, reducing the burden on market players and handling bankruptcy cases fairly and quickly have become the consensus of all parties in society, which undoubtedly provides a good atmosphere for bankruptcy practices in mainland China.

iii Insolvency procedures

Insolvency can be resolved by one of three procedures – liquidation, reorganisation or conciliation. The characteristics of each of these procedures can be summarised as follows.

Liquidation

This is a straightforward process in which the value of the debtor's property is realised in a relatively short space of time and distributed in accordance with the order stipulated in the 2006 Law. The registration of the debtor shall be cancelled once the procedure has been concluded.

Reorganisation

This is a more complicated and complete regeneration procedure, with an emphasis on maintaining the debtor's operating value. A variety of measures can be adopted, including but not limited to automatic freezing (especially the freezing of security interests), reorganisation financing, realising necessary assets, sustaining the debtor's business operations, introducing investors, and even compulsory approval of the reorganisation plan.

Conciliation

A simpler and faster regeneration procedure, emphasising the negotiation between the unsecured creditors and the debtor. The measures that can be adopted are mainly the freezing of unsecured claims, while the security interest is not restricted by the procedure. Mandatory approval cannot be applied.

To a certain extent, it is possible to convert from one procedure to another. If there is no reasonable probability of success in a reorganisation or conciliation procedure, it could be converted to liquidation. Equally, liquidation can be converted to reorganisation. As for the conversion between conciliation and reorganisation procedures, or of a liquidation procedure to a conciliation procedure, there is no explicit provision in the legislation, but in practice it is generally approved.

It is not practical to start an auxiliary (non-main) bankruptcy procedure in mainland China under the 2006 Law, because a bankruptcy case shall be under the jurisdiction of the people's court of the debtor's domicile,4 that is to say the location of the principal office of the debtor.5 If the debtor has no office, the domicile will be taken to mean the place of registration.6 In other words, a debtor who has to file for bankruptcy in China must either have a principal office located in China, or be registered as having a residence in China. Although there are different definitions of the centre of main interest (COMI) theoretically, insolvency proceedings initiated in China may only be the main process, not the non-main process.

However, Article 5 of the 2006 Law stipulates:

Where a legally effective judgment or ruling made on a bankruptcy case by a court of another country involves a debtor's property within territory of the People's Republic of China and said court applies with or requests the people's court to recognise and enforce it, the people's court shall, according to the relevant international treaties that China has concluded to or on the basis of the principle of reciprocity, conduct examination thereof and, when believing that the said judgement or ruling does not violate the basic principles of the People's Republic of China, does not jeopardise the sovereignty and security of the state or public interests, and does not undermine the legitimate rights and interests of the creditors within the territory of the People's Republic of China, decide to recognise and enforce the judgment or ruling.

Despite this, the mainland has become increasingly open to cross-border bankruptcy, and has recently achieved results in the assistance between mainland and Hong Kong in bankruptcy procedures. The Supreme People's Court issued the minutes of the meeting with the Hong Kong Special Administrative Region government on mutual recognition and assistance in bankruptcy procedures between the mainland and Hong Kong Special Administrative Region courts, and issued opinions on pilot work to the People's Courts of Shanghai, Xiamen, Fujian Province and Shenzhen City, Guangdong Province to carry out work to recognise and assist in bankruptcy procedures in Hong Kong. Although the opinion did not adopt the expression of 'non-main process', it did refer to the 1997 Model Law of the United Nations Commission on International Trade Law. According to this opinion, it will take about one month from the submission of the application to the approval.

iv Starting proceedings

The commencement of insolvency proceedings is the date of the acceptance of insolvency applications by the court. All remedies provided by insolvency law can only be triggered after the insolvency application has been accepted.

The creditor, the debtor and the company's liquidation obligor of dissolution (in a specific case) all have the right to apply to initiate insolvency proceedings. However, according to Article 2 of the 2006 Law,7 the burden of proof for each is quite different.

A creditor that applies for insolvency only needs to prove that the debtor cannot pay the debt due.8 Once the creditor proves this, the burden of proof is transferred to the debtor. If the debtor is unable to provide evidence or otherwise prove that it is not the case that its 'assets are insufficient to pay off all debts' or that it 'apparently lacks the ability to pay off his debts',9 the court shall accept the insolvency application promptly.

