CHINA Trends and Developments Contributed by: Wenle Du, Yao Zhang, Lei Zhu and Yadan Pang, Han Kun Law Offices
7. Adding special provisions for the bankruptcy procedures of micro- and small enterprises (MSEs) According to the Revision Draft, MSE cases may be adjudicated by a single judge, who is required to con - clude the proceedings within six months of accept - ance. The timeline for creditor claims is not bound by the standard procedure limits (30 days to three months). In reorganisation, the debtor may manage its assets and business under the supervision of the administrator generally. Either the bankruptcy admin - istrator or the debtor must present a draft reorganisa - tion plan within three months. Shareholders who are crucial to the debtor’s business and agree to settle debts with their future income may retain all or a por - tion of their shares and control (Articles 178 to 183). 8. Improving the bankruptcy system for financial institutions The Revision Draft clarifies the legal framework and the scope of financial institutions subject to bank - ruptcy. • The conditions for initiating bankruptcy proceed - ings require either insolvency or a regulatory authority’s determination that the institution has significantly deviated from regulatory standards. • Applications for bankruptcy may be filed by five entities: creditors, debtors, regulatory authorities, their delegated agencies, and deposit insurance funds or other guarantee funds. • The jurisdiction for bankruptcy cases involving financial institutions is assigned to intermediate people’s courts. • Major shareholders, actual controllers, and benefi - cial owners of financial institutions who are primari - ly responsible for the bankruptcy would be required to fulfil the co-operation obligations as stipulated in Article 17 of the Revision Draft. • The measures implemented by the financial regula - tory authority, including asset verification, creditor verification, and property disposal, are deemed effective upon review and approval by the court. • In cases where other laws provide specific provi - sions for the order of creditor claims in the bank - ruptcy of financial institutions, these provisions shall be adhered to (Articles 192 to 201).
9. Enhancing the bankruptcy regulations for listed companies The Revision Draft provides that the court is required to seek the opinion of the China Securities Regulatory Commission (CSRC) before accepting applications for the reorganisation of listed companies and may consider the CSRC’s input before determining that the reorganisation plan has been fully implemented (Articles 96 and 138). The China Securities Investor Services Center is authorised to represent investors in filing claims (Article 81). Listed companies under - going reorganisation must adhere to the information disclosure requirements set by the securities regula - tory authority. 10. Introducing a system for consolidated bankruptcy The Revision Draft outlines the criteria for accepting cases, the jurisdiction of the court, and the legal impli - cations of substantive consolidated bankruptcy. • It clarifies details such as the interruption of the statute of limitations for external debt claims, revo - cable actions, revocable individual settlements, the initiation of creditor claims, and the submission of draft reorganisation plans (Articles 184 to 188). • It also provides guidelines for the acceptance, jurisdiction, settlement of associated creditor claims, and the voting on draft reorganisation plans in the co-ordinated trials of related enterprises (Articles 189 and 190). • Individuals and enterprises that meet certain condi - tions may apply for substantive consolidation trials or co-ordinated trials. 11. Refining the judicial co-operation system in cross-border bankruptcy The court has jurisdiction over debtors with foreign domicile. Bankruptcy proceedings can be initiated if it is in the best interest of the creditors. The bankruptcy administrator may apply to foreign courts for recognition of the bankruptcy procedure and for recognition of their status as an administra - tor. The chapter outlines the conditions and effects of recognition and assistance of foreign bankruptcy proceedings.
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