Draft Law of Enterprise Bankruptcy and Restructure
of the People’s Republic of China

(June 2000)

Table of Contents

Chapter I General Provisions
Chapter II Application and Acceptance
　　Section 1 Application
　　Section 2 Acceptance
　　Section 3 Manager
　　Section 4 Declaration and Investigation of Creditor’s Rights
　　Section 5 Bankruptcy Costs and Common Debts
Chapter III Creditor’s Conference
　　Section 1 General Provisions
　　Section 2 Supervisor
Chapter IV Conciliation
　　Section 1 Application for Conciliation
　　Section 2 Conclusion of Conciliation
Chapter V Restructure
　　Section 1 Application for and Examination of Restructure
　　Section 2 Business during the Period of Restructure
　　Section 3 Restructure Plan
Chapter VI Bankruptcy Liquidation
　　Section 1 Declaration of Bankruptcy
　　Section 2 Bankruptcy assignee
　　Section 3 Bankruptcy Property
　　Section 4 bankruptcy Obligatory Rights
　　Section 5 Right to Set-off
　　Section 6 Right of Priority
　　Section 7 Appraisal and Distribution
　　Section 8 Conclusion of Bankruptcy Cases
　　Section 9 Exemption
Chapter VII Summary Procedure
Chapter VIII Legal Liabilities
Chapter IX Supplementary Provisions

Chapter I General Provisions

Article 1 The law is enacted in order to try bankruptcy cases fairly and openly, protect lawful rights and interests of creditors and debtors, promote enterprises’ independent operation and responsibility for their own profits and losses, establish a mechanism of survival of the fittest enterprises, maintain economic order and meet the need of developing socialist market economy.

Article 2 This Law applies to following civil subjects:

1) enterprise entities;
2) partnership enterprises and their partners;
3) solely-invested enterprises and their investors; and
4) other profit-making economic organizations established according to law;

Enterprise entities which have been dissolved but not yet liquidated shall be deemed as exist within the procedural scope provided by this Law.

Article 3 Where a debtor fails to pay off debts due, the debts shall be liquidated according to procedures in this Law.

A debtor who ceases to pay for debts due shall be presumed unable to pay.

Article 4 Cases of bankruptcy are under the jurisdiction of the people’s court at the debtor’s domicile.

Article 5 Decisions made by the people’s courts according to procedures in this Law will come into effect at the date of the decision made.

Decisions made by the people’s courts according to procedures in this Law is not subject to appeal, except for otherwise provided by this Law.

Decisions made by the people’s courts according to procedures in this law shall be publicized, except for otherwise provided by this Law.

Article 6 Public notice provided in this Law shall be published on newspapers and journals specified by the Supreme People’s Court for publication and pasted to the notice board of the people’s court where the case is tried.

The public notice comes into effect from the next date after the date of publishing.

Article 7 Procedures of bankruptcy, conciliation and restructure started outside the territory of the People’s Republic of China is not effective to properties of the debtor in the territory of the People’s Republic of China.

Article 8 Where no provisions are stipulated in this Law concerning the hearing of bankruptcy cases, provisions of Civil Procedure Law shall apply.

Chapter II Application and Acceptance

Section 1 Application

Article 9 Where the debtor is under circumstances provided in Article 3 of this Law, both the creditor and the debtor may apply to the people’s court for the acceptance of the bankruptcy case.

Where debtors are partners, written document shall be presented on the unanimous consent of all partners when applying.

Article 10 The applicant shall present to the people’s court written application for the bankruptcy case and relevant evidences.

Written application for the bankruptcy case shall specify the following items:

1) basic situation of the applicant and the person applied;
2) the amount of creditor’s rights, whether there is property security and the basis for the occurrence of the creditor’s rights and their expiration;
3) Justification and basis for the application; and
4) other items that the people’s court considers necessary.

Where the debtor applies, it shall present to the people’s court a written explanation on its property situation, list of obligatory rights and duties and relevant financial reports.

Article 11 After the creditor or the debtor applies, the applicant may claim for withdrawal of application before the hearing of the case by the people’s court and the people’s court shall decide on whether to grant permission.

Section 2 Acceptance

Article 12 After receiving the application for bankruptcy, the people’s court shall decide on whether to accept the case within 15 days. The people’s court shall make the decision if it decides to hear the case of bankruptcy.

Article 13 After accepting the case of bankruptcy, the people’s court shall notify the debtor within 5 days since the date of the decision.

Where the creditor applies, the debtor shall present to the people’s court within 15 days after receiving the notice of the people’s court a written explanation on property situation, list of obligatory rights and duties and relevant financial report.

Article 14 Where the people’s court decides not to accept the bankruptcy case, it shall make the decision and explain its justification.

Decision provided by the proceeding paragraph shall be notified to the applicant within 5 days after the date of the decision by the people’s court, but need no publication.
Where the applicant disagrees with the decision of the people’s court that the case is not to be accepted, it can appeal to the people’s court at a higher level within 10 days after the date when the decision is served.

Article 15 The people’s court shall form a collegial panel to hear the case after the acceptance, except for otherwise provided by the Law.

Article 16 After the acceptance of the bankruptcy case, the people’s court shall notify creditors with clear addresses within 30 days after the date of decision and issue a public notice.

The notification and the public notice shall include following items:

1) the main body of the decision by the people’s court on the case of bankruptcy and the date of acceptance;
2) duration for declaring creditor’s rights and points for attention in the declaration;
3) name of the manager and address for handling business;
4) the debtor to the debtor shall pay off the debts to the manager and the holder of the debtor’s property shall deliver the property to the manager;
5) date and place for the convention of the first creditors’ conference; and
6) other items that the people’s court thinks that shall be specified.

Article 17 After the acceptance of the case, the people’s court shall suspend any other civil enforcement procedures concerning the debtor’s property, except for otherwise provided by this Law.

After the acceptance of the case by the people’s court, any other preserving measures related to the debtor’s property shall be suspended.

Article 18 After the people’s court accepts the case of bankruptcy and before the declaration of bankruptcy, the exercise of the right of mortgage, pledge or lien to the property or rights of the debtor shall be suspended.

Article 19 After the people’s court accepts the case, civil litigation relating to the property and property rights of the debtor that has been started but not yet completed shall be suspended. After the manager takes over the debtor’s property, the litigation resumes.

Article 20 The debtor is borne to the following duties since the date of acceptance of the bankruptcy case by the people’s court:

1) take proper care of all properties, accounts, documents, materials, seals and other articles that it possesses and manages;
2) work according to the requirements of the people’s court, the manager, the executor of the restructure, bankruptcy assignee and answer inquiries according to the facts;
3) attend the creditors’ conference and answer the creditors’ or supervisor’s inquiries according to the facts; and
4) not to leave place of its domicile without the permission the people’s court.

The proceeding paragraph applies to representatives of enterprise entities, partners and persons in charge of partnership enterprises, investors and persons in charge of sole-invested enterprises and persons in charge of other economic organizations and may apply to financial management personnel and major business personnel upon the decision of the people’s court when necessary.

Article 21 After the people’s court accepts the case of bankruptcy, the debtor shall not pay off debts to individual creditors.

Article 22 After the people’s court decides to accept the bankruptcy case, the debtor’s debtor or property holder shall pay off debts or deliver property to the manager, restructure executor or bankruptcy assignee.