A debtor that applies for insolvency is required to prove that he or she meets all the conditions set out in Article 2 of the 2006 Law.

The premise of a company's liquidation obligor of dissolution for insolvency is where an enterprise legal person has been dissolved but has not started or completed liquidation and does not have enough assets to pay off his or her debts. The person responsible for liquidation according to law shall make an application to the people's court for bankruptcy liquidation.10 In this situation, the bankruptcy application is an obligation for the company's liquidation obligor rather than a right, and the obligor can only apply for bankruptcy liquidation.

When a creditor applies for insolvency, the debtor has the right to raise an objection. The rights of other creditors to challenge an application, or to file an objection when a debtor has filed for insolvency are not stipulated specifically in the legislation and judicial interpretations; however, these rights are protected in practice.

In addition, according to the Supreme People's Court's opinion on the pilot work of recognising and assisting the Hong Kong Special Administrative Region's bankruptcy proceedings, if the main process is initiated in Hong Kong, the Hong Kong administrator can apply for assistance from the mainland courts in Shanghai, Xiamen, and Shenzhen. If the Hong Kong administrator applies for assistance, the interested party has the right to raise an objection.

v Control of insolvency proceedings

In practice, the entire bankruptcy process is mainly controlled by the administrator. The duties of the administrator include, but are not limited to:

  1. taking over the property, seals, account books, documents and other data of the debtor;
  2. investigating the financial position of the debtor and preparing a report on such position;
  3. deciding on matters of internal management of the debtor;
  4. deciding on the debtor's daily expenses and other necessary expenditures;
  5. deciding whether to continue or suspend a debtor's business (before the first creditors' meeting, when the debtor has not filed an application for self-management, or the debtor's application has not been approved by the court);
  6. managing and disposing of the debtor's property;
  7. participating in litigation, arbitration or any other legal procedure on behalf of the debtor;
  8. proposing that a creditors' meeting should be held;11
  9. choosing whether or not to continue to perform a contract;12
  10. exercising the right of revocation so as to recover a debtor's property;13
  11. examining the claims declared;14
  12. supervising a debtor while managing a property and business operations on his or her own (reorganisation);15
  13. formulating a reorganisation plan and organising the voting (except when managed by the debtor itself);16 and
  14. supervising the implementation of the reorganisation plan (reorganisation).17

However, the decision-making power of major matters in bankruptcy cases belongs to the creditors' meeting. The duties of a creditors' meeting include:

  1. examining the creditor's right;
  2. examining the expenses and remunerations of the bankruptcy administrator;
  3. supervising the bankruptcy administrator;
  4. selecting and altering the members of the creditors' meeting;
  5. deciding to continue or stop the debtor's business operations; and
  6. deciding whether to adopt a reorganisation plan, a conciliation agreement, a management plan of the debtor's assets and so on.

The duties of the court are mainly aligned to the supervision of the insolvency proceedings, including, but are not limited to:

  1. the review of insolvency applications;
  2. designating administrators and determining their remuneration;
  3. hearing the trial for bankruptcy revocation;
  4. confirming the claims that have been declared;
  5. approval of debtor-in-possession;
  6. executing an automatic freeze (revocation of violations, approval of freeze release);
  7. approving a reorganisation plan (including mandatory approval); and
  8. ruling on the termination of the procedure.

The powers of boards of directors are largely taken over by an administrator during insolvency proceedings. This is less straightforward in a reorganisation procedure. If the debtor is managed by the administrator, the administrator may appoint the debtor's management personnel to be responsible for business affairs. If the debtor applies for self-management, the obligations of the relevant personnel of the debtor (the people's court can be interpreted as including the board of directors) include:

  1. properly preserving the property, seals, account books, documents, etc., that are in their possession and under their management;
  2. proceeding with the work as required by the people's court and the administrator, and truthfully responding to their enquiries;
  3. attending the creditors' meetings as non-voting participants and truthfully answering the creditors' enquiries;
  4. remaining at their domiciles, unless otherwise permitted by the people's court; and
  5. not taking up any post as director, supervisor or senior manager in any other enterprise.18

vi Special regimes

The insolvency of commercial banks, securities companies, insurance companies and other financial institutions has special features.19 First, it can be applied to the takeover and custody procedures of the financial supervision and administration authority of the state council, as well as reorganisation or liquidation. Second, the proceedings applicable to those financial institutions are decided by the financial supervision and administration authority of the state council, rather than by the debtor.

