No. 14 [2020] of the Supreme People’s Court

These opinions are formulated in light of the actual work of the people’s court for the purpose of promoting the efficient adjudication of bankruptcy cases in accordance with law and further improving the efficiency of bankruptcy trials. It also serves to reduce the costs of bankruptcy proceedings, protect the legitimate rights and interests of creditors and debtors, while giving full play to the positive role of bankruptcy trials in improving market subject remedy and withdrawal mechanisms. Measures will be taken to serve and guarantee the high-quality development of the national economy, promote the creation of the international first-class business environment.

I. Optimizing the Procedure and Process of Case Announcement and Acceptance

1. For matters requiring public announcement of the Enterprise Bankruptcy Law and related judicial interpretations, the people’s courts and administrators should post the matters on the information website of the National Bankrupt Enterprise Recombination Cases. At the same time, the announcements can also be posted on the bulletin board of the court accepting bankruptcy cases or the debtor’s place of residence, or published on the official website of the court or newspapers, etc.

For matters requiring notice or notification, the people’s courts and administrators may notify or inform creditors, debtors and other interested parties by telephone, SMS, fax, e-mail, instant messaging, communication groups or other ways that can confirm their receipt of information in a simple way.

2. Where the creditor applies for bankruptcy and the people’s court fails to notify the debtor via simple method and post provided in Article 1, Paragraph 2 of the Opinions, the people’s court shall go to the place of residence to notify the creditor. If the notification is still not made, the people’s court shall make the notification in accordance with the announcement method provided in Article 1, Paragraph 1 of the Opinions. If the debtor has not filed an objection with the people’s court within seven days from the date of the announcement, the debtor shall be deemed to hold no objection to the bankruptcy application after notification.

3. During the process of taking over the debtor’s property and accepting the declaration of claims, the administrator shall require the debtor, creditor and other interested parties to confirm in writing the delivery address, electronic delivery method and relevant legal consequences. For service rules, please refer to the provisions set forth in the Plan for the Pilot Program of the Reform of Separation between Complicated Cases and Simple Ones under Civil Procedure.

The ruling made by the people ’s court does not apply to electronic delivery, except that the pilot courts included in the Measures for the Implementation of the Pilot Program of the Reform of Separation between Complicated Cases and Simple Ones under Civil Procedure shall be excluded in accordance with relevant regulations.

4. According to the provisions of Article 38 of the Minutes of the National Court Work Conference on Bankruptcy Trial, a people’s court shall be appointed for centralized jurisdiction to govern multiple non-substantial merger bankruptcy cases of related companies. If a dispute arises among the relevant people’s courts over the jurisdiction, it should be resolved through consultation. If the negotiation fails, both parties shall report to the higher people’s court for coordination and handling, and a common superior people’s court shall be requested to designate jurisdiction where necessary. If the people’s court at the higher level is required to coordinate the handling, the parties shall submit relevant explanations and materials that have been negotiated. After consultations and coordination, the disputed people’s court shall reach an agreement and form a written summary, and both parties shall comply with the implementation decision. Where relevant matters need to be reported to the common higher people’s court for decision or approval, they shall be handled in accordance with relevant regulations.

II. Improving the Debtors’ Property Takeover and Investigation Methods

5. According to the specific circumstances of the case, the people’s court may simultaneously carry out the preparation work for the designated administrator at the stage of acceptance review of bankruptcy applications. If the administrator makes a real contribution to improving the efficiency and reducing the cost of the bankruptcy process, the people’s court shall take this factor into consideration for determining or adjusting the administrator’s compensation plan.

6. The administrator shall promptly and comprehensively investigate the litigation and execution cases involving the debtor. The court accepting bankruptcy cases may provide the administrator with basic information about the debtor’s litigation and enforcement cases inquired through the court’s case management system in accordance with the administrator’s application or ex officio. If the debtor has an outstanding lawsuit or has not completed the case, the administrator shall promptly report the debtor’s involvement into the bankruptcy proceedings to the relevant people ’s court.

