Enterprise Bankruptcy Law of China Ⅵ

Chapter VII

Creditors' Meeting

Section 1 General Provisions

Article 59 A creditor declaring his claims according to law is a member of the creditors' meeting and has the right to attend the meetings of the creditors and enjoy the right to vote.

A creditor whose claims are not confirmed is not entitled to exercise the right to vote unless the people's court can temporarily decide on the amount of his claims for the sake of his exercise of such right.

Where a creditor secured by the specific property of the debtor and that has not given up his priority right to be repaid shall not enjoy the right to vote on matters as specified in Subparagraphs （7） and （10） under the first paragraph of Article 61 of this Law.

A creditor may entrust his agent with the task of attending the creditors' meeting and exercising the right to vote. To attend the creditors' meeting, the agent shall submit a letter of power of attorney to the people's court or to the chairman of the creditors' meeting.

A creditors' meeting shall be attended by representatives of the employees and of the trade union of the debtor, who may express their views on relevant issues.

Article 60 There shall be a chairman of the creditors' meeting, who shall be designated by the people's court from among the creditors with the right to vote.

The chairman of the creditors' meeting shall preside over such meetings.

Article 61 The creditors' meeting shall exercise the following functions and powers:

（1） checking the claims;

（2） applying with the people's court for replacing the administrator and examining the expenses and remuneration of the administrator;

（3） supervising the work of the administrator;

（4） selecting and replacing members of the creditors' committee;

（5） deciding on whether to have the debtor continue or discontinue his business operations;

（6） adopting plans for reorganization;

（7） adopting agreements for compromise;

（8） adopting plans for management of the debtor's property;

（9） adopting plans for realizing the bankruptcy property into money;

（10） adopting plans for distribution of the bankruptcy property; and

（11） other functions and powers that the people's court deems that the creditors' meeting should exercise.

The creditors' meeting shall keep minutes of the resolutions made on the matters discussed.

Article 62 The first creditors' meeting shall be convened by the people's court within 15 days before the expiration date of the time limit for declaration of claims.@@page@@

Subsequent creditors' meetings may be held when the people's court deems it necessary, or when the administrator, the creditors' committee, or a creditor holding one quarter or more of the total amount of claims proposes to the chairman of the creditors' meeting that such a meeting be held.

Article 63 For convening a creditors' meeting, the administrator shall notify the known creditors 15 days in advance.

Article 64 A resolution made by the creditors' meeting shall be adopted by more than half of the creditors that attend the meeting, have the right to vote, and represent half or more of the total amount of the unsecured claims, unless otherwise provided for by this Law.

Where a creditor believes that a resolution adopted at a creditors' meeting is at variance with the provisions of law or undermines his interests, he may, within 15 days from the date when the resolution is made at the creditors' meeting, plead with the people's court to decide to revoke the resolution and order the creditors' meeting to have a resolution remade according to law.

A resolution adopted at the creditors' meeting shall be binding on all creditors.

Article 65 Where any of the matters specified in Subparagraphs （8） and （9） under the first paragraph of Article 61 of this Law is not adopted through voting at the creditors' meeting, it shall be subject to decision by the people's court.

Where the matter as specified in Subparagraph （10） under the first paragraph of Article 61 of this Law is still not adopted by a second voting at the creditors' meeting, it shall be subject to decision by the people's court.

The decisions as specified in the preceding two paragraphs may be announced by the people's court at the creditors' meeting or notified to the creditors.

Article 66 Where a creditor is dissatisfied with the decision made by the people's court according to the first paragraph in Article 65 of this Law, or where the creditors representing half or more of the total unsecured claims are dissatisfied with the decision made by the people's court according to the second paragraph in Article 65 of this Law, he or they may, within 15 days from the date when the decision is announced or when the notification thereof is received, apply with the said people's court for review. Execution of the decision shall not be discontinued during the period of review.

Section 2 The Creditors' Committee

Article 67 The creditors' meeting may decide to establish a creditors' committee. The creditors' committee shall be composed of the creditors' representatives who are selected by the creditors' meeting and a representative from among the employees of the debtor or from the trade union of the debtor. The members of the creditors' committee shall not exceed nine persons in number.

