Practice of Enterprise Legal Person Applying for Bankruptcy- Zhiheng Law Firm

Author | Wang Hongting Lawyer

The author used to be a member of the bankruptcy administrator of the people's court, and handled many bankruptcy liquidation cases of corporate legal persons. In the course of practice, I also represented enterprises in non-litigation business of applying for bankruptcy. In this article, the author will share some practical contents of applying for bankruptcy and discuss with you (the bankruptcy liquidation flow chart is attached below).

Bankruptcy law requires

Article 2 of the Enterprise Bankruptcy Law of the People's Republic of China: "If an enterprise legal person cannot pay off its debts as they mature, and its assets are insufficient to pay off all its debts or it is obviously insolvent, its debts shall be liquidated in accordance with the provisions of this Law. If an enterprise legal person has the circumstances specified in the preceding paragraph, or there is a clear possibility of losing its solvency, it may be restructured in accordance with the provisions of this Law."

Requirements for filing for bankruptcy

From the above law, it can be seen that an enterprise legal person can apply to the people's court for bankruptcy liquidation in accordance with the relevant provisions of the Bankruptcy Law of the People's Republic of China only if it has the conditions that it cannot pay off its due debts, and its assets are insufficient to pay off all its debts or it is obviously insolvent.

What is a debt due? Simply put, it is a debt that has expired and should be repaid. For debts that have not yet expired, they do not belong to the scope of the law. Debts that have been confirmed as enforceable by a court judgment, and if the debtor fails to repay the debt within the time limit determined by the judgment, it is a debt that has matured. However, if the loan is made to the bank in installments but has not yet fully matured, but only matures in a single period, the loan is not a debt that has matured.

How to judge whether it is insolvent? In the course of business operation, the assets and liabilities of an enterprise legal person are often related to various items, including office leasing, machinery and equipment, employee wages, operating income, etc. Therefore, when the court reviews the debtor's application for bankruptcy, it generally requires the enterprise to provide audit reports and assets for review.

If the creditor applies for the debtor's bankruptcy, the creditor needs to provide proof that the debtor cannot pay off the due debts, such as the final ruling that cannot be executed.

Application materials

As mentioned above, there are clear legal provisions for the people's court to review bankruptcy cases. For this reason, whether the debtor or the creditor applies, they should submit corresponding evidence to prove that the debtor meets the bankruptcy conditions. According to the relevant provisions of the Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Enterprise Bankruptcy Cases, an enterprise legal person shall submit the following materials when applying for bankruptcy by itself:

(A) a written bankruptcy application;

(B) the enterprise entity qualification certificate;

(4) the situation of enterprise employees and the resettlement plan;

(E) a written statement of the losses, accompanied by an audit report;

(6) A detailed statement of the assets of the enterprise up to the date of bankruptcy application, including tangible assets, intangible assets and investment of the enterprise;

(7) Details of the account opened by the enterprise in the Financial Institution Group, including account opening approval materials, account numbers, funds, etc.;

(8) A statement of creditor's rights, listing the name, domicile, amount of debt, time of occurrence, and the situation of demand and repayment of the debtor of the enterprise;

(9) A statement of the enterprise's debt situation, listing the name, domicile, amount of creditor's rights, and time of occurrence of the enterprise.

(10) the guarantees involved in the enterprise;

(11) the litigation situation that has occurred in the enterprise;

(12) Other materials that the people's court deems appropriate to submit.

Bankruptcy liquidation process

After an enterprise submits an application to the people's court, the people's court may directly review in writing or organize a hearing to check whether it meets the acceptance conditions. After the people's court accepts the application, it will enter the bankruptcy liquidation process. The entire bankruptcy liquidation process is roughly as follows:

The possibility of being rejected by the court

After accepting the bankruptcy liquidation and before the bankruptcy declaration, the people's court will review whether the debtor meets the bankruptcy liquidation conditions. If the conditions are not met after review, the people's court will reject the bankruptcy application. The common reason for rejection is that the debtor has not yet reached insolvent. In recent years, the economic environment has not been good, and some enterprises have indeed experienced poor management. However, although some enterprises have not paid their debts in time, their names or financial books show that there are still other assets that can be disposed of to pay off their debts, which does not meet the situation of insolvency.

Bankruptcy is not debt avoidance

It should be noted that bankruptcy liquidation is not a way to evade debts. The Bankruptcy Law has a series of mechanisms to protect creditors to ensure that debtors will not "evade debts" through bankruptcy proceedings. If the debtor's shareholders have not actually paid their capital contributions, or there is a withdrawal of capital contributions after capital contributions, the shareholders should still bear the obligation of capital contributions, and the administrator can recover the capital contributions from the shareholders.

If the debtor has improper property disposal (such as individual liquidation, unreasonable low-price transactions, etc.) within one year before the people's court accepts the bankruptcy application, the administrator has the right to request the court to revoke it. It is also invalid for the debtor to conceal or transfer property, or make up debts or admit untrue debts in order to avoid debts.

Lawyer Profile

Wang Hongting Lawyer

Attorney of

Secretary General of Marriage and Family Department, Zhiheng Marriage, Family Affairs and Wealth Inheritance Law Center

Member of Zhiheng Company Legal Affairs Center

Contributor of Shenzhen Lawyers Association

Areas of expertise:

Marriage wealth, corporate governance

Civil and commercial affairs, labor disputes

Infringement, bankruptcy liquidation

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