Enterprise Bankruptcy Law of the People's Republic of China
Enterprise Bankruptcy Law of the People's Republic of China
Enterprise Bankruptcy Law of the People's Republic of China
Order of the President of the People’s Republic of China No.54
August 27, 2006
The Enterprise Bankruptcy Law of the People’s Republic of China, adopted at the 23rd Meeting of the Standing Committee of the Tenth National People’s Congress of the People’s Republic of China on August 27, 2006, is hereby promulgated and shall go into effect as of June 1, 2007.
Hu Jintao，President of the People’s Republic of China
Appendix: Enterprise Bankruptcy Law of the People's Republic of China
(Adopted at the 23rd Meeting of the Standing Committee of the Tenth National People’s Congress on August 27, 2006)
Contents
Chapter I General Provisions
Chapter II Application and Acceptance
Section 1 Application
Section 2 Acceptance
Chapter III Administrator
Chapter IV A Debtor’s Property
Chapter V Expenses for Bankruptcy Proceedings and Debts Incurred for the Common Good of Creditors
Chapter VI Declaration of Claims
Chapter VII Creditors’ Meeting
Section 1 General Provisions
Section 2 The Creditors’ Committee
Chapter VIII Reorganization
Section 1 Application for and Period of Reorganization
Section 2 Formulation of and Approval for a Reorganization Plan
Section 3 Implementation of a Reorganization Plan
Chapter IX Compromise
Chapter X Bankruptcy Liquidation
Section 1 Bankruptcy Declaration
Section 2 Realization and Distribution
Section 3 Termination of the Procedure for Bankruptcy
Chapter XI Legal Liability
Chapter XII Supplementary Provisions
Chapter I General Provisions
Article 1 This Law is enacted with a view to regulating the procedure for enterprise bankruptcy, fairly settling claims and debts, safeguarding the lawful rights and interests of creditors and debtors, and maintaining the order of the socialist market economy.
Article 2 Where an enterprise legal person cannot pay off his debts due and his assets are not enough for paying off all the debts, or he apparently lacks the ability to pay off his debts, the debts shall be liquidated according to the provisions of this Law.
Where an enterprise legal person is under the circumstances as specified in the preceding paragraph or he has apparently forfeited the ability to pay off his debts, he may undergo reorganization according to the provisions of this Law.
Article 3 A bankruptcy case shall be under the jurisdiction of the people’s court at the place where the debtor resides.
Article 4 Where there are no provisions in this Law to govern the procedure for hearing a bankruptcy case, the relevant provisions of the Civil Procedure Law shall be applicable.
Article 5 Once the procedure for bankruptcy is initiated according to this Law, it shall come into effect in respect of the debtor’s property outside of the territory of the People’s Republic of China.
Where 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 recognize and enforce it, the people’s court shall, according to the relevant international treaties that China has concluded or acceded to or on the basis of the principle of reciprocity, conduct examination thereof and, when believing that the said judgment or ruling does not violate the basic principles of the laws of the People’s Republic of China, does not jeopardize the sovereignty and security of the State or public interests, does not undermine the legitimate rights and interests of the creditors within the territory of the People’s Republic of China, decide to recognize and enforce the judgement or ruling.
Article 6 When trying a bankruptcy case, the people’s court shall, in accordance with law, guarantee the legitimate rights and interests of the employees of the enterprise and investigate the business managers of the bankruptcy enterprise for their legal liabilities.
Chapter II Application and Acceptance
Section 1 Application
Article 7 Where a debtor is under the circumstances as specified in Article 2 of this Law, he may make an application to the people’s court for reorganization, compromise or bankruptcy liquidation.
Where the debtor cannot pay off his debts due, the creditor may make an application to the people’s court for the debtor’s reorganization or bankruptcy liquidation.
Where an enterprise legal person has been dissolved but has not started or completed liquidation and he does not have enough assets to pay off his debts, the person responsible for liquidation according to law shall make an application to the people’s court for bankruptcy liquidation.