Article 23 The following activities concerning the debtor’s property and property rights shall not be against the creditors which happen within 6 months before the people’s court accepts the bankruptcy case:

1) free transfer of property and property rights;
2) sale of property at an abnormal low price;
3) provide property security to debts which originally had not a property security;
4) pay off undue debts in advance;
5) give up creditor’s rights;
6) donation and sponsorship already made by the debtor; and
7) other activities harming the interests of creditors.

Where the debtor has one of activities provided in proceeding paragraph, the manager or liquidator shall apply to the people’s court to rescind.

Article 24 Within 6 months before the people’s court accepts the bankruptcy case, if the debtor knows it can not pay off due debts while still liquidates to the individual creditor, and thus harms the interest of other creditors, the liquidation received by the creditor can not be against other creditors.

Where the debtor has the activity provided in proceeding paragraph, the manager or liquidator shall apply the people’s court to rescind.

Article 25 Following activities concerning the debtor’s property and property rights shall be void whenever it happens:

1) conceal and distribute properties;
2) counterfeit debts or recognize untrue debts.

Article 26 Where the debtor’s property or property rights are acquired due to revocation or void declarance resulting from activities provided in Article 23, 24 or 25 of this Law, the manager or bankruptcy assignee is entitled to recover.

Article 27 After the people’s court accepts the bankruptcy case, if the investor of an enterprise entity fails to perform the duty of investment, it shall pay for its investment .

Section 3 Manager

Article 28 The people’s court shall appoint a manager when accepting the bankruptcy case. The manager takes over daily management and business of the debtor’s property and is responsible and report to the people’s court.

The manager is subject to the supervision of the creditors’ conference when performing its duties. The manager shall attend the creditors’ conference and report on its performance of duties and answer inquiries.

Article 29 The manager shall be persons with necessary professional knowledge.
The Supreme People’s Court will, according to this Law, make measures for the qualification of the manager and its examination and rectification.

Article 30 The manager exercises the following duties since the appointment:

1) take over all properties, accounts, documents, materials, seals and other articles of the debtor;
2) investigate the debtor’s property situation and civil activities, including salaries owed to labourers, expense for social security and taxes;
3) make a report on the investigation of property situation;
4) decide the debtor’s regular expenses and other necessary expenses;
5) apply for deciding whether the debtor can continue business;
6) manage and apply for disposal of the debtor’s property;
7) accept the third person’s delivery of property to the debtor;
8) decide on the debtor’s inner management affairs;
9) employ necessary management personnel, professional technical personnel and other staff;
10) require to convene the creditors’ conference;
11) represent the debtor to participate in litigation or arbitration concerning the debtor’s property disputes; and
12) other functions that the people’s court think to be exercised by the manager.

Article 31 Before the convention of the first creditors’ conference, if the manager has one of the following activities , permission of the people’s court shall be acquired:

1) transfer real estate ownership;
2) transfer property rights such as right of mining, right of land use, right of patent, copyright, right of exclusive use of trademarks;
3) transfer total repertory or business;
4) loan;
5) create property security;
6) transfer personal estate valued over RMB1000 which is required by continuous operation of business;
7) transfer obligatory rights and valuable securities;
8) claim for performance of bilateral contracts;
9) conciliate, arbitrate, litigate or act through other legal procedures concerning the debtor’s property;
10) give up rights;
11) agree on the person having a right of claiming the property to take back the property;
12) withdrawal object matters for the right of priority.

Where the creditors’ conference fails to select and appoint a supervise, permission shall be acquired from the creditors’ conference to conduct activities provided in the proceeding paragraph.

The creditors’ conference may directly make resolutions on activities listed in the first paragraph of this Article , or substitute the permission of the supervisor with resolutions.
Where the supervisor’s resolution disagrees with that of the creditors’ conference, the resolution of the creditors’ conference shall prevail.

Article 32 The remuneration for the manager shall be decided by the people’s court. The remuneration for the manager and the cost necessary for performing duties shall be paid from the debtor’s property. When performing duties, the manager shall be liable for compensation for losses incurred to the debtor’s property due to purposeful or materially negligent acts. If the managers are several persons, each manager shall be jointly liable.

Article 33 Without the permission of the people’s court, the manager can not resign from the position after accepting the appointment by the people’s court.
Where the manager is incompetent for the work, or has a malpractice or other illegal activities, the people’s court may dismiss and replace it upon the application of persons of related interests or out of the court’s function.

Section 4 Declaration and Investigation of Creditor’s Rights

Article 34 Obligatory rights to the debtor which has been created before the people’s court accepts the bankruptcy case shall be exercised according to procedures provided in this Law.
The Obligatory rights provided in the proceeding paragraph is called conciliated obligatory rights when conciliation is reached, restructure obligatory rights when the procedure of restructure is applied and bankrupt obligatory rights after the declaration of bankruptcy.

Article 35 Debts undue is deemed as due when the bankruptcy case is accepted.
As to obligatory rights due after the acceptance of the case which has an interest, interest shall be stopped to calculate since the acceptance of the case. As to those without an interest, legal interest for the period from the acceptance of the case to the expiration of the obligatory rights shall be deducted. But, obligatory rights of loan without an interest is not fall into the category.

Article 36 Obligatory rights with a condition shall be exercised with its full amount.

Article 37 After the people’s court accepts the bankruptcy case, creditors shall declare their rights within the period ascertained by the people’s court for declaration.

Creditors’ rights provided in the proceeding paragraph refers to those rights enjoyed by the creditors to the debtor and created before the acceptance of the bankruptcy case by the people’s court. But rights of claiming for labourers’ salaries and social security cost and taxes may not be declared.

Where labourers declare to the people’s court the claim for salaries, they may mandate a representative for declaration.

Article 38 After the acceptance of the bankruptcy case, the people’s court shall decide on the duration for creditors to declare their rights which can be no less than 30 days and no more than 90 days.

The duration for declaring creditor’s rights is calculated since the publication of the decision on accepting the bankruptcy case by the people’s court.

Article 39 When declaring their rights, the creditors shall explain in a written form the amount of their obligatory rights and whether there is a property security and present relevant evidence. Explanations shall be made if rights declared are joint ones.

Article 40 Where the creditor fails to declare its right due to irresistible causes or other fair justifications, it may apply to the people’s court for extending the duration for declaration. If the creditor fails to declare its right within the period set forth by the people’s court for declaration of obligatory rights, it may supplement the declaration before the conclusion of the bankruptcy case. All costs for examining and ascertaining the obligatory rights supplemented shall be borne to the supplementing declarer.

Where the creditor fails to declare its right within the period set forth by the people’s court, it shall not exercise rights according to procedures provided in this Law except for situations provided by the proceeding paragraph.

Article 41 As to joint creditors, one creditor can represent all the joint creditors in the declaration of obligatory rights and they may also declare separately.

Article 42 The guarantor to the debtor or other joint debtors shall declare to the people’s court its obligatory rights as to its right of recourse rising out of bearing of joint duties.

Article 43 Where joint debtors are applied to procedures of this Law simultaneously or in sequence, their creditors are entitled to declare to the people’s court all the obligatory rights separately in each bankruptcy case.

Article 44 After receiving materials for declaring obligatory rights, the manager shall register and compile a form of obligatory rights.

