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TABLE OF CONTENTS CHAPTER I THE JURISDICTION OF ENTERPRISE BANKRUPTCY CASES CHAPTER II APPLICATION FOR BANKRUPTCY AND ACCEPTANCE OF BANKRUPTCY APPLICATIONS CHAPTER III REPORTING THE CLAIMS CHAPTER IV BANKRUPTCY CONCILIATION AND RECTIFICATION OF THE BANKRUPT ENTERPRISE CHAPTER V BANKRUPTCY DECLARATION CHAPTER VI CREDITORS' MEETING CHAPTER VII THE LIQUIDATION TEAM CHATPER VIII BANKRUPTCY CLAIMS CHAPTER IX BANKRUPTCY PROPERTIES CHAPTER X RECALL, DISPOSAL AND CASHING OF BANKRUPTCY PROPERTIES CHAPTER XI BANKRUPTCY EXPENSES CHAPTER XII DISTRIBUTION OF BANKRUPTCY PROPERTIES CHAPTER XIII TERMINATION OF BANKRUPTCY CHAPTER XIV MISCELLANEOUS CLAUSES The following provisions are enacted in combination with the actual situation on the trial of enterprise bankruptcy cases by the people's courts with a view to correctly applying the Law of the People's Republic of China on Enterprise Bankruptcy (Trial) (hereinafter referred to the Enterprise Bankruptcy Law), the Civil Procedure Law of the People¡¯s Republic of China (hereinafter referred to the Civil Procedure Law), and regulating the trial of enterprise bankruptcy cases. CHAPTER I THE JURISDICTION OF ENTERPRISE BANKRUPTCY CASES Article 1. An enterprise bankruptcy case shall be under the jurisdiction of the people's court of the place of the debtor's domicile. The place of the debtor's domicile shall refer to the place where the debtor has its principal office. If the debtor does not have a principal office, such a case shall be under the jurisdiction of the people's court of the place where the debtor is registered. Article 2. The basic-level people's courts shall generally have the jurisdiction over bankruptcy cases of enterprises approved by and registered in the administrative organs for industry and commerce of counties, county-level cities or districts. The intermediate people's courts shall generally have the jurisdiction over bankruptcy cases of enterprises approved by and registered in the administrative organs for industry and commerce of prefectures, cities at the prefecture level or above. Enterprise bankruptcy cases under state plans shall be subject to the jurisdiction of the intermediate people's courts. Article 3. Where the people's court at a higher level tries an enterprise bankruptcy case over which the people's court at a lower level has jurisdiction, or transfers an enterprise bankruptcy case over which it has jurisdiction to the people's court at a lower level for trial, or where the people's court at a lower level needs to submit an enterprise bankruptcy case over which it has jurisdiction to the people's court at a higher level for trial, the case shall be dealt with in accordance with Article 39 of the Civil Procedure Law; where, due to a particular circumstance, the territorial jurisdiction of a particular enterprise bankruptcy case needs to be adjusted within the scope of a province, autonomous region, municipality directly under the Central Government, it shall be approved by their common superior people's court. CHAPTER II APPLICATION FOR BANKRUPTCY AND ACCEPTANCE OF BANKRUPTCY APPLICATIONS Article 4. The debtor who applies for bankruptcy or against whom a bankruptcy application is filed, shall have the qualification as a legal person. An enterprise, individual business, partnership organization or lease-holding farm household which does not have the qualification as a legal person shall not be qualified as a bankruptcy subject. Article 5. When applying to the people's court for bankruptcy, a state-owned enterprise shall submit the documents of consent of its superior department concerning its bankruptcy, and an enterprise other than the state-owned enterprise shall provide the documents of decision of its establisher or shareholders' meeting concerning the bankruptcy. Article 6. A debtor shall, if applying for bankruptcy, submit the following materials to the people's court: (1) the written application for bankruptcy; (2) the proof of the enterprise's qualification as a subject; (3) the name list of the legal representative and principal responsible persons of the enterprise; (4) the information on the employees of the enterprise and the preparatory proposal on settlement of the employees; (5) the written statement on the losses of the enterprise, attached with an auditing report; (6) the supporting schedule of balance sheet up to the date of the enterprise's application for bankruptcy, including the information on tangible assets, intangible assets and the enterprise's investments; (7) the detailed information on the accounts opened by the enterprise in the financial institution, including the materials for approving the opening of the accounts, the account numbers, the funds, etc.; (8) the statement on the claims of the enterprise, which shall clearly indicate the names and domiciles of the enterprise's debtors, the amount of their debts, the time of the occurrence of as well as the dun and payment of such debts; (9) the statement on the debts of the enterprise, which shall clearly indicate the names and domiciles of the enterprise's creditors, the amount of their claims, and the time of the occurrence of such claims; (10) the guaranties in which the enterprise is involved; (11) the litigations in which the enterprise is involved; and (12) other documents required by the people's court to be submitted. Article 7. A creditor shall, when applying for bankruptcy of the debtor, submit the following materials to the people's court: (1) the facts and evidence on the occurrence of the claims; (2) the nature, amount of the claims, whether or not they are guaranteed, with the evidence attached; and (3) the evidence on the debtor's being unable to repay the debts that are due. Article 8. If a creditor applies for bankruptcy of the debtor, the people's court may notify the debtor to check the following information: (1) authenticity of the claims; (2) the proportion of the claims among the debts that are due and that the debtor is unable to repay; and (3) whether the debtor is under the circumstance of being unable to repay the debts that are due. Article 9. Where, after a creditor applies for bankruptcy of the debtor and the debtor proposes its dissent over the creditor's claims, the people's court considers the dissent tenable, it shall inform the creditor to bring a civil lawsuit first, and shall not accept the application for bankruptcy. Article 10. The people's court shall, after the receipt of an application for bankruptcy, decide within seven days on whether to place the case on the docket. If the materials submitted by the bankruptcy applicant need to be corrected or supplemented, the people's court may order the applicant to make corrections or supplements within a time limit. If the materials are corrected or supplemented on time, the people's court shall, within seven days as of the receipt of the corrected or supplemented materials, decide on whether to place the case on the docket; while if the materials are not corrected or supplemented on time, the application shall be regarded as withdrawn. Where the people's court decides to accept an enterprise bankruptcy case, it shall make a written notification on acceptance