What Are the Qualifications for Bankruptcy?

An application for bankruptcy refers to a lawsuit filed by the parties or interested parties to the court to declare the debtor bankrupt to clear the debt. From the perspective of the insolvency laws of various countries, those who enjoy the right to apply for bankruptcy usually include creditors, debtors and quasi-debtors, that is, corporate directors, directors of limited companies, unlimited liability shareholders of unlimited companies, and liquidators. Some countries also grant some national authorities the right to apply for bankruptcy. For example, the British company law stipulates that the Ministry of Trade and official receivers have the right to apply under certain circumstances. Italy's bankruptcy law of 1942 provides that prosecutors have the right to apply. The Chinese Enterprise Bankruptcy Law (trial) stipulates that creditors and debtors have the right to apply for bankruptcy, but the debtor's application for bankruptcy must be approved by its superior department in charge. An application for bankruptcy shall be filed in writing with a court having jurisdiction over the case, and the applicant shall fulfill its obligation to provide evidence as required by law and provide necessary evidence. Bankruptcy cases are called voluntary bankruptcy by the debtor, and those filed by creditors are called involuntary bankruptcy. ^[1]

Bankruptcy application

According to Article 8 (2) of the Enterprise Bankruptcy Law of the People's Republic of China, an application for bankruptcy should state the following:

(1) Basic information of the applicant and the respondent;

(2) the purpose of the application;

(3) the facts and reasons for the application;

(4) Other matters that the people's court deems necessary to be stated.

When the debtor applies, it shall also submit to the people's court a statement of property status, debt inventory, debt inventory, relevant financial and accounting reports, employee resettlement plans, payment of employee wages and payment of social insurance costs.

In judicial practice, the courts have different standards when examining whether a bankruptcy application submitted by a party meets the legal requirements. To regulate and unify the people's court's review of bankruptcy applications, the Supreme People's Court recently issued the The Provisions of the Republic of China on the Bankruptcy Law of the People's Republic of China on Certain Issues (I) "clearly stipulates the content of examination after the people's court receives an application for bankruptcy. The full text is as follows:

The Supreme People's Court of the People's Republic of China announced that the Supreme People 's Court 's Provisions on the Application of the "People's Republic of China's Enterprise Bankruptcy Law" ^[2] Certain Issues (1) "was held at the 1527th meeting of the Judicial Committee of the Supreme People's Court on August 29, 2011 Approved, hereby announced, effective from September 26, 2011. On September 9, 2011, in order to correctly apply the Enterprise Bankruptcy Law of the People's Republic of China, and in combination with trial practice, the following provisions were made on the applicable legal issues of the people's courts' acceptance of enterprise bankruptcy cases in accordance with the law.

Article 1 Where the debtor cannot pay off the due debts and one of the following circumstances, the people's court shall determine that it has the cause of bankruptcy:

(1) the assets are insufficient to pay off all the debts;

(2) Obviously lack of solvency. The people's court shall not support the relevant parties on the ground that the person who is jointly and severally liable for the debt of the debtor has not lost the ability to pay off, and claims that the debtor has no cause for bankruptcy.

Article 2: Where the following situations exist at the same time, the people's court shall determine that the debtor cannot pay off the debts due:

(1) The creditor's rights and debts relationship is established in accordance with law;

(2) The time limit for debt performance has expired;

(3) The debtor has not fully paid off the debt.

Article 3 If the debtor's balance sheet, or audit report, asset evaluation report, etc. shows that all its assets are insufficient to pay all its liabilities, the people's court shall determine that the debtor's assets are not sufficient to pay off all its debts, but there is evidence to the contrary that the debtor's assets can be paid Except all liabilities.

Article 4 Although the debtor's book assets are greater than the liabilities, but in one of the following circumstances, the people's court shall determine that it is obviously lacking in solvency:

(1) Unable to pay off debts due to serious shortage of funds or unrealizable property;

(2) The whereabouts of the legal representative is unknown, and no other person is responsible for managing the property, unable to pay off the debts;

(3) Unable to pay off debts as enforced by the people's court;

(4) long-term losses and difficulties in turning losses into operation, unable to pay off debts;

(5) Other circumstances that cause the debtor to lose its solvency.

Article 5 Where an enterprise legal person has been dissolved but has not been liquidated or has completed its liquidation within a reasonable period, and the creditor applies for bankruptcy and liquidation of the debtor, the people's court shall accept it, except that the debtor proves that there is no cause of bankruptcy within the legal opposition period.

Article 6 Where a creditor applies for bankruptcy of the debtor, he shall submit relevant evidence that the debtor cannot pay off the debts due. If the debtor does not raise an objection to the people's court within the statutory time limit, or if the objection does not hold, the people's court shall rule to accept the application for bankruptcy. After accepting an application for bankruptcy, the people's court shall order the debtor to submit relevant materials such as a statement of its property status, debt inventory, debt inventory, financial accounting report and other related materials. If the debtor refuses to submit it, the people's court may take compulsory measures such as fines against the person directly responsible for the debtor .

Article 7 When a people's court receives an application for bankruptcy, it shall provide the applicant with a written certificate of receipt of the application and the attached evidence. After receiving the application for bankruptcy, the people's court shall timely review the applicant's subject qualification, the debtor's subject qualification and the reasons for the bankruptcy, as well as relevant materials and evidence, and make a ruling on whether or not to accept it in accordance with Article 10 of the Enterprise Bankruptcy Law. If the people's court considers that the applicant should supplement or correct relevant materials, it shall notify the applicant within five days from the date of receipt of the bankruptcy application. The period for the parties to supplement or correct relevant materials shall not be included in the period specified in Article 10 of the Enterprise Bankruptcy Law.

Article 8 The litigation costs of bankruptcy cases shall be paid from the debtor's property in accordance with Article 43 of the Enterprise Bankruptcy Law. If the relevant party raises an objection to the bankruptcy application on the ground that the applicant has not paid the litigation costs in advance, the people's court will not support it.

Article 9 If the applicant files an application for bankruptcy with the people's court, and the people's court fails to accept the application, or fails to implement it in accordance with Article 7 of these regulations, the applicant may file an application for bankruptcy with the people's court at the next higher level. After receiving the application for bankruptcy, the people's court at the next higher level shall order the lower court to review and make a ruling on whether to accept it in a timely manner; if the lower court still does not make a ruling on whether to accept the ruling, the people's court at the next higher level may make a ruling. If the people's court at a higher level decides to accept an application for bankruptcy, it may also instruct the people's court at a lower level to try the case.