The Enterprise Bankruptcy Law was promulgated in 2006 and entered into force on June 1, 2007.

There are 136 articles in total.

The key points are as follows:

1.Where an enterprise is unable to repay its debts as they become due, and its assets are insufficient for the settlement of all debts or where it is clearly insolvent, such an enterprise shall handle its debts pursuant to the bankruptcy proceeding. (Article 2)

2.Any bankruptcy proceeding that originates under this Law shall be binding on all assets that are held outside the territory of the People’s Republic of China by the debtor. (Article 5)

3.Where a foreign court’s judgment or ruling on a bankruptcy case that has taken effect involves assets in the territories of the People’s Republic of China held by a debtor, and an application or request for judicial recognition and enforcement of the judgment is made to the People’s Court, the People’s Court shall, pursuant to the international treaty that the People’s Republic of China has concluded or is a member of, or pursuant to the principle of reciprocity, examine the application or request. (Article 5)

4.Where a People’s Court rules in favour of accepting a bankruptcy application, the People’s Court shall simultaneously appoint an administrator. (Article 13)

5.Any debt settlement by the debtor with individual creditors after the People’s Court has accepted the bankruptcy application shall be invalid. (Article 16)

6.The People’s Court shall, upon accepting a bankruptcy application, determine the time limit for any declaration of creditor rights to be made. Creditors shall declare their creditor rights to the administrator within the time limit for declaration of creditor rights as determined by the People’s Court. (article 45+48)

7.Upon settlement of bankruptcy expenses and collective debts using the bankrupt’s assets, the following expenses shall be repaid in the following sequence: (Article 113)

(1) wages, medical subsidies, disability subsidies and compensation expenses owed to workers by the bankrupt which are to be included in the basic pension insurance and basic medical insurance expenses of the individual accounts of the workers, and any compensation required to be paid to workers pursuant to provisions in laws and administrative regulations;

(2) social security expenses other than those mentioned in the preceding item as owed by the bankrupt and unpaid taxes of the bankrupt; and

(3) normal bankruptcy creditor rights.

8.Where the bankrupt’s assets are insufficient for the repayment of these expenses in the same sequence, distribution shall be made on a pro rata basis. (Article 113)