Article 8 For applying to a people’s court for bankruptcy, an Application for Bankruptcy and the related evidence shall be submitted to it.
The following matters shall clearly be stated in the Application for Bankruptcy:
(1) a basic introduction to the applicant and the defending party of the application;
(2) purposes of application;
(3) facts and grounds of the application; and
(4) other matters that the people’s court deems necessary to state.
Where a debtor makes an application, he shall submit to the people’s court statements on his financial position, a complete list of his debts, a complete list of his claims, the related financial statements, a plan for employee arrangements and payment of his employees’ wages and social insurance premiums.
Article 9 Before the people’s court accepts an application for bankruptcy, the applicant may request for withdrawal of the application.
Section 2 Acceptance
Article 10 Where a creditor makes an application for bankruptcy, the people’s court shall, within five days from the date it receives the application, notify the debtor concerned. Where the debtor has objections to the application, he shall put forward his objections to the people’s court within seven days from the date he receives notification from the people’s court. The people’s court shall decide whether or not to accept the case within 10 days at the expiration of the period for raising objections.
Except for the circumstances as specified in the preceding paragraph, the people’s court shall decide whether or not to accept an application for bankruptcy within 15 days from the date it receives the application.
Under special circumstances where the time limit for deciding whether to accept a case, as specified in the preceding two paragraphs, needs to be extended, it may be extended for another 15 days upon approval by the people’s court at the next higher level.
Article 11 Where the people’s court decides to accept an application for bankruptcy, it shall serve such decision on the applicant within five days from the date it makes the decision.
Where the application is made by a creditor, the people’s court shall serve its decision on the debtor within five days from the date it makes the decision. The debtor shall, within 15 days from the date the decision is served, submit to the people’s court statements on his financial position, a complete list of his debts, a complete list of his claims, the related financial statements and payment of his employees’ wages and social insurance premiums.
Article 12 Where the people’s court decides not to accept an application for bankruptcy, it shall serve the decision on the applicant within five days from the date it makes the decision and explain the reasons why. Where the applicant is dissatisfied with the decision, he may, within 10 days from the date the decision is served, file an appeal with the people’s court at the next higher level.
Where during the period from acceptance of an application for bankruptcy to declaration of bankruptcy, the people’s court finds through examination that the debtor is not under the circumstances as specified in Article 2 of this Law, it may decide to reject the application. Where the applicant is dissatisfied with the decision, he may, within 10 days from the date the decision is served, file an appeal with the people’s court at the next higher level.
Article 13 When the people’s court decides to accept an application for bankruptcy, it shall designate an administrator at the same time.
Article 14 The people’s court shall, within 25 days from the date it decides to accept an application for bankruptcy, it shall notify the creditors already known and announce its decision.
The following matters shall clearly be stated in the notification and announcement:
(1) titles or names of the applicant and the defending party of the application;
(2) the time when the people’s court accepts the application for bankruptcy;
(3) period, place and points for attention with respect to declaration of claims;
(4) title or name of the administrator and the office address;
(5) demand made by the administrator upon the debtors or property holders of the debtor for paying off the debts or delivering the property;
(6) the time and place for the first creditors’ meeting to be held; and
(7) other matters that the people’s court deems it necessary to notify of and announce.
Article 15 During the period from the date when the decision made by the people’s court to accept an application for bankruptcy is served on the debtor to the date when the procedure for bankruptcy is concluded, the persons related to the debtor shall fulfill the following obligations:
(1) properly preserving the property, seals, account books, documents, etc. which are in their possession and under their management;
(2) proceeding with the work according to the requirements of the people’s court and the administrator, and truthfully answering their inquiries;
(3) attending the creditors’ meetings as non-voting participants and truthfully answering the creditors’ inquiries;
(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.
The persons related to the debtor mentioned in the preceding paragraph include the legal representative of an enterprise, which may, upon decision by the people’s court, also include the financial managers and business managers of the enterprise.