of the case, and serve it to the applicant and the debtor. The time the written notification is made shall be the time the bankruptcy case is accepted. Article 11. Before the people's court decides to accept an enterprise bankruptcy case, the bankruptcy applicant may request the withdrawal of the application for bankruptcy. Where the people's court permits the applicant to withdraw the application for bankruptcy, the expenses paid before the withdrawal of the application for bankruptcy shall be borne by the bankruptcy applicant. Article 12. Where, upon examination, the people's court finds any of the following circumstances, it shall not accept the application for bankruptcy: (1) the debtor conceals or transfers his properties, and he applies for bankruptcy for the purpose of evading debts; (2) the creditor damages the debtor's commercial credit standing by making use of the application for bankruptcy, with the intention to damage fair competition. Article 13. The people's court shall make an order with respect to the application for bankruptcy which it does not accept. Where the bankruptcy applicant refuses to accept this order, it may file an appeal to the people's court at the higher level within ten days as of the service of the order. Article 14. After the people's court accepts an enterprise bankruptcy case, it shall, if finding out that the case does not conform to the conditions for acceptance provided for by law or is under any of the circumstances enumerated in Article 12 of these Provisions, make an order to reject the application for bankruptcy. After the people's court accepts the debtor's application for bankruptcy, it shall, if finding out that the debtor has enormous amount of properties whose whereabouts are unknown and is unable to reasonably explain the whereabouts of the properties, make an order to reject the application for bankruptcy. Where the bankruptcy applicant refuses to accept the order on rejecting the application for bankruptcy, it may file an appeal to the people's court at the higher level within ten days as of the service of the order. Article 15. The people's court shall, if deciding to accept an enterprise bankruptcy case, form a collegial panel, and complete the following work within ten days: (1) to notify the bankruptcy applicant and the defender, in written form, of the information on the members of the collegial panel, and to put up the announcement on acceptance of the enterprise bankruptcy application on the bulletin board of the court, the contents of the announcement shall include: the time the application for bankruptcy is accepted, the name of the debtor, the time limit and place for reporting the claims, the legal consequence for failure to report the claims or overdue report of the claims, the date and place for the first convening of the creditors' meeting; (2) to publicize an announcement in the debtor's enterprise, requiring the debtor to preserve the enterprise properties well, forbidding the debtor to dispose of the enterprise's account books, documents, materials, seals, or conceal, secretly distribute, transfer or sell the enterprise properties without authorization; (3) to notify the debtor to immediately cease repaying the debts, and not to pay any expenses without the permit of the people's court; and (4) to notify the debtor's bank of deposit to cease the settlement for the debtor, and not to transfer the debtor's money for deducting the debts, unless otherwise permitted by the people's court in accordance with the law. Article 16. The people's court shall, after acceptance of the enterprise bankruptcy case filed by a creditor, notify the debtor to submit to the people's court within 15 days the relevant accounting statements, the detailed list of claims and that of debts, the detailed list of enterprise assets, and other materials which the people's court requires to be submitted. Article 17. After the people's court has accepted an enterprise bankruptcy case, it shall, in addition to notifying the known creditors in accordance with Article 9 of the Enterprise Bankruptcy Law, publish an announcement within thirty days on a newspaper which is influential in the state or in the local place, the contents in the announcement shall be the same as those in Item (1) of Article 15. Article 18. After the people's court has accepted an enterprise bankruptcy case, it may, in addition to immediately making the bankruptcy declaration and forming the liquidation team, form a team for supervising the enterprise under the circumstance that the original management office of the enterprise is unable to implement its management duties normally. The members in the team for supervising the enterprise shall be selected from the higher-level department in charge the enterprise, the representatives of the shareholders' meeting, the original managers of the enterprise and the main creditors. Intermediation institutions such as accounting firms and law firms may also be retained to participate in the team. The team for supervising the enterprise shall be mainly responsible for dealing with the following matters: (1) sorting and counting as well as preserving the enterprise properties; (2) checking the claims of the enterprise; (3) carrying out necessary operational activities for the benefits of the enterprise; (4) paying necessary expenses permitted by the people's court; and (5) other work permitted by the people's court. The team for supervising the enterprise shall be responsible to the people's court, and shall accept the guidance and supervision of the people's court. Article 19. Where, after the people's court accepts an enterprise bankruptcy case, another lawsuit on civil dispute with the debtor to be the plaintiff is still in the first instance, the people's court that accepts the lawsuit shall transfer it to the people's court that accepts the bankruptcy case. If the lawsuit is in the second instance, the people's court that accepts the lawsuit shall continue the trial. Article 20. The people's court shall, after acceptance of an enterprise bankruptcy case, suspend other civil execution procedures against the debtor's properties. Any other case on debt dispute with the debtor to be the defendant shall be dealt with on the basis of the following different circumstances: (1) If it has been concluded but the execution of it has not been completed, the execution shall be suspended, and the creditors shall report their claims with the effective legal documents to the people's court that accepts the bankruptcy case; (2) If it has not been concluded and there is no other defendant or a third part without independent claiming right, the legal proceedings shall be suspended, and the creditors shall report their claims to the people's court that accepts the bankruptcy case. After the enterprise is declared to be bankrupt, the legal proceedings shall be terminated; (3) If it has not been concluded and there is another defendant or a third part without independent claiming right, the legal proceedings shall be suspended, and the creditors shall report their claims to the people's court that accepts the bankruptcy case. The trial shall be resumed after the bankruptcy proceedings have been terminated; (4) The