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Bankruptcy in China

Bankruptcy in China

Chinese companies that are struggling with their business and can no longer adapt to the market changes can file for bankruptcy. Recent reforms were undertaken by the Chinese Government which aimed to improve the conditions under which the execution of bankruptcy can take place. The purpose is to speed up the entire process and the company liquidation. If you need help dealing with a company bankruptcy case in China, the experts at our law firm in China can help represent you in front of the authorities and handle all of the necessary steps.

The bankruptcy law in China

The Enterprise Bankruptcy Law of the People’s Republic of China is the main document that provides guidance as per the process of bankruptcy in the country. Its articles contain provisions for the bankruptcy proceedings and the generally associated costs, the debtor and the creditor rights, the declaration of bankruptcy and the final processes for the bankruptcy proceedings. The law also contains a number of provisions regarding liquidation. This law only applies to companies incorporated in Mainland China and not to those that are Hong Kong or Macau resident companies.

For a proper understanding of how companies can file for bankruptcy, please watch the video below: 

Bankruptcy process in China

The bankruptcy process in China is governed by the competent Chinese court located in the areas where the company is incorporated. The aim of the procedure is to satisfy the claims of the creditors in case the debtor is no longer able to pay his debts. For this purpose, the creditors can legally request that all the assets of the bankrupt Chinese company are seized and distributed accordingly. This can also apply to the assets of the debtor that are not located in China. The application for bankruptcy can be filed by the debtor himself (in this case it is voluntary) or by the creditor or creditors. When the bankruptcy proceedings are filed against a debtor, he is entitled to be informed that the procedure was commenced, within approximately five days.

The most common expenses associated with the bankruptcy proceedings in China will include the court costs, the expenses associated with the distribution of assets and the expenses for the bankruptcy administrator, the appointed individual who will oversee the development of the process.

Our lawyers in China can give you more information about the applicable laws and a guideline for the bankruptcy process according to your specific case. You can contact our law firm in China if you have questions about this process