To the Beijing Municipal First, Second and Third Intermediate People’s Courts and the people’s courts of all districts:

The Regulation of Beijing Municipal Higher People’s Court on Online Property Auction in Insolvency Proceedings (Trial) were discussed and adopted by the Judicial Committee of Beijing Municipal Higher People’s Court at the 5th meeting of 2019 on April 8, 2019, and are hereby printed and distributed for your compliance. Situations and problems encountered in the implementation shall be reported to the Civil Division II, Beijing Municipal Higher People’s Court in a timely manner.

The Regulation is hereby given.

Beijing Municipal Higher People’s Court

April 23, 2019

Regulation of Beijing Municipal Higher People’s Court on Online Auction of Property in Insolvency Proceedings

In order to regulate the disposition of debtor’s property by the administrator in the bankruptcy proceedings, improve disposition efficiency, maximize the value of debtor’s property and safeguard the legal rights and interests of the parties concerned, this Regulation has been formulated in accordance with Enterprise Bankruptcy Law of the People’s Republic of China, Minutes of the National Court Meeting on Bankruptcy Trial released by the Supreme People’s Court and other relevant regulations while taking into account the practices in bankruptcy trial of Beijing Municipal People’s Court at all levels.

Article 1 This Regulation shall apply to the case when an administrator disposes debtor’s property publicly in the form of online electronic bidding on an Internet-based auction platform pursuant to the law.

Debtor’s property refers to all properties that a debtor owns when a bankruptcy petition is accepted and property that the debtor acquires after a bankruptcy petition is accepted and before the conclusion of the bankruptcy proceedings.

Article 2 Online auction shall take precedence on principle when it comes to the disposition of debtor’s property except where disposition by any of other means is adopted at creditors’ meeting or is required in accordance with relevant laws, administrative regulations and judicial interpretation, or where the debtor’s property is not suitable for disposition through online auction.

Article 3 An administrator shall dispose debtor’s property through online auction platform as the seller in its own name under the supervision of the creditors’ meeting or the people’s court.

Article 4 An online auction platform shall be selected from the list of judicial online auction service providers recognized by the Supreme People’s Court.

Article 5 Whether online auction is to be adopted to dispose debtor’s property and the online auction plan shall be proposed by the administrator in the value realization plan before submitting the proposal to creditors’ meeting for deliberation and voting. Where the administrator shall dispose debtor’s property before the first meeting of the creditors in accordance with Article 26 of the Enterprise Bankruptcy Law, the administrator shall submit the online auction plan to the people’s court to obtain approval by the court.

An online auction plan shall include but not limited to the following:

(1)Scope of debtor’s property subject to disposal through online auction;

(2)The online auction platform to be selected;

(3)The proposed time of auction, starting price or its calculation, required deposit amount or proportion, payment methods of the deposit and auction proceeds and term of payment.

(4)Bidding deadline, single bid increment, number of auctions, price reduction for each auction and announcement period;

(5)Other matters which are to be decided at the creditors’ meeting.

The administrator shall explain to the creditors’ meeting the possible expenses and tax burdens incurred arising from the auction of debtor’s property.

Article 6 Where a creditor who enjoys secured claims against the specific property of a debtor applies to the administrator for disposition of the said specific property for the purpose of value realization and exercise the right to receive payment with priority, the administrator shall follow the principle of maximizing the value of debtor’s property and take into account the opinions of secured party when developing the online auction plan.

Article 7 Where debtor’s property is subjected to online auction, the administrator shall perform the following duties:

(1)Ascertain and explain the ownership of the property, the burden of rights, quality and defects, the arrears of taxes and fees, possession and use of the property to be auctioned;

(2)Draw up and release an auction announcement independently on the selected online auction platform;

(3) Follow relevant laws including the Company Law of the People’s Republic of China, regulations and judicial interpretations, give prior notice to the known persons with priority, and notify them of the details of the online auction three days before the auction announcement is released.

(4)Hand over the property and provide assistance with the formalities of property ownership transfer;

(5)Other legal duties which shall be performed by the administrator.

Article 8 In order to improve the efficiency in disposition of debtor’s property, the administrator may, with the permission of the people’s court, employ a third-party private service provider to develop the description, take photos and/or videos for the property auction, display the property to be auctioned, take questions, show the potential buyers the samples of the property and so on.

The essential expenses for employing a third-party social service provider shall be included in the bankruptcy expenses and subject to the scrutiny at the creditors’ meeting.

Article 9 The administrator who intends to hold online auction shall give prior announcement to the public. The announcement period for the first auction shall not be less then fifteen (15) days and the announcement period for the second auction shall not be less than seven (7) days. The auction announcement shall also be released on the selected online auction platform and the national enterprise bankruptcy reorganization case information websites, as well as through other media when necessary.

An auction announcement shall contain the following information including the property to be auctioned, starting price, deposit amount, bidders’ qualification, the known defects of the property to be auctioned, relevant rights and obligations, legal responsibilities, auction time, online platform, the people’s court responsible for trying the bankruptcy case, the administrator name and contact information etc.