trial of a case on debt dispute with the debtor to be a collateral debtor shall be continued. CHAPTER III REPORTING THE CLAIMS Article 21. The creditors shall, if reporting their claims, submit the proof of the claims and the lawful and valid identification certificates; an authorized reporter shall submit the valid identification certificate of the authorizer, the power of attorney and the proof of the claims. If any reported claim is guaranteed with property, the creditor shall submit the evidence proving the guaranty with property. Article 22. The people's court shall, when registering the reported claims, clearly record the creditors' names, domiciles, banks of deposit, amount of the reported claims, evidence on the reported claims, information on guaranty with property, time of report, methods of contact as well as other necessary information. Where a liquidation team has been established, the liquidation team shall carry out the above said registration of the claims. Article 23. Where one or more of the joint debtors become bankrupt, the creditors may, with respect to all the claims, exercise their rights against the debtor or each debtor and report their claims. Where the creditors do not report their claims, other joint debtors may report their claims with respect to the debts which they may possibly bear in the future. Article 24. Where a creditor fails to report the claims within the legal period, but is under one of the circumstances provided for in Article 76 of the Civil Procedure Law, it may, prior to the distribution of the bankruptcy properties, report the claims to the liquidation team. The liquidation team shall be responsible for examining the reported claims, which shall be determined by the people's court. Where the creditors' meeting has any dissent over the people's court's consent that the creditor may participate in the distribution of the bankruptcy properties, it may apply to the people's court for reconsideration. CHAPTER IV BANKRUPTCY CONCILIATION AND RECTIFICATION OF THE BANKRUPT ENTERPRISE Article 25. After the people's court has accepted an enterprise bankruptcy case, and before the bankruptcy proceedings are terminated, the debtor may apply to the people's court for conciliation. The people's court may, in the process of trying a bankruptcy case, propose suggestions on conciliation to both the creditors and the debtor on the basis of their specific situation. Where, before the people's court makes an order on bankruptcy declaration, the creditors' meeting and the debtor reach a conciliation agreement that has been ratified by the order of the people's court, the people's court shall publicize an announcement and suspend the bankruptcy proceedings. Where, after the people's court makes an order on bankruptcy declaration, the creditors' meeting and the debtor reach a conciliation agreement that has been ratified by the order of the people's court, the people's court shall make an order on suspending the execution of the bankruptcy declaration order, and shall announce the suspension of the bankruptcy proceedings. Article 26. Where the debtor does not repay all the debts in accordance with the contents stipulated in the conciliation agreement, the relevant creditors may apply to the people's court for compulsory execution. Article 27. Where the debtor does not or is unable to implement the conciliation agreement, the people's court shall, upon application by the creditors, order to resume the bankruptcy proceedings. Where the conciliation agreement is reached prior to the bankruptcy declaration, the people's court shall order to declare bankruptcy of the debtor when ordering to resume the bankruptcy proceedings. Article 28. Where the application for bankruptcy of an enterprise is filed by the creditors, and this enterprise is a state-owned enterprise, the higher-level department in charge of the enterprise may, in accordance with Chapter Four of the Enterprise Bankruptcy Law, apply for rectification of the enterprise. The application for rectification shall be proposed before the debtor is declared bankrupt. Where the enterprise has no higher-level department in charge, its shareholders' meeting may adopt a resolution and apply in the name of the shareholders' meeting for rectification of the enterprise. The responsibility for the rectification shall remain with the persons designated by the shareholders' meeting. Article 29. During the rectification of the enterprise, the higher-level department in charge of the enterprise or the persons responsible for implementing the rectification proposals shall regularly report to the creditors' meeting and the people's court on the rectification and the implementation of the conciliation agreement. Article 30. During the rectification of the enterprise, the execution of the debtor's properties shall still be subject to Article 11 of the Enterprise Bankruptcy Law. CHAPTER V BANKRUPTCY DECLARATION Article 31 Being "unable to repay the debts that are due" provided for in Paragraph 1 of Article 3 of the Enterprise Bankruptcy Law shall mean: (1) the period for the implementation of the debts has expired; (2) the debtor obviously lacks the capacity to repay the debts. Where the debtor ceases repaying the debts that are due and this situation keeps going on, it may be presumed that the debtor is "unable to repay the debts that are due" if there is no adverse evidence. Article 32. The people's court shall, after acceptance of a case on bankruptcy of the debtor, order to announce the bankruptcy of the debtor under any of the following circumstances: (1) the debtor is unable to repay the debts and to reach a conciliation agreement with the creditors; (2) the debtor does not implement or is unable to implement the conciliation agreement; (3) the debtor is under any of the circumstances provided for in Article 21 of the Enterprise Bankruptcy Law during the rectification; or (4) the debtor is under any of the circumstances provided for in Paragraph 2 of Article 22 of the Enterprise Bankruptcy Law after expiry of the period for rectification. The announcement of bankruptcy of the debtor shall be made publicly. Where the application for bankruptcy is filed by the creditors, the debtor shall be notified at the time of bankruptcy declaration to appear in court. Article 33. The debtor shall cease the production and operation as of the date of bankruptcy declaration. In case it is indeed necessary to continue the production and operation for the benefits of the creditors, it shall be permitted by the people's court. Article 34. The people's court shall, after declaring bankruptcy of the debtor, notify the debtor¡¯s bank of deposit to limit the bank account to the use by the liquidation team. The people's court shall, when notifying the bank of deposit, attach the order of the bankruptcy declaration. Article 35. The people's court shall, after ordering to declare bankruptcy of the debtor, publicize an announcement, the contents of which shall include the debtor's losses, assets and liabilities, the time of, reasons and legal basis for bankruptcy declaration as well as preservation of the debtor's properties, account books, documents, materials and seals. Article 36. Where, after