The members of the creditors' committee shall be subject to confirmation by decision of the people's court in writing.

Article 68 The creditors' committee shall perform the following functions and powers:

（1） supervising the management and disposition of the debtor's property;

（2） supervising the distribution of the bankruptcy property;

（3） proposing the convening of a creditors' meeting; and

（4） other functions and powers as entrusted by the creditors' meeting.

When performing its functions and powers, the creditors' committee shall have the right to require the administrator and the relevant employee of the debtor to give an explanation of the matters that fall within the scope of his functions and powers or provide relevant documents.

Where the administrator or the relevant employee of the debtor, in violation of the provisions of this Law, refuses to accept supervision, the creditors' committee shall have the right to plead with the people's court to make a decision on the matters subject to its supervision, and the latter shall make the decision within five days.

Article 69 Before doing any of the following, the administrator shall report to the creditors' committee in a timely manner:

（1） transferring of the rights and interests of such immovables as land and houses;

（2） transferring of such property rights as the right to prospecting mineral deposits, the right to mining and the intellectual property right;

（3） transferring of all the inventory or business operation;

（4） borrowing of money;

（5） creating of security on property;@@page@@

（6） transferring of claims and securities;

（7） executing the contract left unfulfilled by the debtor and the other party;

（8） waivering of rights;

（9） withdrawing of a pledge; and

（10） other acts for disposing of the property that has a vital bearing on the creditor's interests.

Where there is no such creditors' committee, the administrator shall, before executing what is specified in the preceding paragraph, report to the people's court in a timely manner.

Chapter VIII

Reorganization

Section 1 Application for and Period of Reorganization

Article 70 A debtor or creditor may, according to the provisions of this Law, directly apply with the people's court for having the debtor reorganized.

Where a creditor applies for putting his debtor into bankruptcy liquidation, the debtor or his capital contributors whose capital contribution makes up one-tenth or more of the debtor's registered capital may, after the people's court accepts the application for bankruptcy and before it declares the debtor bankrupt, apply with the people's court for reorganization.

Article 71 Where upon examination, the people's court deems that an application for reorganization conforms to the provisions of this Law, it shall rule that the debtor should undergo reorganization and shall make the matter known to the public.

Article 72 The period of reorganization shall last from the date when the people's court rules that the debtor should undergo reorganization to the date when the procedure for reorganization is terminated.

Article 73 During the period of reorganization, the debtor may, through his application and upon approval granted by the people's court, manage his property and business operations on his own under the supervision of an administrator.

Under conditions as specified in the preceding paragraph, the administrator that has taken over the property and business operations from the debtor in accordance with the provisions of this Law shall hand over the property and business operations to the debtor, and the functions and powers to be exercised by the administrator as specified by this Law shall be exercised by the debtor.

Article 74 The administrator that takes charge of the property and business operations may appoint a business manager of the debtor to take care of the business operations.

Article 75 During the period of reorganization, the exercise of the security right over the specific property of a debtor shall be suspended. However, in the case of possible damage or marked depreciation of value of the security, which may impair the secured creditor's right, the secured creditor may apply with the people's court for resuming the exercise of his security right.

During the period of reorganization, the debtor or administrator that borrows money for carrying on business may create a security on the loan.

Article 76 In the case of another person's property that is legally taken into possession by a debtor, if the obligee requests to take the property back during the period of reorganization, the terms previously agreed upon shall be met.

Article 77 During the period of reorganization, no capital contributor of a debtor may request for distribution of profits derived from his investment.

During the period of reorganization, no director, supervisor or senior manager of a debtor may transfer to a third party the equity of the debtor he holds, unless with the consent of the people's court.

Article 78 Under one of the following circumstances during the period of reorganization, the people's court shall, upon request by an administrator or an interested party, rule that the reorganization procedure should be terminated and shall declare the debtor bankrupt:

（1） where the business operations and financial position of the debtor continue to deteriorate and there is no hope of retrieval;

（2） where the debtor indulges in fraud or maliciously decreases his property, or commits any other act which is obviously disadvantageous to his creditors; or

（3） where the debtor commits such an act as to make it impossible for the administrator to perform his duties.