Article 16 After the people’s court accepts an application for bankruptcy, payment of debts made by the debtor to individual creditors shall be invalid.
Article 17 After the people’s court accepts an application for bankruptcy, the debtors or property holders of the debtor shall pay off the debts or deliver the property to the administrator.
Where the debtors or property holders of the debtor intentionally pay off the debts or deliver the property to the debtor in violation of the provisions of the preceding paragraph, thus causing losses to creditors, they shall not be freed from the obligation of paying off the debts or delivering the property.
Article 18 After the people’s court accepts an application for bankruptcy, the administrator shall have the right to decide to rescind or continue to perform a contract that is concluded before the acceptance yet remains to be fulfilled by both the debtor and the other party and shall notify the other party of his decision. Where the administrator fails to notify the other party within two months from the date when the bankruptcy application is accepted or to give any reply to the exhortation made by the other party with 30 days from the date the exhortation is made, the contract shall be deemed to be rescinded.
Where the administrator decides that performance of the contract be continued, the other party shall comply; however, the other party shall have the right to request the administrator to provide guaranty. Where the administrator refuses to do so, the contract shall be deemed to be rescinded.
Article 19 After the people’s court accepts an application for bankruptcy, the measures for preserving the property of the debtor shall be lifted and the procedure for execution shall be suspended.
Article 20 After the people’s court accepts an application for bankruptcy, any civil action or arbitration involving the debtor that has been started but has not yet been concluded shall be suspended; however, the action or arbitration can proceed after an administrator takes over the debtor’s property.
Article 21 After the people’s court accepts an application for bankruptcy, a civil action against the debtor can only be filed with the said people’s court.
Chapter III Administrator
Article 22 The administrator shall be designated by the people’s court.
Where the creditors’ meeting believes that the administrator cannot perform his duties according to law or impartially or is incompetent to fulfill his duties, the meeting may apply with the people’s court for replacement.
The measures for designating administrators and determining their remunerations shall be formulated by the Supreme People’s Court.
Article 23 An administrator shall perform his duties according to the provisions of this Law, report on his work to the people’s court and be subject to supervision by the creditors’ meeting and the creditors’ committee.
The administrator shall attend the creditors’ meetings as a non-voting participant, reporting on the performance of his duties and answering inquires.
Article 24 A liquidation team composed of persons of the departments or authorities concerned or a law firm, a certified public accountant firm, a bankruptcy liquidation firm or any other public intermediary agency that is established according to law may serve as an administrator.
The people’s court may, in light of the actual conditions of a debtor and after consulting with the public intermediary agency concerned, designate the person who has the necessary professional knowledge and has obtained the qualifications for the practice to serve as an administrator.
A person shall not serve as an administrator, if:
(1) he has been subjected to criminal punishment for intentional offense;
(2) his qualification certificate for the relevant practice has been revoked;
(3) he has an interest in the case; or
(4) the people’s court deems it improper to have him serve as an administrator.
Where the administrator is served by an individual person, he shall purchase the responsibility insurance for the practice.
Article 25 An administrator shall perform the following duties:
(1) taking over the property, seals, account books, documents and other data of the debtor;
(2) investigating into 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 day-to-day expenses and other necessary expenditures of the debtor;
(5) deciding, before the first creditors’ meeting is held, to continue or suspend the debtor’s business;
(6) managing and disposing of the debtor’s property;
(7) participating in legal actions, arbitrations or any other legal procedure on behalf of the debtor;
(8) proposing to hold creditors’ meetings; and
(9) performing other duties that the people’s court deems that he should.
Where other provisions governing the duties of an administrator are stipulated in this Law, those provisions shall be applicable.
Article 26 If an administrator decides to continue or suspend the business operation of a debtor or if he intends to take any of the actions as specified by the provisions of Article 69 of this Law before the first creditors’ meeting is held, the matter shall be subject to approval by the people’s court.
Article 27 An administrator shall be hardworking in doing his duties, and shall perform his duties faithfully.
Article 28 An administrator may, upon approval by the people’s court, employ the necessary workers.