When the people’s court compiles the form of obligatory rights, nonmonetary obligatory rights shall be calculated the amount according to average market price at the place of debt performance on the date of decision made by the people’s court on accepting the bankruptcy case. As to monetary obligatory rights in foreign currencies, the amount shall be calculated according to the datum price of RMB market exchange price on the date of decision made by the people’s court on accepting the bankruptcy case.

The original of the form of obligatory rights and materials for declaration shall be kept in the people’s court and the duplicate be kept by the manager for reference by persons with related interests at any time.

Article 45 The form of obligatory rights compiled according to Article 46 of this Law shall be presented to the first creditors’ conference for investigation.

But, obligatory rights already decided through an arbitration award or a judgment of the people’s court and still pending in litigation or arbitration are not subject to the investigation of the creditors’ conference.

Where the manager, debtor and creditors’ conference do not object to the obligatory rights specified in the form, the obligatory rights is deemed as ascertained upon the decision of the people’s court.

Where the obligatory rights specified in the form cannot be ascertained due to objections, the creditor may apply for a decision on ascertaining the obligatory rights to the people’s court which accepts the bankruptcy case.

Section 5 Bankruptcy Costs and Common Debts

Article 46 The following costs which happen after the people’s court accepts the bankruptcy case are bankruptcy costs:

1) cost needed for managing, appraising and distributing the debtor’s property;
2) litigation fee for the bankruptcy case;
3) remuneration for the work of the manager and liquidator and costs for duty performance and costs for employed personnel;
4) remuneration for the work of the supervisor and cost for its duty performance;
5) other expenses used in bankruptcy procedure for common interests of creditors.

Article 47 Following debts which happen after the people’s court accepts the bankruptcy case are common debts:

1) debts arising out of the manager or the liquidator’s claim for performing bilateral contracts;
2) debts arising out of abstract management over the debtor’s property;
3) debts resulting from unjustified profit to the debtor’s property.

Article 48 Bankruptcy costs and common debts shall be paid off from the debtor’s property at any time.

Where the debtor’s property is insufficient to pay for bankruptcy costs or common debts, the manager and liquidator shall suggest the people’s court to conclude the bankruptcy case. The people’s court shall make a decision on concluding the case within 10 days after the people’s court receives the request for conclusion by the manager and liquidator.

Chapter III Creditors’ Conference

Section 1 General Provisions

Article 49 All creditors who declare their obligatory rights according to the law are members of the creditors’ conference. All members of the creditors’ conference are entitled to participate the creditors’ conference and enjoy a right of voting. But, creditors whose rights have not yet decided shall not exercise the right of voting. The creditors’ conference has one chairman who will be appointed by the people’s court among creditors of voting right.

The chairman of the creditors’ conference presides over the creditors’ conference.

Creditors with a property security who does not give up the right of priority in payment do not have voting right to resolutions provided in item 7 and 8 of the first paragraph of Article 51 of this Law.

Article 50 The creditor may authorize an agent to participate in the conference and exercise voting right. Where an agent participates in the conference, it shall present to the people’s court or the chairman of the creditors’ conference the creditor’s written form of authorization.

Article 51 The creditors’ conference has the following functions:

1) select, appoint and dismiss and replace the supervisor;
2) investigate into obligatory rights;
3) decide on whether to continue or stop the business of the debtor;
4) reach a conciliation agreement;
5) reach a restructure plan;
6) agree on a management project for the debtor’s property;
7) agree on a project for appraising bankrupt property;
8) agree on a distribution project for the debtor’s property; and
9) other items the people’s court thinks that shall be determined by the creditors’ conference.

The creditors’ conference shall make a written resolution when exercising the above functions.

Article 52 The first creditors’ conference shall be called for by the people’s court and convened within 15 days after the expiration of the declaration of creditor’s rights.

Creditors’ conference afterwards shall be convened upon the decision made by the people’s court when the people’s court thinks necessary or the manager, restructure executor, bankruptcy assignee, supervisor or creditors of more than 1/4 obligatory rights ascertained apply for the convention.

Article 53 When convening the creditors’ conference, the manager shall notify creditors already known 20 days in advance.

Article 54 Except for otherwise provided in this Law, resolutions made by the creditor’s conference shall be passed upon the approval of more than half creditors with voting right of which the amount of obligatory rights represented shall be more than two thirds of ascertained ones. Resolutions made by the creditors’ conference are binding over all creditors.

Article 55 Where the creditors’ conference fails to form a resolution as to item 3, 6 and 7 of the first paragraph of Article 51 of this Law, the people’s court shall make the decision.

Where the creditors’ conference fails to form a resolution for a second time as to item 8 of the first paragraph of Article 51 of this Law, the people’s court shall make the decision.

The people’s court shall announce decisions provided in the proceeding two paragraphs in the creditors’ conference without further notification and public notice.

Article 56 Where creditors disagree with the decision made by the people’s court according to Article 55 of this Law, they may apply to the people’s court of the same level for review . Enforcement of the decision is not affected during the period of review.

Section 2 Supervisor

Article 57 The creditors’ conference may select and appoint supervisors who shall be recognized by the written decision of the people’s court.

Supervisors can not exceed 3 persons.

Provisions in Article 32 of this Law shall apply to Supervisors’ remuneration, costs necessary for duty performance and liabilities.

Article 58 Provisions of Article 29 of this Law can be applied to the selection, appointment and modification of supervisors.

Article 59 The supervisor, representing the creditors’ conference during its closing of session, exercises the following functions:

1) supervise the management and disposition of the debtor’s property;
2) supervise the execution of the restructure plan; and
3) supervise bankruptcy distribution

The supervisor, when performing duties, is entitled to request the manager, restructure executor or bankruptcy assignee to explain matters within its function or provide relevant documents.

Where persons provided in the proceeding paragraph, in violation of this Law, refuse to be supervised, the supervisor is entitled to apply to the people’s court for a decision made on matters of supervision. Upon the application by the supervisor, the people’s court shall make the decision within 5 days.

Article 60 The supervisor shall be loyal to its functions, performing supervisory duties according to law and be responsible to all creditors. The supervisor shall be liable for compensation where damage is caused to the debtor or the creditor due to its purposeful act or material negligence.

Chapter IV Conciliation

Section 1 Application for Conciliation

Article 61 Where the debtor applies according to Article 9 of this Law, it may directly apply to the people’s court for conciliation.

After the people’s court accepts the bankruptcy case and before the declaring of bankruptcy , the debtor and the creditor may apply to the people’s court for conciliation.

Article 62 When applying for conciliation, the debtor shall present a written application and draft agreement on conciliation to the people’s court.

Where the creditor applies for conciliation, the people’s court shall notify the debtor upon receiving the application. The debtor shall express explicitly the agreement or disagreement for conciliation to the people’s court within 10 days upon receiving the notice of the people’s court. Where it agrees to conciliate, draft agreement on conciliation shall be presented within the time limit set forth by the people’s court.

Where a third person provides security for the debtor’s application for conciliation, the debtor shall present explanations on the security provided by the third person and relevant valid security documents.

Article 63 Where the people’s court, upon examination, considers that the application meets requirements provided in this Law, it shall require the manager to call for the creditors’ conference to discuss a draft agreement of conciliation. Right of mortgage, pledge or lien to the debtor’s property or right shall not be subject to the restriction provided in Article 18 of this Law since the date when the people’s court makes decision to permit conciliation.

Article 64 Where the people’s court, upon examination, considers that the application for conciliation fails to meet with provisions in this Law, it may order the debtor to supplement correspondingly. Where the debtor refuses to supplement or it still fails to meet the requirements of this Law after making supplement, the people’s court shall make a decision to reject its application for conciliation.