bankruptcy declaration, the bankrupt enterprise's properties are sealed up, distrained or frozen in other civil procedures, the people's court that accepts the bankruptcy case shall immediately notify the people's court that takes the measure of sealing up, distraining or freezing the properties to cancel the measure, and handle the transfer formalities to the people's court that accepts the bankruptcy case. Article 37. The people's court shall, after the enterprise is declared bankrupt, designate necessary rear persons. The legal representative, the accountants and the property custodians of the bankrupt enterprise must stay behind for duty. Article 38. Where, after the bankruptcy declaration, the creditors or the debtor has any dissent over the bankruptcy declaration, any of them may, within ten days as of the date the people's court declares bankruptcy of the enterprise, file a petition to the people's court at the higher level. The people's court at the higher level shall form a collegial panel to try the case, and make an order within thirty days. CHAPTER VI CREDITORS' MEETING Article 39. The creditors' meeting shall be composed of the creditors reporting the claims. The chairman of the creditors' meeting shall be designated by the people's court among the creditors with the right to vote. When necessary, the people's court may designate several chairmen of the creditors' meeting, and form a chairmen committee of the creditors' meeting. The refusal by few creditors to attend the creditors' meeting shall not impact the convening of the meeting, provided that the creditors' meeting shall not make any resolution which deprives them of the opportunity to receive repayment of the bankruptcy properties or which is not beneficial for them to receive repayment. Article 40. The first creditors' meeting shall be convened after the expiry of the three months from the people's court's acceptance of the announcement on bankruptcy case. Except that the debtor's properties are not enough to pay the bankruptcy expenses, or the bankruptcy proceedings are terminated in advance, the creditors' meeting shall not be cancelled with the reason that the repayment rate of the general claims is zero. Article 41. The creditors' meeting shall be convened and presided over by the people's court. The people's court shall, in addition to completing the work determined in Article 17 of these Provisions, do well in the following preparatory work: (1) drafting the agenda for the first creditors' meeting; (2) sending a notice to the debtors' legal representative or responsible persons, requiring them to be present at the meeting; (3) sending a notice to the higher-level department in charge of the debtor, establisher or the representative of the shareholders' meeting, requiring him to designate persons to attend the meeting; (4) notifying the members of the bankruptcy liquidation team to attend the meeting; (5) notifying the auditors and appraisers to attend the meeting; and (6) other work needs to be prepared in advance. Article 42. The creditors' meeting shall generally include the following contents: (1) declaring the powers of the creditors' meeting and other relevant matters; (2) declaring the result on examination of the creditors' qualification; (3) designating and declaring the chairman of the creditors' meeting; (4) arranging the debtor's legal representative or responsible persons to accept inquiries by the creditors; (5) the liquidation team shall make a circularized notice on the debtor's production and operation, properties, information on the debts, and shall make a report on the liquidation work and bring forward the proposals on disposition and distribution of the properties; (6) discussing and examining the materials of proof on the claims, the guaranty of the claims with property and the amount of the claims, discussing and adopting the conciliation agreement, checking the liquidation team's liquidation report, discussing and adopting the proposals on disposition and distribution of bankruptcy properties, and so on; the discussed contents shall be kept in records; where the creditors proposes any dissent over the claims registered by the people's court or the liquidation team, the people's court shall examine the claims in time and make an order; and (7) resolutions shall be made in accordance with Article 16 of the Enterprise Bankruptcy Law on the basis of the discussion. Where the work mentioned in the above Items (5) to (7) is unable to be completed at the present creditors' meeting, it shall be handed over to the next creditors' meeting to complete. Article 43. Where the creditors consider that a resolution of the creditors' meeting violates the legal provisions or infringes upon their lawful rights and interests, they may, within seven days after the creditors' meeting, make the resolution, propose the matter to the people's court, and the people's court shall make an order in accordance with the law. Article 44. Where the liquidation team's proposal on distribution of the properties is not adopted upon discussion by the creditors' meeting for twice, the people's court shall make an order concerning the distribution of the properties in accordance with the law. Where the creditors representing more than half of the aggregate amount of claims free from property security have dissent over the order in the preceding paragraph, they may, within ten days as of the date the people's court makes the decision, file a petition to the people's court at the higher level. The people's court at the higher level shall form a collegial panel to try the case, and shall make an order within thirty days. Article 45. A creditor may entrust a proxy to be present at the creditors' meeting, and may authorize the proxy to exercise the right to vote. The proxy shall submit a power of attorney to the people's court or the chairman of the creditors' meeting. Article 46. Where the creditors' meeting is convened after the first creditors' meeting, the chairman of the creditors' meeting shall report to the people's court three days before the notice on the convening of the meeting is sent out, and the meeting convener shall notify the creditors of particulars such as the time, place, contents, purpose, etc. of the meeting fifteen days before the meeting is held. CHAPTER VII THE LIQUIDATION TEAM Article 47. The people's court shall, within fifteen days as of the date the bankruptcy of the enterprise is ordered to be declared, form a liquidation team. Article 48. The members of the liquidation team may be selected from the higher-level department in charge of the bankrupt enterprise, the liquidation intermediation institutions, the accountants and lawyers, or be selected upon designation from the governmental departments of finance, industrial and commercial administration, planning, economy, auditing, taxation, price, labor, social insurance, land administration, state asset administration and personnel. The branches (sub-branches) of the people's bank may send persons to participate in the liquidation team in accordance with the relevant provisions. Article 49. The liquidation team may, upon consent of the people's court, retain intermediation institutions such