The remuneration of an administrator shall be determined by the people’s court.
......
Order of the President of the People’s Republic of China No.54
August 27, 2006
The Enterprise Bankruptcy Law of the People’s Republic of China, adopted at the 23rd Meeting of the Standing Committee of the Tenth National People’s Congress of the People’s Republic of China on August 27, 2006, is hereby promulgated and shall go into effect as of June 1, 2007.
Hu Jintao，President of the People’s Republic of China
Appendix: Enterprise Bankruptcy Law of the People's Republic of China
(Adopted at the 23rd Meeting of the Standing Committee of the Tenth National People’s Congress on August 27, 2006)
Contents
Chapter I General Provisions
Chapter II Application and Acceptance
Section 1 Application
Section 2 Acceptance
Chapter III Administrator
Chapter IV A Debtor’s Property
Chapter V Expenses for Bankruptcy Proceedings and Debts Incurred for the Common Good of Creditors
Chapter VI Declaration of Claims
Chapter VII Creditors’ Meeting
Section 1 General Provisions
Section 2 The Creditors’ Committee
Chapter VIII Reorganization
Section 1 Application for and Period of Reorganization
Section 2 Formulation of and Approval for a Reorganization Plan
Section 3 Implementation of a Reorganization Plan
Chapter IX Compromise
Chapter X Bankruptcy Liquidation
Section 1 Bankruptcy Declaration
Section 2 Realization and Distribution
Section 3 Termination of the Procedure for Bankruptcy
Chapter XI Legal Liability
Chapter XII Supplementary Provisions
Chapter I General Provisions
Article 1 This Law is enacted with a view to regulating the procedure for enterprise bankruptcy, fairly settling claims and debts, safeguarding the lawful rights and interests of creditors and debtors, and maintaining the order of the socialist market economy.
Article 2 Where an enterprise legal person cannot pay off his debts due and his assets are not enough for paying off all the debts, or he apparently lacks the ability to pay off his debts, the debts shall be liquidated according to the provisions of this Law.
Where an enterprise legal person is under the circumstances as specified in the preceding paragraph or he has apparently forfeited the ability to pay off his debts, he may undergo reorganization according to the provisions of this Law.
Article 3 A bankruptcy case shall be under the jurisdiction of the people’s court at the place where the debtor resides.
Article 4 Where there are no provisions in this Law to govern the procedure for hearing a bankruptcy case, the relevant provisions of the Civil Procedure Law shall be applicable.
Article 5 Once the procedure for bankruptcy is initiated according to this Law, it shall come into effect in respect of the debtor’s property outside of the territory of the People’s Republic of China.
Where 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 recognize and enforce it, the people’s court shall, according to the relevant international treaties that China has concluded or acceded to or on the basis of the principle of reciprocity, conduct examination thereof and, when believing that the said judgment or ruling does not violate the basic principles of the laws of the People’s Republic of China, does not jeopardize the sovereignty and security of the State or public interests, does not undermine the legitimate rights and interests of the creditors within the territory of the People’s Republic of China, decide to recognize and enforce the judgement or ruling.
Article 6 When trying a bankruptcy case, the people’s court shall, in accordance with law, guarantee the legitimate rights and interests of the employees of the enterprise and investigate the business managers of the bankruptcy enterprise for their legal liabilities.
Chapter II Application and Acceptance
Section 1 Application
Article 7 Where a debtor is under the circumstances as specified in Article 2 of this Law, he may make an application to the people’s court for reorganization, compromise or bankruptcy liquidation.
Where the debtor cannot pay off his debts due, the creditor may make an application to the people’s court for the debtor’s reorganization or bankruptcy liquidation.
Where an enterprise legal person has been dissolved but has not started or completed liquidation and he does not have enough assets to pay off his debts, the person responsible for liquidation according to law shall make an application to the people’s court for bankruptcy liquidation.
Article 8 For applying to a people’s court for bankruptcy, an Application for Bankruptcy and the related evidence shall be submitted to it.