The people’s court shall notify the applicant the decision within 5 days after the decision is made. But no publication is required.

Where the people’s court according to provisions of this Law, makes a decision to reject the application, it shall at the same time declare the debtor bankrupt.

Article 65 The resolution of conciliation agreement passed by the creditors’ conference shall be approved by more than half creditors with voting right and the amount of creditor’s rights represented shall be more than 2/3 of the total creditor’s rights ascertained.

Article 66 Where the draft agreement of conciliation fails in the creditors’ conference, it shall be deemed as that the creditors’ conference refuses to conciliate. The people’s court shall make a decision declaring the debtor bankrupt.

Article 67 Where the conciliation agreement reached between the debtor and the creditors’ conference violates the law, the people’s court shall make a decision declaring the conciliation void. Where the people’s court makes a decision declaring the conciliation void , it shall also make a decision declaring the debtor bankrupt.

Section 2 Conclusion of Conciliation

Article 68 Conciliation agreement reached between the debtor and the creditors’ conference will come into effect upon publication after the people’s court recognizes through the decision.

Article 69 Public notice made by the people’s court on the decsion recognizing the conciliation agreement shall include the following contents:

1) the main body and the date of the decision recognizing the agreement;
2) conclusion of the bankruptcy case; and
3) other items that the people’s court considers that shall be publicized.

Article 70 Where the people’s court makes a decision recognizing conciliation agreement, it shall at the same time decide on the conclusion of the bankruptcy case.

Where the people’s court decides on the conclusion of the bankrupt case, it shall notify the manager or the bankruptcy assignee to stop duty performance. The manager or the bankruptcy assignee shall deliver property and management affairs to the debtor and present a report on duty performance to the people’s court.

Article 71 Conciliation agreement is binding over the debtor and all conciliating creditors.
The conciliating creditors provided in the proceeding paragraph refer to those who enjoy obligatory rights to the debtor before the acceptance of the bankruptcy case by the people’s court.

The conciliating creditor’s rights not declared according to this Law shall not be exercised during the execution of conciliation agreement. After the execution of conciliation agreement completes, they can be exercised according to conditions for liquidation provided in conciliation agreement.

Article 72 Rights enjoyed by conciliating creditors to the guarantor of the debtor and other joint debtors will not be affected by the conciliation agreement.

Article 73 The debtor shall not, in violation of conditions set forth in conciliation agreement, award extra interests to individual creditors while harming interests of other conciliating creditors.

Article 74 The debtor shall pay off debts according to conditions set forth in the conciliation agreement.

Article 75 The conciliation agreement created through fraudulent or other illegal activities of the debtor shall be void.

Under the circumstance of the proceeding paragraph, the people’s court shall declare the debtor bankrupt.

Under the circumstance of the proceeding paragraph, the liquidation received by the creditor according to the conciliation agreement shall not be returned within the scope of the same proportion.

Article 76 Where the debtor fails to pay off debts according to conditions provided in the conciliation agreement, the conciliating creditor may apply to the people’s court for enforcement. The conciliation made in the agreement by the conciliating creditor will lose effect.

Article 77 Where the debtor fails or is unable to pay off debts according to conditions provided in the conciliation agreement, the conciliating creditor may apply to the people’s court for declaring the debtor bankrupt.

Where the people’s court declares the debtor bankrupt, liquidation received by the conciliating creditor from the debtor due to the execution of the agreement is still valid. The part of conciliating creditor’s rights that are not liquidated shall be exercised as bankrupt obligatory rights.

Creditors provided in the proceeding paragraph can only continue to receive the distribution when the bankruptcy distribution received by other creditors reaches the same proportion with the liquidation received by its own.

Article 78 Where there is a circumstance provided in Article 76 and 77, the security provided by the third person for the conclusion and enforcement of the conciliation agreement continues to be valid.

Article 79 After the people’s court accepts the bankruptcy case, where a conciliation agreement is reached through unanimous consent of all creditors, the debtor may apply to the people’s court for a decision recognizing the agreement and at the same time the decision for concluding the bankruptcy case.

Chapter V Restructure

Section 1 Application for Restructure and Examination

Article 80 Provisions in this chapter only apply to those enterprise entities under circumstance provided in Article 3 of this Law with the hope of being saved.

Where corporate enterprises are unable to pay off debts due because of operational or financial difficulty, the restructure procedure provided by this Law may apply.

Article 81 Where the debtor or the creditor applies according the first paragraph of Article 9 of this Law, it may directly apply to the people’s court for restructure.

After the people’s court accepts the bankruptcy case and before it declares the debtor bankrupt, the debtor or the creditor may apply to the people’s court for restructure.

Where the debtor has a circumstance provided in Article 3 of this Law, investors holding more than 1/3 of the total registered capital of the debtor may directly apply to the people’s court for restructure, and may apply for restructure after the acceptance of the case and before the declaration of bankruptcy of the debtor.

Article 82 When applying for restructure, a written application for restructure shall be presented to the people’s court, together with relevant evidences and a primary project.

Where the people’s court, upon examination, considers that the application for restructure meets with provisions in this Law, it shall make a decision permitting the debtor to conduct restructure.

Section 2 Business Operation during the Period of Restructure

Article 83 The period of restructure is from the time when the people’s court makes a decision permitting the debtor to conduct restructure to the time when the people’s court makes a decision approving the restructure plan or terminating the procedure of restructure. The duration for restructure shall not exceed 12 months.

Article 84 The manager exercises functions provided in Article 30 of this Law during the period of restructure .

Article 85 During the period of restructure , the manager may, upon the agreement of the creditors’ conference, employ through contract professional persons in enterprise operation and management to take charge of the enterprise’s business operation.

Persons employed according to the proceeding paragraph shall acquire the permission from the manager when conducting activities provided in Article 31 of this Law.

Article 86 During the period of restructure , the mortgagee, pledgee and lienor of the debtor shall not exercise right of disposition over the object matter of the security. However, if the possible damage to the pledge or the lien or the possible deterioration of its value is sufficient to harm the right of pledge or lien, the pledgee or the lienor may sale through auction or sell off the object and deposit the price.

The manager may take back the object matter of the pledge or the lien in order to continue the debtor’s business operation, but substitute security shall be provided.

Article 87 Debts borne to the debtor in order to continue business operation during the period of restructure shall be deemed as common debts.

The debt, who makes loan to continue business operation during the period of restructure , may take property which is not the object matter of right of security as the guaranty for the obligatory rights.

Article 88 Where the debtor possesses other’s property with lawful basis, if the person having right over the property, in violation of conditions agreed, claims the property within the period of restructure , the manager may reject.

Article 89 The debts of the restructure creditor and debtor during the period of restructure may set off. The debt must be of the same kind and due before the acceptance of the bankruptcy case by the people’s court.

The restructure creditor’s rights received through transfer by the debtor’s debtor after the application of the bankruptcy case shall not be set off.

Article 90 During the period of restructure , the manager is entitled to decide on whether to dissolve or continue to perform the bilateral contracts concluded before the procedure of restructure while not yet performed and notify in a written form the counterpart. Where the manager fails to inform the counterpart within 3 months after the procedure of restructure, or fails to reply within one month after receiving summon exhortation from the counterpart, the contract will be deemed as dissolved. Damages resulted from the dissolution of the contract is an obligatory right that can be declared.
Where the manager decide to continue to perform a bilateral contract concluded before the procedure of restructure of which the performance has been started, the counterpart shall not refuse to perform the contract or terminate the contract in advance with the excuse of non-performance of debts before the restructure procedure.