as bankruptcy liquidation institution, law firm, accounting firm, etc. to undertake certain bankruptcy liquidation work. The intermediation institutions shall be responsible to the liquidation team with respect to the liquidation work. Article 50. The main duties of the liquidation team are as follows: (1) Taking over the bankrupt enterprise. It shall take over from the bankrupt enterprise's original legal representative and rear persons the supporting schedule of balance sheet and detailed list of tangible assets that are originally registered and tabulated, as well as all properties, account books, document files, seals and relevant materials. Where the team for supervising the enterprise is formed prior to the bankruptcy declaration, the bankrupt enterprise shall be handed over by the team for supervising the enterprise and the enterprise's original legal representative to the liquidation team; (2) It shall clean up the bankrupt enterprise's properties, work out the supporting schedule of properties, the balance sheet and the detailed list of the claims and debts, and organize the appraisal, auction and cashing of the bankruptcy properties; (3) It shall recover the bankrupt enterprise's properties, and shall exercise the rights to properties against the bankrupt enterprise's debtors or property holders in accordance with the law; (4) It shall manage and dispose of the bankruptcy properties, and decide on whether to implement the contracts or carry out the operation within the scope of liquidation, and shall confirm the rights to exemption, offset and recapture; (5) It shall carry out the entrusted appraisal, auction of the bankruptcy properties and other cashing work; (6) It shall propose and execute the proposals on disposition and distribution of the bankruptcy properties in accordance with the law; (7) It shall submit the liquidation report; (8) It shall represent the bankrupt enterprise to participate in litigations and arbitrations. (9) It shall carry out the cancellation registration of the enterprise and other bankruptcy termination matters; and (10) It shall complete other matters designated by the people's court in accordance with the law. Article 51. The liquidation team shall be responsible to and report its work to the people's court, and shall accept the supervision by the people's court. The people's court shall guide the work of the liquidation team in time, clarify the liquidation team's powers and responsibilities, help the liquidation team in drafting working plans, and listen to the liquidation team's reporting its work. Where the liquidation team has any act damaging the benefits of the creditors or any other illegal act, the people's court may make a correction upon the application by the creditors or by its powers. The people's court may change the incompetent members in the liquidation team upon the application by the creditors or by its powers. Article 52. The liquidation team shall attend the creditors' meeting, and accept the inquiries of the creditors' meeting. The creditors shall have the right to consult the relevant materials and inquire about the relevant matters; where a decision of the liquidation team violates the benefits of the creditors, the creditors may apply to the people's court for an order to rescind the decision. Article 53. The liquidation team shall timely register, clean up, audit, appraise the bankruptcy properties and appraise them at current price, and may, when necessary, request the people's court to preserve the bankrupt enterprise's properties. Article 54. The liquidation team shall take effective measures to preserve the bankrupt enterprise's properties. Where the debtor is to lose its rights to properties if the rights are not registered in accordance with the law or exercised in time, it shall register or exercise them in time; for the damageable, perishable or devalued properties or properties with high preservation fee, it shall sell off them in time. CHATPER VIII BANKRUPTCY CLAIMS Article 55. The following claims shall belong to bankruptcy claims: (1) the claims occurring prior to the bankruptcy declaration but not guaranteed with property; (2) the claims occurring prior to the bankruptcy declaration which are guaranteed with property but to which the creditors waive the right to receive repayment in priority; (3) the excessive amount of the claims occurring prior to the bankruptcy declaration, which are guaranteed with property but the amount of which exceeds the value of the guaranteed properties; (4) the claims occurring under the circumstance that the drawer of a negotiable instrument is declared bankrupt, but the drawee or the acceptor makes the payment or acceptance to the holder without knowing the facts; (5) the claims occurring upon rescission of the contract by the liquidation team, which are to be enjoyed by the other party in accordance with the law or stipulated in the contract, and which may be calculated by currency to the debtor; (6) the claims occurring from the debtor's entrusted party's handling of the entrusted matters for the debtor's benefits after the bankruptcy of the debtor; (7) the claims formed from the debtor's issuance of bonds; (8) the claims which the debtor's surety may recover from the debtor after repaying the debts for the debtor; (9) the claims which the debtor's surety reports for pre-exercising the right of recourse in accordance with Article 32 of the Guaranty Law of the People's Republic of China; (10) the suretyship liability which has been determined by the effective legal documents prior to the bankruptcy declaration if the debtor is a surety; (11) the indemnity liability occurring under the circumstance that the debtor causes property losses to others prior to the bankruptcy declaration due to an act of tort or breach; (12) other claims ratified by the people's court. The claims in the above Item (5) shall be subject to the calculation principle of actual loss. The penalty of breach shall not be regarded as bankruptcy claim, nor shall the deposit be subject to the penalty provisions on deposit. Article 56. Where a labor contract is rescinded due to bankruptcy of an enterprise, the right to request compensation which the employees shall enjoy over the enterprise in accordance with the law or the labor contract, shall be repaid with reference to the order provided for in Item (1) of Paragraph 2 of Article 37 of the Enterprise Bankruptcy Law. Article 57. The labor remuneration that the debtor owes to the non-formal employees (including short-term laborers), shall be repaid with reference to the order provided for in Item (1) of Paragraph 2 of Article 37 of the Enterprise Bankruptcy Law. Article 58. The funds raised by the enterprise employees, which the debtor owes, shall be repaid with reference to the order provided for in Item (1) of Paragraph 2 of Article 37 of the Enterprise Bankruptcy Law, provided that the part of high interest in violation of the legal provisions shall not be protected. The investments contributed in the enterprise by the employees shall not belong to bankruptcy claims. Article 59. Where the debtor is to bear the liability for the debts of an enterprise of economic association when it withdraws from the economic