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What Happens to a Chinese Enterprise if It Goes Bankruptcy?-CTD 101 Series

Thu, 13 Oct 2022
Contributors: Meng Yu 余萌
Editor: C. J. Observer

It will lose control over its assets and management, and will no longer be able to pay off any particular debt independently.

This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection. We will explain how debt collection works in China below.

1. Loss of control over its assets and management

After the court issues a ruling on accepting the bankruptcy of a Chinese enterprise and designates a bankruptcy administrator, the Chinese enterprise shall transfer its assets, seals, account books, documents, and other materials to the administrator, and shall no longer enjoy the right to operate and dispose of its assets.

In the reorganization or pre-reorganization cases of some listed enterprises, upon approval by the court, the listed enterprises may continue to exercise the right to manage the enterprise without handing it over to the bankruptcy administrator.

2. Prohibition of individual discharge

An enterprise entering bankruptcy procedures shall not discharge a particular debt alone.

In essence, bankruptcy procedures aim to ensure equality, to a certain extent, for all creditors. Therefore, it excludes the discharge of any certain debt.

3. Lifting of conservatory measures and termination of execution measures

Bankruptcy procedures exclude the satisfaction of certain debts. Therefore, the court shall stop the enforcement of the debts’ repayment immediately even if it has been initiated.

It means that, with the ruling on accepting the bankruptcy application, the court shall lift all conservatory measures against the debtor’s assets, and suspend relevant enforcement measures.



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Contributors: Meng Yu 余萌

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