Article 91 In order to continue business operation during the period of restructure , the manager shall, according to relevant laws, decide on the employment or non-employment of current staff and workers of the restructure enterprises, and it may also employ persons out of the restructure enterprises.

Article 92 Where the people’s court makes a decision permitting the debtor to conduct restructure, the investors of the debtor shall not claim for any property delivery to the debtor based on the investor’s rights.

Where the people’s court makes a decision permitting the debtor to conduct restructure, directors, managers and other personnel of high management shall not transfer part or all of its stock rights to the debtor to a third person.

Article 93 After the restructure procedure starts and before the restructure plan is approved, under the following circumstances when persons with related interests applies, the people’s court may, upon examining and ascertaining, make a decision to terminate the restructure
procedure:

1) The debtor’s business and property situation continue to deteriorate and there is little possibility for revitalization;
2) The debtor conducts fraudulent activities, purposefully mitigates enterprise property, suspends without fair justification or conducts other activities obviously unfavorable to creditors; and
3) The manager is unable to perform duties because of activities of the legal organ of the debtor and other personnel.

The people’s court may, based on its function, terminate restructure procedure one month in advance before the period of restructure expires where the restructure plan is not approved in advance.

Under the circumstance of the proceeding two paragraphs, where the debtor has a circumstance provided in the first paragraph of Article 3 of this Law, the people’s court shall make a simultaneous decision on declaring the debtor bankrupt except that the debtor or the creditor applies to solve debts through a way of conciliation before bankruptcy declaration.

Section 3 Restructure Plan

Article 94 The debtor shall draft on the restructure plan . The restructure plan shall be reported to the people’s court for rectification after being approved at the creditors’ conference.

Article 95 The draft of the restructure plan shall include the following contents:

1) business project of the restructure enterprise;
2) project for adjustment of creditor’s rights;
3) project for liquidation of creditor’s right;
4) restructure executor;
5) execution period of the restructure plan; and
6) other projects favorable to the restructure plan.

Article 96 Creditor’s rights in the restructure plan can be divided into the following kinds:

1) creditor’s rights with a property security;
2) labour creditor’s rights;
3) tax; and
4) ordinary creditor’s rights.

Article 97 The restructure plan can adopt respectively the following measures to adjust various kinds of creditor’s rights:

1) to decrease the liquidation rate proportionately;
2) to pay off at one time or by installment or through suspension;
3) to modify other conditions of the creditor’s rights; and
4) other measures consistent to laws and administrative regulations.

Creditor’s right of the same kind in the restructure plan shall be liquidated at a same condition.

Article 98 The restructure plan may include a project for merger or division of the restructure enterprises.

Article 99 Provisions in Article 29 of this Law shall apply to the qualification for the restructure executor.

Article 100 The manager shall present to the people’s court the draft of the restructure plan and feasibility report within the period set by the people’s court.

Article 101 After receiving the draft restructure plan, where the people’s court considers it satisfying with this Law upon examination, it shall convene the creditors’ conference timely and present for voting.

The debtor and the manager shall explain to the creditors’ conference on the draft restructure plan and reply to inquiries.

Article 102 Investors of the debtor may attend the creditors’ conference when discussing the draft restructure plan.

Article 103 Where the creditors’ conference votes on the draft restructure plan, it shall divide into groups to vote according to the kinds of the obligatory rights provided in Article 96 of this Law.

Where more than half creditors in a same voting group who attend the conference agree on the draft restructure plan and the amount of creditor’s rights represented makes up more than 2/3 of the total amount ascertained, the draft restructure plan will be deemed as passed in that group.

Where each group passes the draft restructure plan, the restructure plan will be deemed as passed.

Article 104 Where the creditors’ conference fails to pass the draft restructure plan , the people’s court shall make a decision concluding the restructure procedure and declaring the debtor bankrupt.

Article 105 The manager shall apply to the people’s court to approve the restructure plan within 15 days after the restructure plan is passed.
After receiving the application, where the people’s court considers it satisfying provisions in this Law upon examination, it shall make a decision approving the restructure plan.

Article 106 Before the people’s court makes a decision according to Article the second paragraph of Article 105, it shall hold a hearing and listen to opinions of the manager, the supervisor, parties and relevant departments and experts.

Article 107 Where the people’s court, upon examination, considers that the restructure plan does not meet provisions of this Law, it shall make a decision rejecting the application for the approval of the restructure plan.

After the people’s court makes a decision rejecting the application for the approval of the restructure plan, where the debtor is under a circumstance provided in paragraph one of Article 3 of this Law, the people’s court shall declare the debtor bankrupt. Where the debtor is not under a circumstance provided in paragraph one of Article 3 of this Law, the people’s court shall make a decision concluding the bankruptcy case.

Article 108 When the people’s court makes a decision approving the restructure plan, it shall notify the manager to transfer the debtor’s property and management affairs to the restructure executor. The restructure executor starts to perform its function from the date when the people’s court approves the restructure plan. The manager stops duty performance since the date when the people’s court approves the restructure plan.

Article 109 The restructure plan approved by the people’s court is binding on all obligatory rights created before the acceptance of the bankruptcy case by the people’s court.

Restructure obligatory rights that fails to be declared according to this Law shall not be exercised during the execution of the restructure plan. After the restructure plan completes in execution, they can be exercised according to the liquidating terms for obligatory rights of the same kind in the restructure
plan.

Liabilities for liquidation borne to the guarantor of the restructure enterprise or other joint debtor will not be affected by the restructure plan.

Article 110 The restructure executor is in charge of the execution of the restructure plan.

Article 111 Where the restructure enterprise is unable to or fails to execute the restructure plan, the people’s court shall, upon the application of persons with related interests, make a decision terminating the execution of the restructure plan.

Where the people’s court makes a decision terminating the execution of the restructure plan , the people’s court shall declare the debtor bankrupt.

Under the circumstance provided in paragraph one of this Article, conciliation made by the restructure creditor in the restructure plan loses effect. But, security provided for the execution of the restructure plan continues to be valid within the scope of security provided by the restructure
plan.

Article 112 When the execution of the restructure plan completes, the restructure executor stops its duty performance and presents to the people’s court on the execution report timely. The people’s court, upon examination and recognition, shall make a decision concluding the bankruptcy case.

The debtor’s liability for liquidating the part of the restructure obligatory rights mitigated according to the restructure plan will be exempted from the date when the people’s court makes a decision concluding the bankruptcy case.

Chapter VI Bankruptcy Liquidation

Section 1 Declaration of Bankruptcy

Article 113 Where the people’s court declares the debtor bankrupt according to this Law, a written decision shall be made and be served to the debtor within 3 days after the decision is made.

Article 114 Where the people’s court with jurisdiction for the bankrupt case discovers in the process of hearing civil cases or civil enforcement that the debtor has a circumstance provided in the first paragraph of Article 3 of this Law, it may, based on its function, declare the debtor bankrupt.

The people’s court shall deliver the decision to the debtor within 3 days after the decision is made declaring the debtor bankrupt according to its function.