Section 2 Formulation of and Approval for a Reorganization Plan

Article 79 A debtor or administrator shall, within six months from the date when the people's court rules that the debtor should undergo reorganization, submit a draft plan for reorganization to the people's court and the creditors' meeting at the same time.

Upon request made by a debtor or administrator before the expiration of the period as specified in the preceding paragraph and on justifiable grounds, the people's court may rule that the period should be extended for three months.

Where a debtor or administrator fails to submit a draft plan for reorganization on schedule, the people's court shall rule that the procedure for reorganization should be terminated and declare the debtor bankrupt.

Article 80 Where it is the debtor who manages his own property and business operations, a draft plan for reorganization shall be formulated by the debtor.

Where it is the administrator who is in charge of management of the property and business operations, the draft plan for reorganization shall be formulated by the administrator.@@page@@

Article 81 A draft plan for reorganization shall contain the following:

（1） the debtor's plan for business operations;

（2） classification of the creditors' claims;

（3） the plan for the adjustment of the claims;

（4） the plan for payment of the claims;

（5） the period of time for implementing the reorganization plan;

（6） the period of time for supervising the implementation of the reorganization plan; and

（7） other plans conducive to the debtor's reorganization.

Article 82 For the creditors holding the following categories of the claims to attend the creditors' meeting at which the draft plan for reorganization is to be discussed, they shall be grouped according to the following categories of the claims when a vote is taken on the draft plan for reorganization:

（1） the secured claims on the debtor's specific property;

（2） the wages, subsidies for medical treatment, injuries and disability and the pensions for the disabled and the families of the deceased which the debtor owes, the basic old-age insurance premiums and the basic medical insurance premiums which he owes and fails to enter in the employees' personal accounts, and the compensations which should be paid to the employees as prescribed by relevant laws and administrative regulations;

（3） the taxes the debtor fails to pay; and

（4） the common claims.

For a vote on the draft plan for reorganization, the people's court may, when necessary, decide to form a group of small-claim creditors under the category of the common claims.

Article 83 It shall not be stipulated in a reorganization plan that the social insurance premiums which a debtor fails to pay, other than the ones which are specified under Subparagraph （2） in the first paragraph of Article 82 of this Law should be reduced or exempted. The creditor involved in the said ones shall not take part in the voting of the draft plan for reorganization.

Article 84 The people's court shall, within 30 days from the date when it receives a draft plan for reorganization, convene a creditors' meeting for a vote on the draft.

When more than half of the creditors in voting group for the same category of claims who are present at the creditors' meeting agree to a draft plan for reorganization and they represent two-thirds or more of the total amount of the said category of claims, the draft shall be deemed to be adopted by the group.

The debtor or administrator shall give an explanation of the draft plan for reorganization at the creditors' meeting and answer inquiries.

Article 85 Representatives of the capital contributors of a debtor may, as non-voting participants, attend the creditors' meeting to discuss a draft plan for reorganization.

Where a draft plan for reorganization involves the adjustment of the rights and interests of capital contributors, a group of capital contributors shall be formed to vote on the matter.

Article 86 When all the voting groups agree to adopt a draft plan for reorganization, the draft shall be deemed to be adopted.

The debtor or administrator shall, within 10 days from the date when the plan for reorganization is adopted, apply with the people's court for approval of the plan. Where upon examination, the people's court deems that the application complies with the provisions of this Law, it shall, within 30 days from the date when it receives the application, decide to grant approval, terminate the procedure for reorganization and announce it.

Article 87 Where a draft plan for reorganization is not adopted by some of the voting groups, the debtor or administrator may consult with those groups. The said groups may take another vote after consultation. The result of consultation shall not damage the interests of the other voting groups.