association, the claims that the creditors of the enterprise of economic association enjoy over the debtor shall belong to bankruptcy claims. Article 60. Where a creditor and the debtor have claims and debts towards each other, the creditor may request the liquidation team for exercising the right to offset. The exercise of the right to offset shall meet the following conditions: (1) the creditor's claims have been confirmed; and (2) both the claims and the debts under request for offset occur prior to the bankruptcy declaration. The confirmed bankruptcy claims may be transferred. Where the transferee intends to offset the debts it owes to the debtor with the transferred claims, it shall not be supported by the people's court. Article 61. The following claims shall not belong to bankruptcy claims: (1) fines and other relevant expenses imposed by administrative or judicial organs upon the bankrupt enterprise; (2) the fee for the debtor's late payment of payable amount after the people's court's acceptance of a bankruptcy case, including the fee for the debtor's late payment of the interest for delay or labor insurance which should be doubled due to its failure to execute an effective legal document; (3) the interest of the debts after the bankruptcy declaration; (4) the expenses paid by the creditors for participating in the bankruptcy proceedings; (5) the share rights of the bankrupt enterprise, the rights of the stockholders on their share rights and stocks; (6) the claims reported to the liquidation team after the distribution of the bankruptcy properties began; (7) the claims having exceeded the limitation of action; (8) the management fee and contract fee that the establisher of the debtor haven't collected from the debtor. With respect to the above said rights that do not belong to bankruptcy claims, the people's court or the liquidation team shall also make a registration on the report of the parties. Article 62. The funds gratuitously allocated by the government to the debtor shall not belong to bankruptcy claims. However, the money granted by the administrative departments of finance, poverty reduction, scientific and technological management, through conclusion of contracts and pursuant to the principles of paid use, regular return, may be regarded as bankruptcy claims. Article 63. Where a creditor has any dissent over the claims confirmed or denied by the liquidation team, it may propose it to the liquidation team. If the creditor still has any dissent over the settlement of the liquidation team, it may propose it to the people's court. The people's court shall make an order in accordance with the law after verifying the facts. CHAPTER IX BANKRUPTCY PROPERTIES Article 64. Bankruptcy properties shall be composed of the following properties: (1) all the properties owned or, operated and managed by the debtor at the time of bankruptcy declaration; (2) the properties obtained by the debtor after the bankruptcy declaration but prior to the termination of the bankruptcy proceedings; (3) other rights to properties which shall be exercised by the debtor. Article 65. The properties or property rights jointly owned by the debtor and others such as the things, the claims, the intellectual properties, etc. shall be partitioned in the bankruptcy liquidation, and the part owned by the debtor from the partition shall belong to bankruptcy properties. If such properties cannot be partitioned, the debtor shall transfer the part which it shall own, and the proceeds from the transfer shall belong to bankruptcy properties. Article 66. Where the debtor's establisher haven't contributed the registered capital sufficiently, the establisher shall make it up, and the supplemented part shall belong to bankruptcy properties. Article 67. Where, prior to the bankruptcy, the enterprise received other's properties through transfer and obtained the ownership or land use right in accordance with the law, such properties shall belong to bankruptcy properties even if the enterprise hasn't paid or completely paid the consideration. Article 68. Where the debtor's properties are under measures of execution in civil litigation, the remaining part over which the execution is not carried out or completed after acceptance of the bankruptcy case, shall be listed in bankruptcy properties once the enterprise is declared bankrupt. Any executed property that is to be returned due to wrong execution, shall be listed in bankruptcy properties after it is returned. Article 69. Where the debtor obtains the right of subrogation in accordance with the legal provisions, the claims it enjoys upon the right of subrogation shall belong to bankruptcy properties. Article 70. The claims undue at the time the debtor is declared bankrupt shall be regarded as due, and shall belong to bankruptcy properties, provided that the interest undue shall be deducted. Article 71. The following properties shall not belong to bankruptcy properties: (1) the properties of others which are occupied or used by the debtor on the basis of any of legal relationships such as warehouse keeping, storage, contract for processing, entrusted transaction, sale by proxy, loan for use, deposit, lease, etc.; (2) mortgaged, retained and pledged properties, with exception of the part remained from the obligee's waiving the right to receive repayment in priority or from payment of the guaranteed claims in priority; (3) subrogated things such as insurance, compensation, indemnity, etc. occurred after the guaranteed properties are lost; (4) the properties with priority in accordance with the legal provisions, with exception of the part remained from the obligee's waiving the right to receive repayment in priority or from payment of particular claims in priority; (5) the special things on sale, the occupation of which haven't been transferred but the relative party has completely paid the consideration; (6) the properties which have been delivered to the other party but whose property right certificate has not been obtained or the formalities on transfer of the name of the property right have not been completed; (7) the properties over which the debtor has not obtained ownership from the sale of preservation of ownership; (8) the properties over which the state has the exclusive ownership and cannot be transferred; (9) the properties owned by the work union of the bankrupt enterprise. Article 72. With respect to the properties enumerated in Item (1) of Article 71 of these Provisions, the obligee of the properties shall have the right to recapture them. Where the properties in the preceding paragraph have been damaged or lost prior to the bankruptcy declaration, the obligee of the properties may only report the claims to the limit of direct losses; where they have been damaged or lost after the bankruptcy declaration due to the liability of the liquidation team, the obligee of the properties shall have the right to receive indemnity of the equal value. Where the debtor obtained profits from transfer of the above said properties, the obligee of the properties shall have the right to demand the debtor to make indemnity of the equal value. CHAPTER X RECALL, DISPOSAL AND CASHING OF BANKRUPTCY PROPERTIES Article 73. The