Articles 15,16, 17, 19, 20, 21, 38, 44 and 45 of this Law shall apply to cases in which the people’s court declares bankruptcy based on its function.

Article 115 After the people’s court makes a decision declaring the debtor bankrupt shall make a public notice within 10 days since the date on which the decision is made. The public notice shall include the following items:

1) the main body and date of the decision on bankruptcy declaration;
2) the name of the bankruptcy assignee where it is already appointed, the address where business is dealt with and contacting telephone;
3) the debtor or property holder of the bankrupt person shall pay off debts or deliver property to the manager or the bankruptcy assignee; and
4) other items that the people’s court deems that shall be included in the public notice.

When the people’s court declares the debtor bankrupt based on its function, the public notice shall also specify items provided in item 2 and 5 of the second paragraph of Article 16 of this Law.

Article 116 Before declaring bankruptcy, the people’s court shall make a decision concluding the procedure of bankruptcy and publicize the decision under one of the following circumstances:

1) Relevant authorities of the government provide support or adopt other measures to help the debtor in paying off debts;
2) Other organizations or individuals provide security for the debt or help the debtor in paying off debts;
3) The debtor has already liquidated all of the due debts.

Article 117 Where the property of the partnership enterprise is not sufficient to liquidate debts due, the people’s court shall declare the partnership enterprise bankrupt, and meanwhile declare all partners bankrupt. But, where the partner has provided property which is sufficient to pay off all debts of the partnership enterprise, the people’s court will not declare all the partners bankrupt while declare the partnership enterprise bankrupt.

The provision in proceeding paragraph shall apply to the bankruptcy of solely-invested individual enterprises.

Section 2 Bankruptcy assignee

Article 118 After declaring the debtor bankrupt, the people’s court shall appoint bankruptcy assignee within 7 days since the date on which the decision is made. Before the bankruptcy assignee accedes, the manager will act for the bankruptcy assignee, executing its function.

The bankruptcy assignee will be called liquidating workshop when its number is more than one. Members of the liquidating workshop jointly execute its function. The chief of the workshop will be appointed by the people’s court.

After appointing the bankruptcy assignee, the people’s court shall publicize in time the name of the bankruptcy assignee and address for dealing with business affairs.

Article 119 Article 29 of this Law shall apply to the qualification of the bankruptcy assignee.

Article 120 The bankruptcy assignee is responsible for the management, liquidation, appraisal, sale and distribution of bankruptcy property and conducts all civil activities in its own name within the business scope the bankruptcy liquidation.

Where the bankruptcy assignee performs duties, Article 30 of this Law will apply.

The bankruptcy assignee shall report to the people’s court on its work when performing duties and be subject to supervision of the creditors’ conference and the supervisor.

Article 121 Article 32 of this Law shall apply to the remuneration of the bankruptcy assignee, costs and liabilities necessary for performing duties.

Article 122 Article 33 of this Law shall apply to the bankruptcy assignee when relieving from the position.

Section 3 Bankruptcy Property

Article 123 All properties and property rights belonging to the bankrupt person when declared bankrupt and those acquired by the bankrupt person before the conclusion of the bankruptcy procedure constitute the bankruptcy property.

Article 124 Where disputes arose among the bankruptcy assignee, bankrupt person or other persons with related interests on the belonging of the bankruptcy property, they may bring suit to the people’s court where the bankruptcy case is heard.

Article 125 As to property not belonging the bankrupt person, the person having a right over the property may claim the property through the bankruptcy assignee.

Article 126 Where the seller has transported the object matter of the sale, while the bankrupt person has not yet received and not paid off the total price when declared bankrupt, the seller may claim the object matter in transportation. But the bankruptcy assignee may pay the total price and ask the seller to delivery the object matter.

The proceeding paragraph does not affect the application of Article 132 of this Law.

Section 4 Bankruptcy Obligatory Rights

Article 127 As to Non-monetary obligatory rights and obligatory rights expressed in foreign currencies, the amount of the bankruptcy obligatory rights shall be the amount of the obligatory rights evaluated at the time of bankruptcy declaration.

The standard for calculating the evaluated amount of the obligatory rights provided in the proceeding paragraph apply the second paragraph of Article 44 of this Law.

Article 128 Where one or more joint debtors are declared bankrupt, the creditor may take the total amount of its obligatory rights at the time of bankruptcy declaration as bankruptcy obligatory rights and exercise rights separately to each bankrupt person.

Article 129 Where one or more joint debtors are declared bankrupt and the other joint debtor has paid off debts for the bankrupt person, it may exercise its right to recourse as the bankruptcy obligatory right.

Where one or more joint debtors are declared bankrupt, other joint debtor may exercise its future right to recourse, when paying off debts for the bankrupt person, as the bankruptcy obligatory right, except that the creditors have already exercised the total amount of the obligatory rights.

Article 130 Article 129 of this Law applies to the guarantor of the bankrupt person.

Article 131 Where partners is declared bankrupt according to this Law, every partner shall liquidate separately.

Creditors to partners and creditors to the partnership enterprise is equal in the procedure of bankruptcy liquidation for each partner.

As to the part of the bankruptcy obligatory rights which the bankruptcy property of the partnership enterprise are not enough to pay off, creditors to the partnership enterprise may, according to Article 128 of this Law, exercise its right in the procedure of bankruptcy liquidation for each partner. But, the total amount received from the distribution through exercising the right shall not exceed the amount of the obligatory right to be liquidated.

Article 132 The bankruptcy assignee has the right to decide on dissolving or continuing to perform a bilateral contract not yet performed to the bankrupt person.

The counterpart of the contract not performed may set a time limit for the bankruptcy assignee to summon by exhortation it to make the decision on whether to dissolve or continue to perform the contract. If the bankruptcy assignee fails to reply within the time limit, the contract shall be deemed as dissolved.

Where the bankruptcy assignee decides to continue to perform the contract, while the counterpart requires it to provide corresponding security in provided or reasonable period, the contract shall be deemed as dissolved if the bankruptcy assignee fails to provide security in the provided or reasonable period.

Where the bankruptcy assignee dissolves the contract and the counterpart has already paid a deposit, the right for claiming the deposit will be the bankruptcy obligatory right.

Where the contract is dissolved according to provisions in proceeding four paragraphs, the counterpart’s right of claiming damages will the bankruptcy obligatory right.

Article 133 A contract of mandate terminates due to bankruptcy declaration. But, if the agent has not received the notice of bankruptcy declaration and is unaware of the fact of bankruptcy declaration, and continues to dispose the authorized affairs, obligatory rights thus incurred
will be bankruptcy obligatory rights.

Section 5 Right of Set-off

Article 134 Where the creditor owes debts to the bankrupt person before bankruptcy declaration, regardless whether the kind of debts is same, the creditor may claim for set-off to the bankruptcy assignee before the project on bankruptcy distribution is publicized.

Article 135 Under one of the following circumstances, set-off provided in
Article 134 of this Law shall not apply:

1) The bankruptcy creditor owes debts to the bankrupt person after the bankruptcy declaration;
2) Debtors of the bankrupt person acquire others’ bankruptcy obligatory rights after bankruptcy declaration;
3) The bankruptcy creditor already knows that the bankrupt person stops payment or declares for bankruptcy and still owes debts to the bankrupt person, except that the creditor owes debts due to reasons provided by law or reasons took place one year before the application for bankruptcy.
4) The debtor of the bankrupt person already knows that the bankrupt person stops payment or applies for bankruptcy, but still acquires obligatory rights from the bankrupt person, except that the debtor acquires obligatory rights due to reasons provided by law or reasons took place one year before the application for bankruptcy.

