Enterprise bankruptcy liquidation

Author: Xu Haifeng
Publisher:
Publish Date: 2005-01-01
Features: Preface Bankruptcy law is a special law of debt law, addressing special issues of creditor-debtor relationships when a debtor is unable to repay due debts. In bankruptcy proceedings, due to its inherent uniqueness and complexity, the handling of many issues differs from general civil law theories. Bankruptcy is both a legal procedure and a judicial procedure. Before the implementation of the People's Republic of China Enterprise Bankruptcy Law (Trial Version) (hereinafter referred to as the Enterprise Bankruptcy Law (Trial Version)) in 1986, Shenyang witnessed the first bankruptcy case in China. The Enterprise Bankruptcy Law (Trial Version) had significant limitations, as it primarily targeted the bankruptcy issues of state-owned industrial enterprises under a planned economy. Therefore, the Civil Procedure Law, promulgated on April 9, 1991, included a special chapter on "Bankruptcy Repayment Procedures for Enterprise Legal Persons," and the Company Law, enacted on December 29, 1993, included a supplementary chapter on "Enterprise Bankruptcy, Dissolution, and Liquidation." The State Council also successively issued the Notice on the Trial Implementation of Enterprise Bankruptcy Issues in Several Cities (October 25, 1994) and the Supplementary Notice on the Trial Implementation of Enterprise Mergers, Bankruptcies, and Employee Reemployment (April 20, 1997). Relevant ministries and commissions under the State Council have promulgated numerous administrative regulations and documents concerning bankruptcy. Some local people's congresses and local governments have also enacted local bankruptcy regulations, while the Supreme People's Court has issued several judicial interpretations. Based on China's more than ten years of enterprise bankruptcy practices, the number of state-owned enterprise bankruptcies has been continuously increasing, with over 20,000 bankruptcy cases involving state-owned enterprises now recorded. While the number of state-owned enterprises meeting bankruptcy conditions but unable to proceed with bankruptcy proceedings—so-called "pending bankruptcy" enterprises—is even higher. Since the promulgation of the Company Law in 1993, numerous corporate bankruptcies have occurred in practice, along with the bankruptcies of foreign-invested enterprises. Additionally, in the securities market, many listed companies, which were once hailed as representing China's "best economic performance," are now facing bankruptcy issues. China has seen a series of bankruptcy cases in recent years, some of which have had a particularly significant impact. The bankruptcy of the Guangdong International Trust and Investment Corporation in 1998 and the bankruptcy of the Guangdong Holdings Group in 2000 involved numerous international and overseas creditors, drawing global attention to China's bankruptcy system. In recent years, major bankruptcy cases have occurred internationally, serving as a wake-up call for us. Meanwhile, the development of international bankruptcy law has accelerated rapidly, with bankruptcy systems and procedures becoming increasingly standardized. Many countries now publish bankruptcy-related information online, such as the International Association of Insolvency Practitioners and the World Bank, which have established specialized websites. This enables comparisons of the strengths and weaknesses of bankruptcy systems and procedures across different countries and regions, while also accelerating the exchange of bankruptcy-related legal cultures. The United Nations also has a specialized committee responsible for the development and improvement of "Cross-Border Insolvency Law." After joining the WTO, Chinese society will become more open. Without a sound bankruptcy system, the market economy and commercial transactions will lack a foundation. Currently, many companies exploit legal loopholes to evade debts, causing significant negative impacts. In today's emphasis on building trust, if enterprises do not focus on shaping their own trustworthy image, they will likely be eliminated in future market competition and may face legal liability. Therefore, we must persist in improving China's bankruptcy-related legal system, guiding enterprises to operate legally and normatively, and actively participating in the global market competition, so that China's national industries can gradually establish themselves among the world's advanced enterprises. Based on extensive research and in accordance with the latest laws and regulations, this book aims to provide readers with a clear and accessible understanding while also offering practical guidance. We sincerely thank the contributors of the materials. Due to the book's formatting constraints, the references may not fully comply with standards, and we kindly ask for your understanding. We express our deepest apologies and heartfelt gratitude once again!
Foreign investment entering China has undergone a challenging and winding path. In the past, domestic attitudes toward foreign capital entering China were often viewed as capital exploitation, with strong resistance. However, with the acceleration of economic integration and the further development of China's opening-up policies, the country has gradually integrated into the global economic landscape. Especially after joining the WTO, China has relaxed its restrictions on foreign investment, making the entry of foreign capital an inevitable trend. Currently, the domestic attitude toward foreign investment has undergone a 180-degree turn, from exclusion to actively attracting investment, with many local governments making it their top priority to offer various preferential conditions to lure foreign capital. However, we must maintain a clear awareness: while foreign investment can be attracted with preferential policies, we must avoid blind worship. Foreign investment in China takes diverse forms, including joint ventures, cooperative enterprises, and wholly foreign-owned enterprises. This book primarily explores the scenario where foreign investment acquires existing Chinese companies or enterprises through mergers and acquisitions, then operates these acquired entities to establish various types of enterprises, such as joint ventures, cooperative enterprises, or wholly foreign-owned enterprises. Chinese listed companies, which are standardized post-reform enterprises under the Company Law, have clear property rights, well-structured organizations, and management operations, making them ideal targets for foreign investment. The merger and acquisition of Chinese listed companies once attracted considerable attention in August 1995 but fizzled out quickly, followed by a long period of stagnation that persists to this day. Although foreign investment in listed companies remains "long-awaited and still not coming," the author strongly feels a sense of "approaching storm" and "undercurrents." Numerous signs indicate that the pace of foreign investment in listed companies is accelerating, and foreign capital is about to knock on the door of China's A-share market. In the near future, it is entirely possible that a wave of foreign investment in listed companies will emerge.