7. The administrator shall promptly and comprehensively investigate the debtor’s property situation. The court accepting bankruptcy cases may, in accordance with the administrator’s application or ex officio, promptly provide the administrator with the debtor’s property information inquired through the court online execution inspection and control system.

8. The administrator shall take over the debtor’s property, seal, account books, documents and other materials in a timely manner. If the debtor refuses to hand over, the people’s court may impose a fine upon the directly liable person according to the administrator’s application or ex officio, and may make a ruling on the content and time limit that the debtor should hand over. If the debtor fails to perform the obligations determined by the ruling, the people’s court may take necessary measures such as search and compulsory delivery in accordance with the relevant provisions of the enforcement procedure of Civil Procedure for enforcement.

During the takeover process, with respect to the property owned by the debtor that does not belong to the debtor, the right holder may claim recovery from the administrator in accordance with Article 38 of the Enterprise Bankruptcy Law. If the administrator disapproves, the right holder may file a lawsuit with the court accepting the bankruptcy case to exercise the right of retrieval. During the litigation, the administrator’s takeover will not be terminated.

9. If the administrator needs to entrust an intermediary institution to evaluate, appraise and audit the debtor’s property, it shall sign an entrustment agreement with the relevant intermediary institution. The entrustment agreement should include the time limit for completing the corresponding work and the liability for breach of contract. Liability for breach of contract may include contents that the intermediary agency fails to complete on time without justifiable reasons. The administrator has the right to entrust other parties, and the fees already charged by the original intermediary institution will be refunded or the uncollected fees will no longer be charged.

III. Improving the Efficiency of Creditors’ Meetings and Voting

10. The first creditor meeting can be held on-site or via online video. The people’s court shall, in accordance with the provisions of Article 14 of the Enterprise Bankruptcy Law, indicate in notice and announcement the way of convening the first meeting of creditors. After the resolution of the first creditors’ meeting is passed, subsequent creditors’ meetings may also be convened by other off-site methods such as non-online video communication groups. Where the creditors’ meeting is convened off-site, the administrator shall verify the identity of the participants, and record and save the meeting process.

11. In addition to on-site voting, the creditors’ meeting may use written, fax, SMS, e-mail, instant messaging, communication group and other off-site methods to vote. The administrator shall acquire and record the electronic data of the voting content in a timely manner through printing, photographing, etc., and seal or sign for further confirmation. If the administrator is an intermediary institution or a liquidation group, it shall be signed and confirmed by two staff members of the administrator. The administrator shall notify the creditors who participated in the voting of the voting results after the creditors’ meeting is held or within three days after the voting period expires.

12. If the creditors request to withdraw the resolution of the creditors’ meeting, the People’s Court shall provide support if it meets the provisions of Article 12 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Enterprise Bankruptcy Law of the People’s Republic of China (3). However, the people’s court will not render support if only slight flaws occur on the convened meeting or the voting procedures without substantial impact on the resolution.

IV. Building a Mechanism of Speedy Trial for Handling Simple Cases

13. For bankruptcy liquidation and settlement cases where the relationship betweencreditor’s rights and debts is clear, the debtor’s property status is clear, and the case is simple, the people ’s court may apply the speedy trial.

Speedy trial shall not apply to a bankruptcy case under any of the following circumstances:

(1) The debtor has a pending litigation and arbitration awaiting a decision or award, and the relationship between creditor’s rights and debts is complex;

(2) The issue of management, price change, distribution of the debtor’s property may be longer with greater difficulties, and the debtor ’s property situation is complicated;

(3) The debtor belongs to a listed company, financial institution, or its affiliated enterprise goes into merger bankruptcy or cross-border bankruptcy;

(4) Other circumstances rendering the application of speedy trial unsuitable.

