On 9 Oct. 2021, the Supreme People’s Court (SPC) released three cases of substantive consolidation in bankruptcy as the 29th batch of guiding cases.
Guiding Cases No. 163 and No. 165 both deal with bankruptcy liquidation of affiliated enterprises.
Both cases clarify that where there is a high degree of confusion of personality among affiliated enterprises, rendering the cost for distinguishing between the properties of each affiliated enterprise prohibitive, seriously injuring the fair payment interests of creditors, the court may apply substantive consolidation in bankruptcy of affiliated enterprises to conduct the trial upon application.
Guiding Case No. 164 clarifies the rules and criteria for the court to allow investors to try out the production of a qualified enterprise when hearing a bankruptcy reorganization case.
In the process of bankruptcy reorganization, a bankrupt enterprise faces risks such as the extinction of high-quality core assets and the non-use impairment of machinery and equipment, the trustee may apply for trial production funded by the investors in advance. The court may grant permission if the trustee’s application is conducive to safeguarding the interests of all parties.
Cover Photo by Jessica Holmes on Unsplash
Contributors: CJO Staff Contributors Team