The Supreme People’s Court Several Issues Regarding the PRC Enterprise Insolvency Law Provisions (I) came into force on 26 September. Since the Enterprise Insolvency Law came into force, people’s courts at different levels have been taking different approaches towards whether an application for the insolvency of an enterprise should be registered and placed on file. The Provisions set out rules to address the problems arising from the issue.
Determine if cause exists
According to the Provisions, if a debtor is unable to discharge its due debts and (1) its assets are insufficient to repay all of the debts or (2) it appears insolvent, the court should determine that the debtor has cause to be declared bankrupt. If a concerned party claims that a debtor does not have cause to be declared bankrupt on the grounds that a party which is jointly and severally liable for the debts of the debtor has not yet become insolvent, the people’s court should rule not to uphold the claim.
Failure to discharge debts
According to the Provisions, if (1) a debtor has a debtor-creditor relationship as established by law; (2) the time limit for it to repay its debts has expired; and (3) it has not fully settled the debts, the court should hold that the debtor is unable to discharge the debts due.
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Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.