The following matters shall clearly be stated in the Application for Bankruptcy:
(1) a basic introduction to the applicant and the defending party of the application;
(2) purposes of application;
(3) facts and grounds of the application; and
(4) other matters that the people’s court deems necessary to state.
Where a debtor makes an application, he shall submit to the people’s court statements on his financial position, a complete list of his debts, a complete list of his claims, the related financial statements, a plan for employee arrangements and payment of his employees’ wages and social insurance premiums.
Article 9 Before the people’s court accepts an application for bankruptcy, the applicant may request for withdrawal of the application.
Section 2 Acceptance
Article 10 Where a creditor makes an application for bankruptcy, the people’s court shall, within five days from the date it receives the application, notify the debtor concerned. Where the debtor has objections to the application, he shall put forward his objections to the people’s court within seven days from the date he receives notification from the people’s court. The people’s court shall decide whether or not to accept the case within 10 days at the expiration of the period for raising objections.
Except for the circumstances as specified in the preceding paragraph, the people’s court shall decide whether or not to accept an application for bankruptcy within 15 days from the date it receives the application.
Under special circumstances where the time limit for deciding whether to accept a case, as specified in the preceding two paragraphs, needs to be extended, it may be extended for another 15 days upon approval by the people’s court at the next higher level.
Article 11 Where the people’s court decides to accept an application for bankruptcy, it shall serve such decision on the applicant within five days from the date it makes the decision.
Where the application is made by a creditor, the people’s court shall serve its decision on the debtor within five days from the date it makes the decision. The debtor shall, within 15 days from the date the decision is served, submit to the people’s court statements on his financial position, a complete list of his debts, a complete list of his claims, the related financial statements and payment of his employees’ wages and social insurance premiums.
Article 12 Where the people’s court decides not to accept an application for bankruptcy, it shall serve the decision on the applicant within five days from the date it makes the decision and explain the reasons why. Where the applicant is dissatisfied with the decision, he may, within 10 days from the date the decision is served, file an appeal with the people’s court at the next higher level.
Where during the period from acceptance of an application for bankruptcy to declaration of bankruptcy, the people’s court finds through examination that the debtor is not under the circumstances as specified in Article 2 of this Law, it may decide to reject the application. Where the applicant is dissatisfied with the decision, he may, within 10 days from the date the decision is served, file an appeal with the people’s court at the next higher level.
Article 13 When the people’s court decides to accept an application for bankruptcy, it shall designate an administrator at the same time.
Article 14 The people’s court shall, within 25 days from the date it decides to accept an application for bankruptcy, it shall notify the creditors already known and announce its decision.
The following matters shall clearly be stated in the notification and announcement:
(1) titles or names of the applicant and the defending party of the application;
(2) the time when the people’s court accepts the application for bankruptcy;
(3) period, place and points for attention with respect to declaration of claims;
(4) title or name of the administrator and the office address;
(5) demand made by the administrator upon the debtors or property holders of the debtor for paying off the debts or delivering the property;
(6) the time and place for the first creditors’ meeting to be held; and
(7) other matters that the people’s court deems it necessary to notify of and announce.
Article 15 During the period from the date when the decision made by the people’s court to accept an application for bankruptcy is served on the debtor to the date when the procedure for bankruptcy is concluded, the persons related to the debtor shall fulfill the following obligations:
(1) properly preserving the property, seals, account books, documents, etc. which are in their possession and under their management;
(2) proceeding with the work according to the requirements of the people’s court and the administrator, and truthfully answering their inquiries;
(3) attending the creditors’ meetings as non-voting participants and truthfully answering the creditors’ inquiries;
(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.
The persons related to the debtor mentioned in the preceding paragraph include the legal representative of an enterprise, which may, upon decision by the people’s court, also include the financial managers and business managers of the enterprise.
Article 16 After the people’s court accepts an application for bankruptcy, payment of debts made by the debtor to individual creditors shall be invalid.
