The Second Civil Division of the Higher People's Court of Guangxi Zhuang Autonomous Region

Notice on Issuing the Guiding Opinions on Several Issues Concerning the Handling of Bankruptcy Cases

 

To the business divisions or trial teams responsible for bankruptcy adjudication in people's courts at all levels in the whole region:

In order to adjudicate bankruptcy cases in accordance with the law, unify adjudication standards, and ensure the unity of case handling quality and efficiency, our court has compiled and summarized the practical experience of bankruptcy trials in recent years to form the "Guiding Opinions on Several Issues in Handling Bankruptcy Cases", which is now issued to you for reference in the trial. If you encounter new problems in practice, please report them to our court.

 

                                                                                          The Second Civil Division of the Higher People's Court of Guangxi Zhuang Autonomous Region

April 26, 2020

 

Guiding Opinions on Several Issues Concerning the Handling of Bankruptcy Cases

 

I. Appointment and Supervision of Administrators

 

Article 1 [General Principles] The collegial panel handling bankruptcy cases may use competitive methods to appoint a suitable administrator.

 

If a random method is adopted to designate the administrator, the decision to designate the administrator shall be made at the same time as the ruling to accept the bankruptcy application is made; however, if a competitive method is adopted, the procedure for competitive designation may be initiated at the same time as the ruling to accept the bankruptcy application is made.

 

Article 2 [Competitive Designation Procedure] When a manager is designated through competitive means, the collegial panel hearing the bankruptcy case may proceed in accordance with the following procedures:

 

1. Adopt a public announcement to invite social intermediary agencies in the administrator roster to participate in the competition, and at the same time, specific social intermediary agencies can also be invited to participate in the competition;

 

2. The collegiate panel shall determine the preliminary list after reporting to and obtaining the consent of the leading院 leaders in charge. The preliminary list shall include no fewer than two and no more than five candidate institutions.

 

3. The collegial panel will organize the case filing materials and the candidate institutions' application materials, and then report to the High Court to finally determine one administrator, and one to two alternate administrators, as replacements when the administrator needs to be replaced. In the entire competitive designation process, it is only necessary to report to the High Court for instructions once.

 

Article 3 [Assessment of Administrator] The assessment of candidate administrators should focus on the following factors: whether the administrator has handled bankruptcy cases; the number, duration, and effect of completed bankruptcy cases; the number, progress, and reasons for bankruptcy cases that have not yet been completed (mainly to determine whether it will affect their efficiency and energy to accept new cases); the stability of the administrator team; whether there are statutory circumstances such as inability to perform duties or inability to be competent for the position, etc.

 

When evaluating intermediary institutions such as liquidation companies, attention should be paid to the full-time law firms or accounting firms from which their teams actually come, and the bankruptcy cases that the team is actually handling but have not yet been completed should be specifically reviewed.

 

Article 4 [Designation of Joint Administrator] For bankruptcy cases that are major, difficult, complex, and involve a large number of creditors, employees, and stakeholders, the accepting court may designate a joint administrator in accordance with Article 14 of the Measures of the Guangxi Zhuang Autonomous Region Higher People's Court on the Designation of Enterprise Bankruptcy Case Administrators. The joint administrator shall determine the primary and secondary responsibilities, division of labor, and other internal coordination relationships, and submit the work plan to the accepting court.

 

Article 5 [Creating Scientific Incentive Mechanisms] Each Intermediate Court may, in conjunction with the "Guangxi Zhuang Autonomous Region Higher People's Court Measures on the Work Evaluation of Enterprise Bankruptcy Case Administrators" (hereinafter referred to as the "Higher Court Evaluation Measures"), further refine the reward and punishment mechanisms for administrators within its jurisdiction. It can fully stimulate the enthusiasm and initiative of administrators in handling bankruptcy cases through the design of positive incentives for additional points and the design of negative lists for reverse supervision.

