Senior Judge Du Wanhua, tasked with making Chinese bankruptcy and corporate restructuring law work better (see these earlier blogposts), spoke recently on a video conference held by the Chinese courts, where he released a few points of big data on Chinese bankruptcy law and highlighted (in this version) current and forthcoming court policy on bankruptcy. The data he released can be expected to be part of the conversation when the 21st US-China [or China-US, depending on your perspective] Legal Exchange takes place in Beijing and Shanghai on 13 and 15 December 2016 on bankruptcy law.
The video conference concerned one of the vexed issues of Chinese bankruptcy law, how to transfer cases from enforcement to bankruptcy proceedings, but Du Wanhua’s talking points as released were more general. Some of his points are highlighted below.
Updated data on bankruptcy cases
The Chinese courts have accepted 3463 bankruptcy cases through October of this year, up almost 30% year on year, of which 2249 have been closed, up almost 60%. At the same time, the business registration authorities (the State Administration of Industry and Commerce (SAIC) and local counterparts), have cancelled the registration of 396,000 companies.
Transitioning from enforcement to bankruptcy procedures
Judge Du revealed that close to half (40-50%) of the unsatisfied enforcement cases are ones that are wholly unsatisfied, with a goodly portion involving corporate judgment debtors. (As mentioned in earlier blogposts, there is no procedure to transfer cases from enforcement procedures to bankruptcy). Judge Du mentioned that the SPC had already drafted guidance which have been discussed by the SPC’s Judicial Committee and would be issued soon. He noted that unsatisfied judgments because of local protectionism have led to conflicts between creditors and “fierce” conflicts between courts. He called for courts not to engage in “buck passing” on enforcement cases that are transferred to another court for bankruptcy procedures.
Establish coordination system for bankruptcy cases
Echoing themes in earlier statements by Judge Du and others in the Chinese courts, he calls for localities to establish a unified coordination mechanism for enterprise bankruptcy work, with government and courts, under Party Committee leadership, to plan state asset protection, safeguarding of financial safety, resettlement and reemployment of workers, and for the bankruptcy of non-state owned enterprises to proceed smoothly.
Will this coordination system improve matters? The jury is still out.