Article 17 After the people’s court accepts an application for bankruptcy, the debtors or property holders of the debtor shall pay off the debts or deliver the property to the administrator.
Where the debtors or property holders of the debtor intentionally pay off the debts or deliver the property to the debtor in violation of the provisions of the preceding paragraph, thus causing losses to creditors, they shall not be freed from the obligation of paying off the debts or delivering the property.
Article 18 After the people’s court accepts an application for bankruptcy, the administrator shall have the right to decide to rescind or continue to perform a contract that is concluded before the acceptance yet remains to be fulfilled by both the debtor and the other party and shall notify the other party of his decision. Where the administrator fails to notify the other party within two months from the date when the bankruptcy application is accepted or to give any reply to the exhortation made by the other party with 30 days from the date the exhortation is made, the contract shall be deemed to be rescinded.
Where the administrator decides that performance of the contract be continued, the other party shall comply; however, the other party shall have the right to request the administrator to provide guaranty. Where the administrator refuses to do so, the contract shall be deemed to be rescinded.
Article 19 After the people’s court accepts an application for bankruptcy, the measures for preserving the property of the debtor shall be lifted and the procedure for execution shall be suspended.
Article 20 After the people’s court accepts an application for bankruptcy, any civil action or arbitration involving the debtor that has been started but has not yet been concluded shall be suspended; however, the action or arbitration can proceed after an administrator takes over the debtor’s property.
Article 21 After the people’s court accepts an application for bankruptcy, a civil action against the debtor can only be filed with the said people’s court.
Chapter III Administrator
Article 22 The administrator shall be designated by the people’s court.
Where the creditors’ meeting believes that the administrator cannot perform his duties according to law or impartially or is incompetent to fulfill his duties, the meeting may apply with the people’s court for replacement.
The measures for designating administrators and determining their remunerations shall be formulated by the Supreme People’s Court.
Article 23 An administrator shall perform his duties according to the provisions of this Law, report on his work to the people’s court and be subject to supervision by the creditors’ meeting and the creditors’ committee.
The administrator shall attend the creditors’ meetings as a non-voting participant, reporting on the performance of his duties and answering inquires.
Article 24 A liquidation team composed of persons of the departments or authorities concerned or a law firm, a certified public accountant firm, a bankruptcy liquidation firm or any other public intermediary agency that is established according to law may serve as an administrator.
The people’s court may, in light of the actual conditions of a debtor and after consulting with the public intermediary agency concerned, designate the person who has the necessary professional knowledge and has obtained the qualifications for the practice to serve as an administrator.
A person shall not serve as an administrator, if:
(1) he has been subjected to criminal punishment for intentional offense;
(2) his qualification certificate for the relevant practice has been revoked;
(3) he has an interest in the case; or
(4) the people’s court deems it improper to have him serve as an administrator.
Where the administrator is served by an individual person, he shall purchase the responsibility insurance for the practice.
Article 25 An administrator shall perform the following duties:
(1) taking over the property, seals, account books, documents and other data of the debtor;
(2) investigating into 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 day-to-day expenses and other necessary expenditures of the debtor;
(5) deciding, before the first creditors’ meeting is held, to continue or suspend the debtor’s business;
(6) managing and disposing of the debtor’s property;
(7) participating in legal actions, arbitrations or any other legal procedure on behalf of the debtor;
(8) proposing to hold creditors’ meetings; and
(9) performing other duties that the people’s court deems that he should.
Where other provisions governing the duties of an administrator are stipulated in this Law, those provisions shall be applicable.
Article 26 If an administrator decides to continue or suspend the business operation of a debtor or if he intends to take any of the actions as specified by the provisions of Article 69 of this Law before the first creditors’ meeting is held, the matter shall be subject to approval by the people’s court.
Article 27 An administrator shall be hardworking in doing his duties, and shall perform his duties faithfully.
Article 28 An administrator may, upon approval by the people’s court, employ the necessary workers.
The remuneration of an administrator shall be determined by the people’s court.
......