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	OFFICIAL REPLY OF THE SUPREME PEOPLE'S COURT ON WHETHER THE RIGHT TO USE OF ALLOTTED STATE-OWNED LAND OF A BANKRUPT ENTERPRISE SHALL BE INCLUDED AS INSOLVENT PROPERTY

	(Public Announcement of the Supreme People's Court of the People's Republic of China (No.6 [2003] of the Supreme People's Court), April 16, 2003: The Official Reply of the Supreme People's Court on Whether the Right to Use of Allotted State-Owned Land of a Bankrupt Enterprise Shall Be Grouped as Insolvent Property was adopted at the 1245th Session of the Judicial Committee of the Supreme People's Court on October 11, 2002. It is hereby promulgated and shall come into force on April 18, 2003)


SUBJECT : RIGHT TO USE OF ALLOTTED STATE-OWNED LAND
ISSUING DEPARTMENT : THE SUPREME PEOPLE'S COURT OF THE PEOPLE'S REPUBLIC OF CHINA
ISSUE DATE : 04/16/2003
IMPLEMENT DATE : 04/18/2003
LENGTH : 585 words
TEXT :

Regarding Request for Instructions on Whether the Right to Use of Allotted State-Owned Land of the Bankrupt Enterprise Shall Be Included as Insolvent Property and the Determination of the Effect of Relevant Mortgages (No.158 of 2002), we hereby make the following reply upon deliberation:

I. In accordance with Item (4) of Paragraph 1 of Article 58 of the Law of the People's Republic of China on Land Administration and Article 47 of the Interim Regulations on the Assignment and Transfer of the Right to Use State-Owned Land of Towns, the right to use state-owned land obtained by an insolvent enterprise through allotment is not insolvent property, and the relevant people's government may take back and dispose of the land when the enterprise goes into bankruptcy. With respect to a state-owned enterprise that has been brought into the acquisition and bankruptcy plan of the state, the right to use state-owned land obtained thereby according to law shall be dealt with pursuant to the relevant documents of the State Council.

II. An enterprise has no right to dispose of the right to use state-owned land it obtained through allotment, if it is to create any mortgage with that right to use state-owned land, apart from going through the formalities for mortgage registration, it shall also obtain approval from the people's government or land administrative department with the authority of examination and approval. Otherwise, the mortgage created shall be determined as invalid. If the enterprise has gone through the statutory formalities for examination and approval and has made the mortgage registration when creating any mortgage with the right to use state-owned land obtained through allotment, such mortgage shall be determined as valid. In accordance with Article 50 of the Law of the People's Republic of China on the Administration of Urban Real State and Article 56 of the Guarantee Law of the People's Republic of China, only after the mortgagee has paid the amount equal to the fees for assignment of the land use right with the money converted from the subject under mortgage or obtained through auctioning or selling of the subject, may the mortgagee enjoy the priority of compensation with respect to the remaining part of the money. However, where a state-owned enterprise included in the acquisition and bankruptcy plan of the state creates any mortgage with the right to use state-owned land obtained through allotment, the case shall be handled pursuant to the relevant documents of the State Council.

III. With respect to the effect of the mortgage created by a state-owned enterprise with the key equipment, complete sets of equipment or workshops, the case shall be handled pursuant to the Official Reply on the Legal Effect of the Mortgage Contract Signed by the State-Owned Industrial Enterprise and the Creditor on Mortgage of Machines and Equipment.

With respect to the effect of the mortgage created by a state-owned enterprise with any building, the case shall be handled in two ways: if the building is attached to the right to use state-owned land obtained through allotment, and the building is mortgaged together with the land use right, statutory examination and approval formalities are required for the mortgage of the land use right, otherwise, the mortgage shall be determined as invalid. If the building is subsidiary to the right to use state-owned land obtained through assignment or transfer, and the building is mortgaged together with the land use right, the mortgage shall be determined as effective even if in absence of the approval of the relevant authority.