Provisions of the Supreme People's Court on Certain Issues Relating to the Application of the Enterprise Bankruptcy Law of the People's Republic of China (I)

Fa Shi [2011] No. 22

September 9, 2011

The Provisions of the Supreme People's Court on Certain Issues Relating to the Application of the Enterprise Bankruptcy Law of the People's Republic of China (I) which were adopted at the 1527th meeting of the Judicial Committee of the Supreme People's Court on August 29, 2011, are hereby promulgated and will come into effect on September 26, 2011.

In order to correctly apply the Enterprise Bankruptcy Law of the People's Republic of China, in light of the trial practice, the following provisions are hereby set out for the issues concerning the application of law in the acceptance of enterprise bankruptcy cases in accordance with the law by people's courts.
　
Article 1 If a debtor is unable to pay off the due debts and falls under any of the following circumstances, the people's court shall hold that it has the cause of bankruptcy:
1. Where its assets are not sufficient to pay off all its debts; and
2. Where it obviously lacks solvency.
If the relevant party asserts that the debtor does not have the cause of bankruptcy on the ground that any party who is severally and jointly liable for the debts of the debtor does not lose solvency, the people's court shall not support the assertion.

　
Article 2 If a debtor has the following circumstances concurrently, the people's court shall hold that the debtor is unable to pay off the due debts:
1. The claim-debt relationship is established legally;
2. The time limit for the repayment of debts has expired; and
3. The debtor fails to pay off all of the debts.

　
Article 3 If the balance sheet, audit report or assets evaluation report of a debtor shows that all of its assets is insufficient to pay off all of its debts, the people's court shall hold that the assets of the debtor is insufficient to pay off all of its debts, except where there is evidence sufficient to prove that the assets of the debtor is able to pay off all of its debts.

　
Article 4 If the assets of a debtor exceed the liabilities on the balance sheet, but it falls under any of the following circumstances, the people's court shall hold that it obviously lacks solvency:
1. Where it is unable to pay off its debts due to such reasons as the serious insufficiency of funds or the failure to realize property;
2. Where it is unable to pay off its debts because the whereabouts of its legal representative is unknown and there is no other person responsible for managing its property;
3. Where it is unable to pay off its debts upon enforcement of the people's court;
4. Where it is unable to pay off its debts because it has made a loss for a long time and it is difficult for it to turn losses into profits; and
5. Any other circumstances which result in the loss of solvency of the debtor.

　
Article 5 I an enterprise with the legal person status has been dissolved without liquidation or has not completed liquidation within a reasonable time limit and a creditor applies for the bankruptcy of the debtor, the people's court shall accept the application, except where the debtor provides evidence within the statutory objection period to prove that it does not have the cause of bankruptcy.

　
Article 6 If a creditor applies for the bankruptcy of a debtor, it shall submit relevant evidence for the inability of the debtor to pay off the due debts. If the debtor fails to file an objection against the application of the creditor with the people's court within the statutory period or the objection is not established, the people's court shall make a ruling in accordance with the law to accept the bankruptcy application.
After accepting the bankruptcy application, the people's court shall order the debtor to submit a description of its financial position, the list of its debts, the list of its claims, its financial reports and other relevant materials. If the debtor refuses to do so, the people's court may take such compulsory measures such as fines against the directly responsible person of the debtor.
　
Article 7 When receiving a bankruptcy application, the people's court shall issue to the applicant a written certificate for the receipt of the application and evidence attached thereto.
After receiving a bankruptcy application, the people's court shall promptly examine, among others, the subject qualification of the applicant, the subject qualification of the debtor, the reasons for bankruptcy, relevant materials and evidence and rule on whether or not to accept the application in accordance with Article 10 of the Enterprise Bankruptcy Law.
If the people's court deems that the applicant shall make additions to or correct the relevant materials, it shall, within five days of the date on which the bankruptcy application is received, notify the applicant of the same. The period in which the parties involved supplement or correct the relevant materials shall not be included in the period specified in Article 10 of the Enterprise Bankruptcy Law.
　
Article 8 Court cost for a bankruptcy case shall be appropriated from the property of the debtor according to Article 43 of the Enterprise Bankruptcy Law. If the relevant party files an objection against the bankruptcy application on the ground that the applicant fails to pay court cost in advance, the people's court shall not support the objection.

Article 9 If an applicant files a bankruptcy application with a people's court and the people's court fails to receive the application or fails to act in accordance with Article 7 hereof, the applicant may file a bankruptcy application with the people's court at the next higher level.
After receiving the bankruptcy application, the people's court at the next higher level shall order the people's court at a lower level to examine the application in accordance with the law and promptly rule on whether or not to accept the application; if the people's court at a lower level still fails to rule on whether or not to accept the application, the people's court at the next higher level may directly make a ruling.
If the people's court at the next higher level rules to accept the bankruptcy application, it may instruct the people's court at a lower level to hear the case.