Section 6 Right of Priority

Article 136 Persons having a right of mortgage, pledge and lien over the property or the rights of the bankrupt person are person with right of priority.
Persons with right of priority enjoy right of priority in liquidation by the object matter to the right.

Article 137 Persons with right of priority, when exercising the right, is not subject to restriction for the procedure for bankruptcy liquidation.

Where creditors with right of priority exercise the right, but are not fully liquidated, the part of creditor’s rights not paid off shall be exercised according to the procedure of bankruptcy liquidation.

Where creditors with right of priority give up the right of being liquidated in prior, they shall exercise the right according to the procedure for bankruptcy liquidation.

Article 138 The bankruptcy assignee may claim the object matter to the right of priority through paying off debts or providing other relevant security.
As to liquidation of debts provided in the proceeding paragraph, when the value of the object matter to the right of priority is lower than the amount of obligatory rights secured, the value shall not exceed the market price at that time.

Section 7 Appraisal and Distribution

Article 139 The bankruptcy assignee shall sell off bankruptcy property timely according to appraisal project for bankruptcy property passed by the creditors’ conference or upon the permission of the supervisor.

Article 140 The bankruptcy assignee shall prepare the appraisal project for bankruptcy property timely and present to the creditors’ conference for discussion. The project passed by the creditors’ conference will be enforced after being presented to the people’s court to make a decision.
Decision made in the proceeding paragraph need not be publicized.

Article 141 Bankruptcy property appraised shall be sold through auction, except for otherwise provided by the resolution made by the creditors’ conference.

Integrated equipment in the bankruptcy property shall be sold off in whole.
Where it can not be sold in whole, it may be sold off separately.

Bankrupt enterprise can be sold off in whole or in part. When the enterprise is sold, individual property can be sold separately.

Property that can not be sold through public auction or sold publicly shall be sold off in a way provided by the state.

Article 142 Bankruptcy property shall liquidate according to the following sequence after paying off in prior the bankruptcy costs and common debts:

1) salaries owed to laborers, owed costs for social security that shall be paid and other costs which shall be paid to laborers according to laws and administrative regulations;
2) tax owed by the bankrupt person;
3) ordinary bankruptcy obligatory rights;

Where the bankruptcy property is insufficient to pay off debts in the same sequence of liquidation, it shall be distributed proportionately.

Article 143 Bankruptcy distribution shall be conducted in a monetary way except that the resolution made by the creditors’ conference has special provisions.

Article 144 Bankruptcy assignee shall prepare distribution project for bankruptcy property in time and present to the creditors’ conference for discussion.

Distribution project provided in the proceeding paragraph shall specify the following items:

1) name and address of creditors participating bankruptcy distribution;
2) amount of creditor’s rights involved in the distribution;
3) amount of property subject to the distribution;
4) sequence, ratio and amount of bankruptcy distribution;
5) measures for implementing bankruptcy distribution.

After the creditors’ conference passes the distribution project for bankruptcy property upon discussion, the bankruptcy assignee shall present to the people’s court the distribution project for bankruptcy property to make a decision.

The distribution project for bankruptcy property comes into effect since the date when the court makes the decision.

Article 145 After the distribution project for the bankrupt property comes into effect, it shall be implemented by the bankruptcy assignee.

The bankruptcy assignee may make distribution for once or more times according to the distribution project.

Where the bankruptcy assignee makes distribution for several times, it shall publicize the amount of property and creditor’s rights for distribution this time.

When the bankruptcy assignee makes the final distribution, it shall specify in the public notice, together with items provided in the second paragraph of Article 148 of this Law.

Article 146 As to obligatory rights with a term of dissolution, the creditor may receive distribution after providing corresponding security.

After the creditor referred to in the proceeding paragraph receives the distribution, where the term to its right is not satisfied within 30 days after the publication of the final distribution, the creditor will be exempted from the liability of security already provided. Where the security object has been delivered, it shall be returned. Where the term to the obligatory right is satisfied within 30 days after the publication of the final distribution, the distribution received shall be recovered.

Article 147 As to obligatory rights with a term of validity, where the creditor receives bankruptcy distribution, the bankruptcy assignee shall deposit its distribution quota.

The proceeding paragraph applies to obligatory rights with a term of dissolution where the creditor fails to provide any corresponding security.

Where the bankruptcy assignee deposits the distribution quota according to proceeding two paragraphs, the deposited distribution quota shall be
distributed to other creditors if the term of validity is not satisfied or the term
of dissolution is satisfied within 30 days after the publication of the final
distribution. Where the term of validity is satisfied or the term of dissolution is
not satisfied within 30 days after the publication of the final distribution, the
deposited distribution quota shall be delivered to the creditor.

Article 148 The bankruptcy assignee shall deposit the distribution quota
that the creditor does not accept.

Where the creditor does not accept within 60 days after the publication of
the final distribution, it will be deemed as giving up the right of the
distribution. The bankruptcy assignee shall distribute the deposited quota to
other creditors.

Article 149 In bankruptcy distribution, as to obligatory rights subject to
objection or those in pending litigation, the bankruptcy assignee shall deposit
their distribution quota. But where the distribution cannot be accepted within
2 years after the conclusion of the bankruptcy procedure, the people’s court
shall distribute the deposited quota to other creditors.

Section 8 Conclusion of Bankruptcy Case

Article 150 Where the bankruptcy assignee fails in implementing the
bankruptcy distribution according to the project of bankruptcy distribution, it
may apply to the people’s court to make a decision concluding the
bankruptcy case.

The bankruptcy assignee shall present report on the distribution of
bankruptcy property timely after the distribution finishes and apply to the
people’s court to make a decision concluding the bankruptcy case.

After the people’s court receives the application of the bankruptcy assignee
for concluding the bankruptcy case, it shall make a decision on whether to
conclude the bankruptcy case within 30 days.

Article 151 The bankruptcy assignee shall, holding the decision of the
people’s court on concluding the bankruptcy case, apply to the original
registration authority of the bankrupt enterprise to cancel the registration
within 10 days after the case is concluded.

Article 152 The bankruptcy assignee terminates in performing its duties
since the day next to the day on which the registration is cancelled.

Article 153 Within 2 years after the bankruptcy case concludes according
to the fourth paragraph of Article 48 or Article 150, the creditor may apply to
the people’s court to add to the distribution according to the project for
distributing the bankruptcy property under one of the following
circumstances:

1) discover that there is property that shall be recovered according to
Article 26 of this Law;
2) discover that the bankrupt person has other property that shall be
subject to the distribution.

Where there is a circumstance provided in the proceeding paragraph, but
the amount of the property is too little to be added to the distribution, no
distribution will be added.

Article 154 The guarantor of the bankrupt person and other joint debtors
shall continue to be liable for liquidation to obligatory rights not paid off in the
procedure of bankruptcy liquidation after the conclusion of the bankruptcy
case.

Section 9 Exemption

Article 155 Where the bankrupt person is a natural person provided in
paragraph one of Article 2 of this Law, it shall, after the conclusion of
bankruptcy case, before exemption according to Article 156, be liable for
liquidation for the part of bankruptcy obligatory rights unpaid off with its total
property acquired deducting the costs necessary for basic livings and
performance of legal duties.