There are also special rules for affiliates (which can be interpreted as including enterprise groups). One is substantive consolidation. When there is a high level of variation in the corporate personality of affiliated enterprises, which can have serious consequences for a fair settlement for creditors, and the cost to distinguish the members' property of each affiliated enterprise is too high,20 the rule of substantive consolidation of affiliated companies could be applied.

The other special rule is the coordination of judicial practice. When a number of affiliated companies that are in different locations are at risk of bankruptcy and apply for insolvency, but do not meet the conditions for substantive mergers, the insolvency proceedings of those affiliated companies can be coordinated, including under the jurisdiction of one court.21

vii Cross-border issues

As has already been stated, the main requirement for making an application for insolvency in China is that the debtor's domicile is in China. Once the procedure for insolvency is initiated according to the 2006 Law, it shall come into effect in respect of the debtor's property outside the territory of the People's Republic of China, if applicable.22

According to Article 5, Paragraph 2 of the 2006 Law, when a legally effective judgment or ruling made on a bankruptcy case by a court of another country involves a debtor's property within the territory of the People's Republic of China, and the said court applies with or requests the people's court to recognise and enforce it, the people's court shall – according to the relevant international treaties that China has concluded, or to which China has acceded, or on the basis of the principle of reciprocity – conduct an examination thereof and, on finding that the said judgment or ruling does not (1) violate the basic principles of the laws of the People's Republic of China, (2) jeopardise the sovereignty and security of the state or public interests, or (3) undermine the legitimate rights and interests of the creditors within the territory of the People's Republic of China, and decide to recognise and enforce the judgment or ruling.

According to Article 50 of the Minutes of Bankruptcy Trial Proceedings of National Courts in 2018, 'when a legally effective judgment or ruling made on a bankruptcy case by a court of another country has been recognised by the people's court, the remaining property of the debtor within the territory of the People's Republic of China may be distributed in accordance with the provisions of the foreign court after the creditor's right of security right, employee's creditor's right, the social insurance premiums and the taxes which the bankruptcy fails to pay have been paid in full'.

As regards cooperation in cross-border insolvency cases, according to Article 49 of the Minutes of Bankruptcy Trial Proceedings of National Courts in 2018, the people's courts should properly resolve legal conflicts and contradictions that have occurred, and determine the jurisdiction in reasonable terms. Under the principle of equal protection of the same kinds of creditors' rights, a balance should be struck between the interests of foreign creditors and those of Chinese creditors, and protect the repayment interests of the priority of the creditors' rights, including employees and tax claims in China. The country will actively participate in and promote the negotiation and signing of international treaties on cross-border insolvency, explore new ways to apply the principle of reciprocity, strengthen cooperation between Chinese courts and administrators in cross-border bankruptcy, and promote the healthy and orderly development of international investment.

Insolvency metrics

According to the 2020 Government Work Report, gross domestic product in 2019 reached 99.1 trillion yuan, an increase of 6.1 per cent, which is in a period of economic growth. 13.52 million new jobs were created in urban areas, and the surveyed unemployment rate was below 5.3 per cent. Consumer prices rose by 2.9 per cent. The balance of international payments is basically balanced. According to data from the National Bureau of Statistics, the number of domestic listed companies (A and B shares) in 2019 was 4,154, the total market value of stocks was 79,648.7 billion yuan and the turnover of stocks was 206,825.3 billion yuan. According to the statistics of Guotai Junan Securities, as of 18 November 2020, there were 23 new first default issuers in the credit bond market in 2020, with 160 defaulting bonds (including rollovers, etc.), and the default principal and interest of 122.1 billion yuan. Compared with last year, the default rate during the same period did not rise significantly. According to Wind data, a total of 142 bonds defaulted in 2020, with a total amount of 162.69 billion yuan. Compared with last year, there was an increase of 13.21 billion yuan. According to the work report of the Supreme People's Court, in 2019, courts across the country concluded 10,132 bankruptcy cases, involving 1.2 trillion yuan in creditor's rights, including 728 reorganisation cases and revitalising assets of 470.8 billion yuan.