Article 10 The administrator shall publicize the following information on the same day of auction announcement at the selected online auction platform:

(1)Auction announcement;

(2)the text, photos and/or videos concerning the property to be auctioned;

(3)Auction time, starting price and bidding rules;

(4)Bidding deposit, auction proceedings payment methods and account;

(5)Entity enjoying preemptive right and nature of right;

(6)Information of whether the known persons enjoying preemptive right are notified or not;

(7)Property handover method, formalities of property ownership transfer and tax and/or fee burdens;

(8)Other matters which need to be publicized and explained.

Article 11 The administrator who intends to hold online auction of debtor’s property shall propose a reference price for the creditors’ meeting to fix a starting price. The reference price may be fixed in one of the following forms:

(1)Targeted inquiry. Where a debtor’s property has a taxable benchmark price, government pricing or government-guided price, the administrator may conduct targeted inquiry with the relevant institution in the place where the property is located when determining the reference price;

(2)Online inquiry. Where debtor’s property is not required to be subject to on-site inspection or authentication by professionals and the conditions for online inquiry are met, the administrator may conduct online inquiry through judicial online inquiry platform;

(3)Entrusted evaluation. Where entrusted evaluation is required in accordance with relevant laws and administrative regulations or by the creditors’ meeting, the administrator shall entrust an evaluation institution to conduct the evaluation. Where the conditions of online inquiry are not met or the online inquiry fails, the administrator may entrust an evaluation institution to conduct the evaluation;

(4)Appraisal by administrator. Where a reference price cannot be determined through the preceding three methods or entrusted evaluation expense is too high, the administrator may make appraisal based on market trading price and financial data etc.

Where the methods of determining reference price of debtor’s property is not covered in this Regulation, Regulations of the Supreme People’s Court on Several Issues Concerning the Determination of the Reference Prices for Disposition of Property by the People’s Courts shall apply.

Article 12 Where the creditors’ meeting is unable to make resolution on the starting price, the people’s court may rule on the starting price which shall not be lower than 70 percentage of the reference price generally.

Article 13 The creditors’ meeting may authorize the administrator to determine the starting price.

Article 14 The amount of cash deposit that a bidder shall pay ranges from 5 - 20 percentage of the starting price on principle. Where the resolution of the creditors’ meeting determines an amount of cash deposit beyond the said range, the resolution shall be followed.

Article 15 No limits are prescribed for the times and price reduction variation of online auction of debtor’s property. In order to improve efficiency of property disposition, the resolution of the creditors’ meeting on property value realization plan may make it clear that debtor’s property can be disposed through online auction until it is successfully sold in cash or that allowed times of auction failure before the property is sold off can be prescribed.

Article 16 For a determined online auction or in the bidding process, the administrator may decide to postpone, pause or terminate online auction on good reasons but have to report their decision to the creditors’ committee in time or the people’s court in case that the creditors’ committee is not set up. Changing online auction for non-online auction or changing online auction platform shall be subject to resolution of the creditors’ meeting.

Article 17 Where a buyer pulls back after a deal is made through online auction, the paid deposit will not be refunded and will be counted into debtor’s property. Where the deposit amount is insufficient to make up for the auction expenses or the difference between the amounts of the first-time and second-time auctions, the administrator may demand the previous buyer to make repayment.

Where a second-time auction is held due to the previous buyer pulling back, the previous buyer shall not take part in the bidding.

Article 18 Once a deal is made in auction, a letter of confirmation specifying the identity and budding code of the bid-winning buyer and other information will be automatically generated and publicized at the online auction platform. The buyer may request the administrator not to make public their identity information.

Article 19 The buyer shall pay the auction amount specified in the announcement to the bank account designated by the administrator or the people’s court which tries the bankruptcy case. The administrator shall withhold, declare and pay on behalf of the seller the taxes and fees which should be borne by the seller.

Article 20 The administrator shall assist the buyer with the property handover, license or certificate change and ownership transfer, and request the people’s court to provide assistance when it is deemed necessary.

Article 21 Where there is no bidding during the bidding period of an online auction, the auction is considered failure. Where a second-time auction is determined by the resolution of the creditors’ meeting, the administrator shall initiate the online auction within seven (7) working days after the failure except there are special circumstances.

Article 22 Where the creditors’ meeting decides to set up the creditors’ committee, the committee may be authorized by the resolution of the creditor’s meeting to exercise the functions and powers of the creditors’ meeting as stipulated in this Regulation.

Article 23 Where the administrator causes any loss to a creditor, a debtor or a third party in the disposition of debtor’ property due to its failure to perform his due diligence and execute his duties faithfully, the administrator shall bear the compensation.

Article 24 Where the administrator disposes debtor’s property through online auction but there are no specific provisions in this Regulation, Regulations of the Supreme People’s Court on Several Issues Concerning the Judicial Online Auction by the People’s Courts shall apply.

Article 25 Where a liquidation team disposes the property of the liquidated enterprise involved in a compulsory liquidation, this Regulation shall apply.

Article 26 This Regulation shall come into force as of April 23, 2019.