liquidation team shall send a written notice to the debtor and the property holder of the bankrupt enterprise, requiring them to repay the debts or deliver the properties to the liquidation team within a limited time. Where the debtor or the property holder of the bankrupt enterprise has any dissent, it shall propose it within seven days after receipt of the notice, and the people's court shall make an order. Where, after receipt of the notice, the debtor or the property holder of the bankrupt enterprise neither repays the debts or delivers the properties to the liquidation team, nor proposes any dissent within the stipulated period without any justifiable reason, the liquidation team shall file an application to the people's court, and the people's court shall take compulsory execution measures after making an order. The bankrupt enterprise's properties outside the territory of China shall be recalled by the liquidation team. Article 74. The limitation of action for the claims enjoyed by the debtor shall, as of the date the people's court accepts the debtor's application for bankruptcy, be subject to the provisions in Article 140 of the General Principles of Civil Law of the People's Republic of China on discontinuance of the limitation of action. Where the debtor and the creditors have reached a conciliation agreement, and the bankruptcy proceedings are suspended, the limitation of action shall be recounted from the date the people's court orders to suspend the bankruptcy proceedings. Article 75. The liquidation team may, upon consent by the people's court, retain lawyers or other persons from intermediation institutions to recover the claims. Article 76. The properties of the debtor's branches and sole subsidiaries not qualified as legal persons shall be brought together in bankruptcy proceedings to be cleaned up. Article 77. The investment equity in the sole enterprise established by the debtor shall be recovered. Where the sole enterprise is unable to offset debts with assets, the liquidation team shall cease recovering the investment equity of the sole enterprise. Article 78. The share rights and proceeds thereof produced from the debtor's investments out of its own enterprise shall be recovered. Such share rights may be sold or transferred, and the proceeds from the sale or transfer of which shall be listed in the bankruptcy properties for distribution. Where the value of the share rights is negative, the liquidation team shall cease recovering the proceeds. Article 79. Where a sole enterprise established by the debtor, or an enterprise in which the debtor invests shares or the shares of which are held by the debtor, is unable to repay the debts that are due, and needs to repay the debts upon bankruptcy, it shall file an application for bankruptcy separately. Article 80. The liquidation team shall, when disposing of the right to use collectively-owned land, abide by the relevant legal provisions. The right to use collectively-owned land for which the land requisition formalities have not been gone through, shall be transferred within the scope of the collectivity. Article 81. The dwellings of the employees of the bankrupt enterprise, on which contracts have been concluded and purchasing money has been paid, and which have been allocated to individuals upon housing reform, shall not belong to bankruptcy properties. If the housing reform has not been carried out, the liquidation team may apply to the relevant department for handling the housing reform matters, and sell the dwellings to the employees. If the conditions for housing reform are not met in accordance with the state provisions, or if any employee does not want to purchase the dwelling in the housing reform, the liquidation team shall deal with the matter in light of the actual situation. Article 82. The debtor's public welfare facilities such as kindergarten, school, and hospital, shall be treated in accordance with the relevant provisions of the state, instead of being distributed as bankruptcy properties. Article 83. The liquidation team may, before disposing of the bankruptcy properties, determine an appraisal institution with appropriate qualification for appraisal to carry out the appraisal for the bankruptcy properties. Where the creditors' meeting or the liquidation team has any dissent over the conclusion on appraisal or the appraisal fee of the bankruptcy properties, the matter shall be dealt with reference to the provisions in Article 27 of Some Provisions on the Evidence in Civil Litigation of the Supreme People's Court. Article 84. Where the creditors' meeting has no dissent over the market price of the bankruptcy properties, it need not, upon consent by the people's court, carry out the appraisal, unless the bankruptcy properties are state-owned assets. Article 85. The cashing of the bankruptcy properties shall be carried out by means of auction. The liquidation team shall be responsible for entrusting a qualified auction institution to carry out the auction. Where any bankruptcy property is prohibited by law from being auctioned, or the proceeds from the auction of such property would be insufficient to be used to pay the expenses for the auction, such property shall not be auctioned. The bankruptcy properties provided for in the preceding paragraph, which are not or are unable to be auctioned, may be distributed in kind or be sold off at a price at the time of bankruptcy distribution. Where a creditor has any dissent over the valuation of the bankruptcy properties when the liquidation team distributes them in kind or sells off them at a price, it may request the people's court to have an examination. Article 86. The complete set of equipment among the bankruptcy properties shall generally be sold as a whole. Article 87. Any bankruptcy property which are limited merchantable things by law shall be purchased by a department designated by the state or be dealt with in accordance with the relevant legal provisions. CHAPTER XI BANKRUPTCY EXPENSES Article 88. The bankruptcy expenses shall include: (1) the necessary expenses for managing, selling off and distributing the bankruptcy properties; (2) the bankruptcy case acceptance fee; (3) the expenses of the creditors' meeting; (4) the expenses necessary for dunning the debts; and (5) other expenses paid in the bankruptcy proceedings for the common benefits of the creditors. Article 89. The people's court may, when accepting enterprise bankruptcy cases, collect the case acceptance fee in advance in accordance with the Supplementary Provisions to the Measures for the People's Courts to Collect Litigation Fees. The necessary expenditures ratified by the people's court that occur prior to the bankruptcy declaration shall be allotted from the debtor's properties. In case the debtor's properties are insufficient to pay such expenditures, the creditors who applied for the bankruptcy shall pay the expenditures. Article 90. During the liquidation, the living expenses and medical expenses of the employees may be allotted from the bankruptcy properties in priority. Article 91. The bankruptcy expenses may be paid at any time. In case the bankruptcy properties are insufficient to pay the bankruptcy expenses, the people's court