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It becomes easier to file bankruptcy proceedings in China

18 December 2013 

Currently, many PRC courts are reluctant to accept the bankruptcy applications due to various reasons, and in fact, many bankruptcy applications have been rejected or put aside. This has made creditors hesitate to apply for bankruptcy proceedings against debtors. In order to change this situation, last month PRC Supreme Court issued a judicial interpretation on implementation of PRC Enterprise Bankruptcy Law.
The said judicial interpretation clarified and simplified the creditor's burden of proof when it applies for a debtor's bankruptcy. Namely, the creditor is only required to prove that the debtor fails to settle its debt as due. On the other hand, if the debtor is to avoid bankruptcy, it shall have to prove that none of the bankruptcy conditions (namely "the debtor's assets are not enough to pay off all the debts", and "the debtor is obviously incapable of paying off its debts") has been met.
The said judicial interpretation made further explanations on the meaning of "the debtor's assets are not enough to pay off all the debts" and "the debtor is obviously incapable of paying off its debts", so that bankruptcy conditions for a debtor to enter into bankruptcy proceedings are further clarified and simplified. We can foresee that in China, more and more creditors would incline to protect their rights and interests by filing bankruptcy proceedings against debtors.
The said judicial interpretation also stipulates that in case a court refuses to receive the bankruptcy application documents, or does not accept the bankruptcy application pursuant to the stipulated procedures, the applicant is entitled to submit the same application to the next higher level court.

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Disclaimer
Any legal information contained in this newsletter is general in nature and laws and regulations are changing from time to time and compliance will always depend upon the particular circumstances. We have not attempted to give exhaustive descriptions of law or to give a legal opinion on specific legal issues. You should not rely on this newsletter as a legal advice for any particular purpose.

 

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