 

Article 6 [Supervision of Business Subcontracting by Administrators] For bankruptcy cases that are significant, difficult, complex, and involve a large number of creditors, employees, and stakeholders, the administrator may, after requesting and obtaining approval from the accepting court, adopt methods such as cooperation, employment, or subcontracting to transfer part of the work to social intermediary organizations outside the administrator institution.

 

In principle, the administrator shall not subcontract work to social intermediary organizations or other personnel outside the "Administrator Roster" compiled by the Guangxi High Court. If the above method is adopted to transfer part of the work, the accepting court must review the following: the practical necessity and feasibility of the administrator transferring part of the work; the administrator shall not transfer all or most of the work to other social intermediary organizations or personnel outside the administrator's organization.

 

If the administrator transfers part of the work or absorbs personnel from outside the administrator's institution without requesting approval during practice, the High Court will take disciplinary measures such as demotion and suspension of qualifications in accordance with the "High Court Evaluation Measures".

 

Article 7 [Supervision of the Administrator’s Function of Collecting Debts] The administrator shall list all outstanding debts of the bankrupt enterprise, compile them into a register, and verify them with the bankrupt enterprise’s investors, directors, senior managers or actual controllers, and relevant staff; formulate collection policies, and carry out collection work in a planned and measured manner.

 

For escape behaviors such as withdrawing capital contributions, false capital contributions, embezzling or concealing corporate property by investors, directors, senior executives, or actual controllers of bankrupt enterprises, or for behaviors such as eroding the company's independent personality, encroaching on the company's independent property, transferring company assets, or controlling the transfer of company benefits in the daily operation of the enterprise, the administrator shall file a lawsuit on behalf of all creditors, enterprise employees, or debtors, apply for preservation or restrictive measures, and provide clues to the public security organs if criminal clues are found, and take multi-channel measures to recover the property of bankrupt enterprises and pursue the legal responsibility of relevant personnel.

 

The collegial panel handling bankruptcy cases shall supervise the administrator to perform the above-mentioned property management and collection duties in accordance with the law. If the administrator fails to diligently collect debts or recover property, the People's Court may reduce the remuneration the administrator should receive as appropriate; if the circumstances are serious, a fine may be imposed in accordance with the law; if losses are caused to creditors or debtors, compensation liability shall be borne in accordance with the law.

 

Article 8 [Preservation of the Administrator's Account] If the people's court rejects the bankruptcy application after accepting it because it does not meet the reasons for bankruptcy, the collegial panel hearing the case may simultaneously rule to preserve the administrator's special bank account to avoid the account from being sealed and deducted by the debtor's creditors through enforcement procedures before the relevant bankruptcy expenses or common benefit debts are paid off.

 

2. Handling of Bankruptcy-Derived Litigation

 

Article 9 [Centralized Trial of Bankruptcy-Derived Litigation] In principle, bankruptcy-derived litigation cases shall be handled by the collegial panel hearing the bankruptcy case. The trial department responsible for hearing bankruptcy cases shall promptly coordinate the case assignment mechanism of the court so that bankruptcy-derived litigation cases are handled by the collegial panel hearing bankruptcy cases. If the handling of derivative litigation cases and the handling of bankruptcy cases are still in different departments, communication and coordination shall be strengthened.

 

Where the intermediate people's court accepting the bankruptcy application accepts the first-instance civil cases (lawsuits for confirmation of bankruptcy claims) concerning the debtor in accordance with the provisions on centralized jurisdiction of derivative litigation, it may transfer the case to the lower basic people's court for trial in accordance with the provisions of Article 38 of the Civil Procedure Law of the People's Republic of China, except where it is not appropriate to delegate the trial according to the nature of the case.

 

If the derivative litigation involves a large number of series cases such as groups and the public, the intermediate people's court accepting the bankruptcy application shall transfer the case to a specific basic court for centralized trial, and at the same time do a good job in supervision and guidance. If such derivative litigation cases enter the second-instance procedure, they shall be handled by the bankruptcy collegial panel of the intermediate people's court.