shall, upon the liquidation team's application, order to terminate the bankruptcy proceedings. CHAPTER XII DISTRIBUTION OF BANKRUPTCY PROPERTIES Article 92. The responsibility to execute the proposal on distributing the bankruptcy properties shall, upon adoption by the creditors' meeting, remain with the liquidation team. The properties may be distributed either in a lump sum or by installments. Article 93. The proposal on distributing the bankruptcy properties shall include the following contents: (1) the categories and total value of the properties distributable for bankruptcy, the cashed and uncashed properties; (2) the orders for repayment of the claims, the categories and amount in each order, including the wages of the employees and the labor insurance expenses that are owed by the bankrupt enterprise, the amount and calculation basis of taxes that are owed by the bankrupt enterprise; for enterprise bankruptcy under state plans, the amount and calculation basis for the expenses for settlement of the employees shall be stated in addition; (3) the total amount of the bankruptcy claims and the repayment proportion; (4) the method and time for the bankruptcy distribution; and (5) the statement on the properties which may be recovered in the future and are planned to be added for distribution. Article 94. The claims that are listed in bankruptcy properties may be distributed. The distribution of the claims shall be in compliance with the principle of facilitating the creditors to the realization of the claims. Where the claims that have been confirmed by the people's court are to be distributed to the creditors, the liquidation team shall issue a letter on the distribution of the claims to the creditors, and the creditors may, on the basis of such a letter, request the debtor for implementation. In case the debtor refuses to implement it, the creditors may apply to the people's court for compulsory execution. Article 95. Where the creditors fail to obtain the distributed properties within the specified time limit, such properties may be deposited or be sold off for price to be deposited, and the liquidation team shall issue a written notice urging the creditors to obtain the distributed properties. Where the creditors haven't obtained the distributed properties in one month after receipt of the said written notice or in two months after the liquidation team's issuance of the said written notice, the liquidation team shall add this part of properties for distribution. CHAPTER XIII TERMINATION OF BANKRUPTCY Article 96. After the bankruptcy properties have been distributed, the liquidation team shall report to the people's court on the distribution, and shall apply to the people's court for termination of the bankruptcy proceedings. The people's court shall, after receipt of the liquidation team's report and application for termination of the bankruptcy proceedings, order to terminate the bankruptcy proceedings within seven days if the court holds that the said report and application conform to the provisions on termination of the bankruptcy proceedings. Article 97. After the bankruptcy proceedings are terminated, the liquidation team shall go through the registration for cancellation of the enterprise in the original organ for registration of the bankrupt enterprise. Where, after the termination of the bankruptcy proceedings, there are still recoverable bankruptcy properties or such remaining matters such as distribution of added properties which need to be disposed of, the liquidation team or some of its members may be reserved upon consent by the people's court. Article 98. The distributable properties arising after the termination of the bankruptcy proceedings shall be added for distribution. The properties added for distribution shall include, in addition to the properties to be recovered by the people's court provided for in Article 40 of the Enterprise Bankruptcy Law, the money collected in bankruptcy proceedings due to correction of wrong expenditures, the properties recovered due to acknowledgement of rights, the properties waived by the creditors and the rights to properties realized after the termination of the bankruptcy proceedings, and so on. Article 99. After the termination of the bankruptcy proceedings, the bankrupt enterprise's file materials such as account books, documents, etc. shall be transferred by the liquidation team to the higher-level organ in charge of the bankrupt enterprise for preservation; where there is no such an organ in charge, they shall be preserved by the bankrupt enterprise's establisher or shareholders. CHAPTER XIV MISCELLANEOUS CLAUSES Article 100. Where, when trying an enterprise bankruptcy case, the people's court discovers that the bankrupt enterprise's original legal representative or directly responsible person has any of the acts enumerated in Article 35 of the Enterprise Bankruptcy Law, it shall make a suggestion to the relevant department on imposing an administrative sanction upon the legal representative or directly responsible person; in case he is suspected to have committed a crime, the people's court shall transfer the relevant materials to the relevant state organ for investigation. Article 101. Where the bankrupt enterprise has any of the acts enumerated in Article 35 of the Enterprise Bankruptcy Law, and thus causing the enterprise properties unable to be recovered, and causing actual losses, the liquidation team may bring a civil lawsuit against the bankrupt enterprise's original legal representative or directly responsible person and demand him to bear the civil liability for compensation. Article 102. Where, after acceptance of an enterprise bankruptcy case, the people's court discovers that the enterprise has enormous amount of properties with their whereabouts unknown, it shall transfer the relevant information and materials on the suspected crime to the relevant state organ for investigation. Article 103. The people's court may suggest to the relevant department that it restrict the main responsible persons of the bankrupt enterprise from re-establishing an enterprise, or prohibit them from holding the posts of company directors, supervisors or managers within a legal time limit. Article 104. Where the Supreme People's Court finds definite errors in an order made by the people's court at any level during the bankruptcy proceedings, or the people's court at a higher level finds definite errors in an order made by the people's court at a lower level during the bankruptcy proceedings, it shall notify the court to make a correction, and may, if the court refuses to make a correction, order the people's court at a lower level to make a new order. Article 105. Enterprise bankruptcy cases under state plans shall, in addition to being subject to these Provisions, be subject to the relevant provisions of the state on enterprise bankruptcy. Article 106. These Provisions shall come into force as of September 1, 2002. In case any judicial interpretation formulated prior to the promulgation of these Provisions concerning the trial of enterprise bankruptcy cases is in conflict with these Provisions, it shall no longer be applied. |
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