The bankrupt person provided in the proceeding paragraph may draft a
plan for liquidating debts after the conclusion of the bankruptcy case and
present it to the creditors’ conference for recognition before the conclusion of
the bankruptcy case. The plan for liquidating debts recognized by the
creditors’ conference is binding to both parties.

Article 156 After the conclusion of the bankruptcy case, under one of the
following circumstances, the liability of the bankrupt person shall be exempted from the unpaid part of the ordinary bankruptcy obligatory rights
except for damages for purposeful infringement upon personal rights:

1) Over 40 % of the total bankruptcy obligatory rights have been liquidated
at the time of conclusion of the bankruptcy case and three years have been
passed since the conclusion;
2) Over 30% but less than 40% of the total bankruptcy obligatory rights
have been liquidated at the time of conclusion of the bankruptcy case and
four years have been passed since the conclusion;
3) Over 20% and less than 30% of the total bankruptcy obligatory rights
have been liquidated at the time of conclusion of the bankruptcy case and
five years have been passed since the conclusion;
4) Over 10% and less than 20% of the total bankruptcy obligatory rights
have been liquidated at the time of conclusion of the bankruptcy case and
seven years have been passed since the conclusion;
5) Less than 10% of the total bankruptcy obligatory rights have been
liquidated at the time of conclusion of the bankruptcy case and ten years
have been passed since the conclusion.

Persons being imposed to criminal punishment due to bankruptcy crimes or
conducting activities provided in Chapter 9 or Article 27 of this Law will not
be exempted from the liability.

After being exempted, where the bankrupt person is willing to pay off debts
already exempted, the liquidated interests obtained by the creditor shall be
protected by law.

Chapter VII Summary Procedure

Article 157 After accepting the bankruptcy case, where the people’s court
investigates that the total amount of the debtor’s property is less than
RMB500,000 and the obligatory rights and duties are clear and the total
number of creditors is small, this chapter may apply.
Where this chapter has no provision, other provisions of this Law will apply.

Article 158 Where the people court tries bankruptcy cases to which this
chapter applies, the case may be tried by one judge.

Article 159 To bankruptcy case to which this chapter applies, the debtor
can only apply for conciliation once.

Article 160 Decisions made by the people’s court to cases to which this
chapter applies shall be delivered only through notice. But, decisions on the
acceptance of the bankruptcy case, the declaration of the bankruptcy of the
debtor and the conclusion of the bankruptcy case by the people’s court shall
be publicized in addition to the notice.

Article 161 After accepting cases to which this chapter applies, the
people’s court shall decide on the duration of the declaration of creditor’s
rights which can not be less than 7 days and more than 30 days.

The first creditors’ conference shall be convened within 5 days after the
expiration of the duration for declaring creditor’s rights.

Article 162 Bankruptcy cases tried by the people’s court to which this
chapter applies is not subject to the restriction of period provided in Article
56 of this Law.

Article 163 Bankruptcy cases tried by the people’s court to which this
chapter applies shall be concluded within 12 months after the acceptance of
the case.

Chapter VIII Legal Liabilities

Article 164 The people’s court may summon by force the debtor or its
representative who is obligated to attend the creditors’ conference if it
refuses to attend without fair justification after being summoned by the
people’s court, and the people’s court may at the same time impose a fine of
no less than 1,000 and no more than 5,000 yuan.

The people’s court may impose a fine of no less than 1,000 and no more
than 5,000 yuan to the debtor and other persons who are obligated to make
explanations when they refuse to explain or reply or make false statement or
reply.

Where a crime is constituted, criminal liability will be investigated according
to law.

Article 165 Where, in violation of this Law, the debtor refuses to present
written explanations on its property situation, lists of obligatory duties and
rights and other relevant financial reports or presents false ones, the
people’s court may impose a fine of no less than 2,000 and no more than
10,000 yuan to persons of direct liability.

Where, in violation of this Law, the debtor refuses to deliver to the manager
or bankruptcy assignee property and relevant accounts, documents,
materials and seals concerning the property, the people’s court may impose
a fine of no less than 2,000 and no more than 10,000 yuan.

Where a crime is constituted, criminal liability will be investigated.

Article 166 Where the debtor conducts void activities provided in Article 25
of this Law and one of the following activities within 12 months before the
acceptance of the bankruptcy case by the people’s court, the people’s court
may impose a fine to persons of direct liability of no less than RMB10,000 and no
more than RMB100,000. Where a crime is constituted, criminal liability will
be investigated:

1) sell property at an abnormally low price;
2) pay off undue debts in advance;
3) give up creditor’s rights; or
4) counterfeit or destroy relevant evidences and materials which results in
property situation unclear.

Article 167 Where the debtor conducts one of the following activities, the
people’s court may impose a fine of no less than 5,000 and no more than
50,000 yuan to persons of direct responsibility. Where a crime is constituted,
criminal liability will be investigated according to law:

1) already know the inability to pay off debts, but still provide property
security for debts without property security within 6 months before the
acceptance of the bankruptcy case by the people’s court;
2) already know the inability to pay off debts, but still pay off individual
debts within 6 months before the acceptance of the bankruptcy case by the
people’s court.

Article 168 Where the debtor already knows or should know its inability to
pay off due debts, but still expends money and property irrationally or splurges property, the people’s court may impose a fine of no less than
3,000 and no more than 30,000 yuan to persons of direct responsibility.
Where a crime is constituted, criminal liability will be investigated.

Article 169 Where the manager, the restructure executor, the bankruptcy
assignee, the supervisor, the creditor or its representative exploits its
function or position in enforcing this law to ask for or receive bribery or
obtain other improper interests, the people’s court may impose a fine of no
less than 10,000 and no more than 100,000 yuan according to the
seriousness of the circumstance. Where a crime is constituted, criminal
liability will be investigated.

Article 170 Where the manager, the restructure executor, the bankruptcy
assignee, the supervisor, the creditor or its representative gives bribery in
the process of enforcing this Law, the people’s court may impose a fine of no
less than 2,000 and no more than 3,000 yuan to persons of direct
responsibility according to the seriousness of the circumstance. Where a
crime is constituted, criminal liability will be investigated.

Article 171 The people’s court may admonish or summon by force
whoever violates the provision in item 4 of the first paragraph of Article 20 of
this Law and may at the same time impose a fine of no less than 5,000 and
no more than 50,000 yuan.

Article 172 Where the manager, the restructure executor, the bankruptcy
assignee or the supervisor causes economic damage to the creditor, the
debtor or a third person because of negligence of duties or other illegal
activities, it shall be liable for compensation. Where a gross damage is
caused, a fine of no less than 10,000 and no more than 100,000 yuan and a
punishment of detention may be imposed according to the seriousness of the circumstance. Where a crime is constituted, criminal liability will be investigated.

Chapter IX Supplementary Provisions

Article 173 The Bankrupt enterprise and the local government where the bankrupt enterprise locates shall well resolve the settlement of enterprise workers and staff according to laws and regulations.

Article 174 Where a state enterprise established before the Company Law of the People’s Republic of China took effect is to fall under bankrupty, the State Council is authorized to make otherwise provisions.

Article 175 The law will come into effect from the date of promulgation.

The Law of Enterprise Bankruptcy of the People’s Republic of China (trial) will be nullified since the date of promulgation.

>>>> Chinese

　　 · Draft Bankruptcy Law of the People's Republic of China