Plenary insolvency proceedings

This is not applicable; there is no such phrase in the Chinese bankruptcy legal system.

Ancillary insolvency proceedings

This is not applicable; there is no such phrase in the Chinese bankruptcy legal system.

Trends

In all likelihood, the number of insolvency cases will continue to rise in the future and the number of large company insolvencies will also increase. First of all, with the uncertainty of the development of covid-19 pandemic, the economic environment faces many challenges, such as overseas trade war and the transformation of industry within China. In some industries, such as coal and automobile manufacturing industry, consolidation and withdrawals will continue for a while. Second, the popularity of insolvency is increasing steadily. More and more debtors have begun to understand the relevant law and tried to find a way out of their debts by means of insolvency. Third, the insolvency process itself is expanding. For example, the introduction of pre-packaged resolutions would reduce the time and costs of formal insolvency process, therefore more and more debtors, especially corporate groups, prefer to implement it before applying for bankruptcy reorganisation. Fourth, in order to adapt to the current economic situation better, the 2006 Law would need to be revised and the mechanism of insolvency for individuals is also being explored and might be incorporated into the law in the near future.

The following areas of industry and types of companies are likely to be affected by developments in the coming year.

i Large private group company

One of the main characteristics of this type of company is family governance, rather than a professional management system. Another is its source of funds, a large proportion of which comes from private loans rather than financial loans with high rates of interest. The high financial costs and scattered business operations make them relatively vulnerable to risks, and most of them are not well prepared for the risks they may face the future.

ii Holding company or parent company of a listed company

The shareholders of listed companies tend to maximise the use of listed companies as financing tools. The high stock pledge rate of listed companies was of wide concern during 2018, having triggered the need for loan recovery via forced liquidation by financial institutions. The registration-based IPO system, other than guiding investors not to pay too much attention to 'shell value' but to investment value, will also increase the number of distressed listed companies. Therefore, the number of insolvencies of listed companies or their holding companies/parent companies will increase.

iii Real estate companies

The real estate market, especially in terms of commercial real estate companies, is showing a trend of uneven development. The market in mega cities and central cities has been buoyant for a long time; many places have even issued lottery policies to regulate it. In contrast, a large number of small and medium-sized cities, and even suburban areas of large cities, have developed blindly in the past few years. Some commercial real estate companies rely more on the possibilities for follow-ups rather than the buildings themselves. However, if the level of investment fails to reach expected targets, it can be difficult for them to collect payments and pay their due debts (especially in the case of after-sales leaseback and buyback).

iv New economy and new financial corporates

These types of companies are those promoted by high-profile enterprises and founded by entrepreneurs who are over-optimistic about the future and rely on sharing, platform and other similar concepts. Following the removal of the requirement for the paid-in contribution ratio under the Company Law, the threshold for setting up a company is greatly reduced, which has stimulated a wide range of entrepreneurial enthusiasm. However, these companies are often 'chasing the wind gap'. They are significantly affected by market forces and other non-specific factors, and have almost no anti-risk capabilities. This year, the incidence of financial crisis experienced by online peer-to-peer companies indicates that these types of companies can potentially be at great risk.

v Local investment company

Most of these companies are owned or even controlled by local governments, and they play an important role in the adjustment of local industrial structure and infrastructure construction. However, in practice, some investment companies are embodied by other financial institutions or large companies as a manifestation of government support. Local investment companies are required to provide guarantees in loan issuance, mergers and acquisitions of local companies, and these guarantees are often large in amount. At the same time, compared with state-level companies, the governance structure and operational capabilities of local investment companies is relatively weak, and there are certain debt risks. From the perspective of bond defaults, the number of debtors of medium and large state-owned enterprises has increased, such as the default of Liaoning state-owned enterprise Brilliance Holdings. This shows that even state-owned enterprises that deal with debt problems in a market-oriented and rule-of-law approach, especially in bankruptcy procedures, will gradually be accepted by state-owned asset management departments.