14. If the people’s court decides to apply the speedy trial while accepting the application for bankruptcy, it shall be notified in the decision letter of the designated manager, and shall be announced jointly with the matters specified in Article 14 of the Enterprise Bankruptcy Law.

15. For bankruptcy cases that apply speedy hearing, the people’s court that accepts the application for bankruptcy shall conclude the case within six months from the date of adjudication.

16. The administrator shall notify the known creditors to participate in the creditors’ meeting 15 days in advance in accordance with the provisions of Article 63 of the Enterprise Bankruptcy Law, and notify the known creditors of the specific contents of the matters to be considered and voted three days in advance, except as all known creditors agree to shorten the above time.

17. At the first creditors’ meeting, the administrator may submit the debtor’s property price change plan, distribution plan and the plan for possible additional distribution after the end of the bankruptcy proceedings to the creditors’ meeting for voting.

After the debtor’s property has actually changed in value, the administrator may calculate the specific amount of the distribution according to the distribution rules adopted by the resolution of the creditors’ meeting. After the debtor informs the creditor, the allocation is made without any further voting.

18. For bankruptcy cases with speedy trial, the following matters shall be handled within the following time limit:

(1) The people’s court shall notify the known creditors or the administrator assists in notifying known creditors within 15 days from the date of ruling to accept the bankruptcy application;

(2) Generally, the administrator shall complete the investigation of the debtor’s property status within 30 days from the date of acceptance and submit a property status report to the people’s court;

(3) If properties are available for bankruptcy distribution, the administrator should generally submit a bankruptcy property distribution report to the people’s court within ten days after the final distribution of the bankruptcy property and submit a ruling to terminate the bankruptcy proceedings;

(4) If the case meets the conditions for terminating the bankruptcy proceedings, the people’s court shall make a ruling within ten days from the date of receiving the relevant application from the administrator.

19. Speedy trial shall not apply to a bankruptcy case or if the case cannot be concluded within the time limit specified in Article 15 of the Opinions, it shall be converted to ordinary trial and the original bankruptcy proceedings shall continue to be valid. The court accepting the bankruptcy case shall send the decision letter on the conversion of the trial method to the administrator and make an announcement. The administrator shall notify the known creditors and debtors of the above matters.

V. Strengthening Coercive Measures and Cracking Down on Debt Evasion

20. Where the relevant persons or other persons of the debtor intentionally make false statements, falsify or destroy the debtor’s account books and other important evidence, or insult, defame, frame, beat, or retaliate against the administrator, in addition to applying the compulsory measures stipulated in the Enterprise Bankruptcy Law in accordance with the law, the people’s court may also handle the matters in accordance with Article 111 of the Civil Procedure Law.

21. Where the debtor’s properties go missing, or creditors, investors, and other interested parties provide preliminary evidence or clear clues that the debtor’s property may be illegally embezzled, misappropriated, concealed, etc., the administrator shall promptly investigate the property survey. If there is evidence to prove that the debtor and its related personnel have committed the acts specified in Article 31, Article 32, Article 33, Article 36 of the Enterprise Bankruptcy Law, the administrator shall recover the relevant property according to law.

22. The People’s courts shall accurately identify the criminalization standards for illegal acts and severely crack down on malicious debt evasion. If the debtor’s property is improperly transferred or disposed of due to the non-standard operation of the enterprise, the administrator shall protect the legitimate rights and interests of the creditors by exercising the right of revocation, recovering property according to law, claiming damages, and the relevant personnel shall be subject to civil liabilities according to law. If the legal representative, investor, actual controller, etc. of the enterprise has maliciously embezzled, misappropriated or concealed the enterprise property, or concealed or deliberately destroyed the accounting documents, accounting books, financial accounting reports and other illegal acts that should be kept according to law, where a crime is suspected, the people’s court shall promptly transfer it to the organs concerned for handling according to the request of the administrator or in accordance with its authority under the law.