MACAU SAR, CHINA Law and Practice Contributed by: Calvin Tinlop Chui and Carla Veiga, Lektou
1. Overview of Legal and Regulatory System for Insolvency/Restructuring/ Liquidation 1.1 Legal Framework The insolvency regime in Macau follows the conven - tional differentiation between bankruptcy and insol - vency. Entrepreneurs engaged in commercial activi - ties, such as commercial companies, individuals or entities acting on their own behalf or through third parties, are considered bankrupt if they fail to pay their debts promptly. Debtors who are not commer - cial entrepreneurs, such as freelance professionals, may be deemed insolvent if their liabilities exceed their assets. The provisions of the bankruptcy regime apply to the insolvency regime, unless they do not relate to the commercial enterprise, without prejudice to specific provisions on insolvency and other regulations. Macau bankruptcy rules are dependent on the principle of territoriality. Within the Macau jurisdiction, the most relevant laws and statutory regimes governing financial restructur - ings, reorganisations, liquidations and insolvencies of business entities are the following: • the Macau Commercial Code, approved by Decree-Law 40/99/M of 3 August 1999; • the Macau Civil Code, approved by Decree-Law 39/99/M of 3 August 1999; and • the Macau Civil Procedure Code, approved by Decree-Law 55/99/M of 8 October 1999. 1.2 Types of Insolvency Insolvency proceedings may be voluntary, if initiated by the debtor, or involuntary, if commenced through the intervention of creditors or the Public Prosecutor’s Department, regardless of the debtor’s initiative. 1.3 Statutory Officers Under Macau law, the statutory officer appointed in bankruptcy proceedings is designated as the “bank - ruptcy administrator” and the administrator’s rights and duties are governed by the Macau Civil Procedure Code.
2. Creditors 2.1 Types of Creditors Mortgage Creditors
Mortgage creditors have a higher priority compared to other secured and unsecured creditors. They are entitled to be paid from the proceeds of the sale of the mortgaged property before other creditors. Pledge Creditors Pledge creditors have a right to be paid from the pro - ceeds of the sale of the pledged property before unse - cured creditors. However, they have a lower priority than mortgage creditors. Lien Creditors The holder of a lien on real property has a right to be paid before the debtor’s other creditors, includ - ing mortgage creditors. This right of payment takes precedence over that of other creditors, including the mortgagee, unless the property retained is delivered. General Unsecured Creditors General unsecured creditors do not hold any specific security interest in the debtor’s assets. They have a lower priority compared to secured creditors and are paid after the secured creditors have been satisfied. Priority Unsecured Creditors Certain creditors, such as employees, have preferred status and are given priority over general unsecured creditors. They are entitled to be paid out of the debt - or’s assets before general unsecured creditors. Subordinated Creditors Subordinated creditors have a lower priority com - pared to general unsecured creditors. They are paid only after the claims of the general unsecured credi - tors have been satisfied. 2.2 Priority Claims in Restructuring and Insolvency Proceedings In Macau insolvency proceedings, there are certain preferential claims that take precedence over other claims. Some of these priority claims are outlined below.
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