vi Developments in insolvency

Integration with asset trading markets

More and more asset management companies and distressed asset investors are starting to invest in distressed debts and bankrupt companies. They have already gained considerable income based on their advantages of information (compared to peer companies), profession (compared to bankruptcy administrators) and funds. Some companies have even established funds specifically to invest in bankrupt companies. In practice, the insolvency area is considered an opportunist's paradise.

The pre-package solution

The reorganisation procedure is time-consuming and expensive, especially for large group companies. In order to accelerate the process of reorganisation of enterprises, in practice, a method of drafting debt and asset restructuring plans before the acceptance of a reorganisation application is being explored; this is called 'pre-package'. After the reorganisation application is accepted by the court, the bankruptcy administrators would formulate the draft reorganisation plan in a shorter time, based on the debt and asset restructuring plan that had been formed in the pre-package procedure. Then the draft reorganisation plan would pass the creditors' meeting as soon as possible and get the approval of the court later. The reorganisation procedure could be finished more quickly through this process.

The difficult development of the reorganisation and corporate credit repair system

Credit repair, business recovery and debt exemption are all difficult for bankrupt enterprises to resolve solely under the regime of the insolvency law. Better coordination between insolvency law and numerous other laws and regulations is therefore necessary. There have been some attempts in this regard, and investigations have been carried out through various 'coordination between government and court' policies, but, in practice, there are still significant difficulties that need to be overcome.

vii Expectations in legislation

We expect to see the below over the course of the following year.

  1. Personal insolvency will be formally legislated for, either separately or incorporated into the existing insolvency law. We remain cautiously optimistic.
  2. The bankruptcy system of affiliated companies is expected to be clarified.
  3. Special enterprises, such as banks, securities companies and insurance companies, may be governed by special laws.
  4. Pre-packaged resolution may be incorporated into regulations, in preparation for being part of formal insolvency proceedings in the near future.
  5. A procedure for summary bankruptcy may become a special system, similar to simple trial in litigation. With more and more bankruptcy cases occurring, the use of a summary bankruptcy procedure would improve efficiency greatly.
  6. Enterprise group insolvency will be included in the field of law enforcement, and may be regulated by a specific provision in the insolvency law.

Footnotes

1 Ren Yimin is a senior partner at Capital Equity Legal Group, Zhu Yun is a partner at Capital Equity Legal Group. The authors would like to thank Mr Wang Jianye and Dr He Huan for their contributions to this chapter.

2 Organisation Law of the People's Court of the People's Republic of China, Article 18.

3 Resolution of the Standing Committee of the National People's Congress on Strengthening Legal Interpretation, Article 2.

4 2006 Law, Article 3.

5 Civil Code, Article 63.

6 Provisions on Several Issues Concerning the Trial of Enterprise Bankruptcy Cases, Article 1.

7 If an enterprise legal person cannot pay off the debts due and the assets are insufficient to pay off all the debts, or the person apparently lacks the ability to pay off his or her debts, the debt shall be liquidated in accordance with the provisions of the 2006 Law. If an enterprise legal person is under the circumstances as specified before or has apparently forfeited the ability to pay off his or her debts, he or she may undergo reorganisation.

8 2006 Law, Article 7.2.

9 ibid., at Article 2.1.

10 ibid., at Article 7.

11 ibid., at Article 25.

12 ibid., at Article 18.

13 ibid., at Articles 31 to 39.

14 ibid., at Article 57.

15 ibid., at Article 73.

16 ibid., at Article 80.

17 ibid., at Article 90.

18 ibid., at Article 15.

19 ibid., at Article 134.

20 Minutes of Bankruptcy Trial Proceedings of National Courts in 2018, Articles 32 to 37.

21 ibid., at Articles 38 and 39.

22 2006 Law, Article 5.1.

Get unlimited access to all The Law Reviews content