Where a voting group that does not adopt a draft plan for reorganization refuses to take another vote on it or the draft plan is not adopted even by a second vote but it meets the following conditions, the debtor or administrator may apply with the people's court for approval of the draft plan:

（1） according to the draft plan for reorganization, the claims as specified in Subparagraph （1） under the first paragraph of Article 82 of this Law will be paid in full as far as the specific property is concerned, the losses caused by postponed payment will be compensated for in a fair manner, and the secured interests will not be substantially impaired, or the voting groups concerned have adopted the draft plan for reorganization;

（2） according to the draft plan for reorganization, the claims as specified in Subparagraphs （2） and （3） under the first paragraph of Article 82 of this Law will be paid in full, or the voting groups concerned have adopted the draft plan for reorganization;

（3） according to the draft plan for reorganization, the proportion for repayment of the common claims will not be lower than that as allotted under the procedures for bankruptcy liquidation at the time when the draft plan is submitted for approval, or the voting groups concerned have adopted the draft plan;

（4） in the draft plan for reorganization, the rights and interests of capital contributors are adjusted in a fair and impartial manner, or the group of capital contributors has adopted the draft plan;@@page@@

（5） in the draft plan for reorganization, members of the same voting group are treated fairly, and the order arranged therein for payment of the claims does not contravene the provisions of Article 113 of this Law; and

（6） the debtor's plan for business operations is feasible.

Where upon examination, the people's court deems that the draft plan for reorganization complies with the provisions of the preceding paragraph, it shall, within 30 days from the date when it receives the application, decide to grant approval, terminate the procedure for reorganization and announce it.

Article 88 Where a draft plan for reorganization is not adopted and is not approved according to the provisions of Article 87 of this Law, or a draft plan, though adopted, is not approved, the people's court shall rule that the procedure for reorganization should be terminated and shall declare the debtor bankrupt.

Section 3 Implementation of a Reorganization Plan

Article 89 A reorganization plan shall be implemented under the debtor's charge.

After the people's court decides to approve a reorganization plan, the administrator that has taken over the management of the property and business operations shall hand over the property and business operations to the debtor.

Article 90 Beginning from the date when the people's court decides to approve a reorganization plan, the administrator shall supervise the implementation of the plan within the period for supervision as specified in the plan.

Within the period when being supervised, the debtor shall report to the administrator on the implementation of his reorganization plan and his financial position.

Article 91 At the expiration of the period when being supervised, the administrator shall submit a report on supervision to the people's court. From the date when the report on supervision is submitted, the administrator's duty of supervision is terminated.

Any interested party to the reorganization plan shall have the right to consult the report on supervision submitted by the administrator to the people's court.

Upon application by the administrator, the people's court may decide to extend the period for supervision over the implementation of a reorganization plan.

Article 92 The reorganization plan approved by decision of the people's court shall have a binding force on the debtor and all the creditors.

Where a creditor fails to declare his claims according to the provisions of this Law, he shall not exercise his right when the reorganization plan is being implemented; however, when the implementation of the plan is concluded, the creditor may exercise his right in compliance with the conditions for payment of claims of the same category as specified in the reorganization plan.

The right enjoyed by a creditor against the debtor's guarantor and all the joint-and-several debtors shall not be affected by the reorganization plan.

Article 93 Where a debtor cannot or fails to implement a reorganization plan, the people's court shall, upon request of the administrator or interested party, decide to terminate the implementation of the plan and declare the debtor bankrupt.

Where the people's court decides to terminate the implementation of a reorganization plan, the commitment taken by the creditors on adjustment of the claims in the plan shall be invalidated. However, the repayment received by the creditors due to implementation of the plan shall remain effective, and the part of the claims for which no repayment has been paid shall be regarded as bankruptcy claims.

The creditors as specified in the preceding paragraph may continue to join the distribution, only when the other creditors in the same sequential order receive the same proportion of repayment.

Under the circumstances as specified in the first paragraph of this Article, the guaranty provided for implementation of the reorganization plan shall continue to be effective.

Article 94 With respect to the debts that are reduced or exempted according to a reorganization plan, the debtor shall cease to be liable for repayment upon complete implementation of the reorganization plan.