 

Article 10 [Handling of Creditors' Objections to Other Claims] If a creditor objects to other people's claims recorded in the statement of claims, the accepting court shall, as far as possible, coordinate and centrally handle them in the bankruptcy procedure, and take various ways to coordinate and resolve the interest protection issues of various subjects. When necessary, it can confirm specific rights and interests protection methods through rulings, without necessarily relying on substantive adjudication methods such as lawsuits for confirmation of claims.

 

Article 11 [Judgment Items Concerning Interest Claims] After the bankruptcy application is accepted, when the people's court makes a confirmation judgment on interest-bearing claims, its judgment items may not be restricted by the provisions of Article 46, Paragraph 2 of the Enterprise Bankruptcy Law, but it should still explain in the reasoning part of the judgment that the interest confirmed by the judgment should be re-adjusted and determined in the bankruptcy procedure in accordance with the provisions of the Enterprise Bankruptcy Law. After the above judgment becomes effective, the creditor may directly declare the claim to the administrator with the effective judgment document, and the administrator shall determine the interest on the claim it enjoys in accordance with the provisions of Article 46, Paragraph 2 of the Enterprise Bankruptcy Law.

 

Article 12 [Resumption after Suspension of Derivative Litigation] After the bankruptcy application is accepted, the civil litigation procedure concerning the debtor that has begun but has not yet ended may be suspended, and shall continue after the administrator takes over the debtor's property. The time limit for the administrator to take over the property is generally within 30 days from the date the accepting court designates the administrator.

 

3. Overall Handling Ideas for Bankruptcy Cases of Real Estate Enterprises

 

Article 13 [Giving Play to the Role of Government-Court Linkage] When handling bankruptcy cases of real estate enterprises, the accepting court shall pay attention to communication, coordination, and cooperation with the local party committee and government, and strive to obtain support and assistance in bankruptcy guarantee funds, tax policies, enterprise credit repair, certificate processing, and project adjustment.

 

Article 14 [Handling of Project Continued Construction or Continued Operation] For bankruptcy cases of real estate enterprises, if the real estate project still has market profit space, the project continued construction funds can be raised by taking the construction project contractor to rebuild the buildings under construction, introducing new financing or third-party investment, etc. The funds advanced or invested by the investor can be used as common benefit debts and given priority from the bankruptcy property.

 

Article 15 [Principle of Overall Coordination and Handling] When handling bankruptcy cases of real estate enterprises, we should try to reduce the litigation burden of creditors as much as possible, and coordinate and centrally handle the interest protection and balance of various subjects such as home buyers and construction parties in the bankruptcy procedure as much as possible, adhere to the principle of giving equal consideration to fairness and efficiency, and take various ways to coordinate and resolve the reasonable demands of special rights and interests subjects.

 

4. Discretionary Reduction or Exemption of Application and Litigation Fees

 

Article 16 [Reduction, Postponement, and Exemption of Application Fees] If an enterprise applying for bankruptcy has difficulties in paying the application fees, it may apply to the collegial panel of the accepting court for postponement, reduction, or exemption of relevant application fees.

 

If a bankrupt enterprise applies for judicial assistance in a bankruptcy liquidation case, it shall submit a written application and provide supporting materials that can prove that the bankrupt enterprise has difficulty in paying litigation fees, such as the situation that there are very few existing assets, no assets can be broken, or assets cannot be realized, etc., which makes it difficult to bear the bankruptcy fees.

 

The collegial panel of the accepting court shall strictly review whether it is necessary to grant the bankrupt enterprise's application for reduction or exemption of fees, and determine whether to collect or how much fees to collect in the case closing ruling.

 

Article 17 [Collection of Bankruptcy-Derived Litigation Fees]

 

In the process of performing their duties in accordance with the law, the administrator, on behalf of the interests of all creditors, enterprise employees or debtors, sues to recover from the bankrupt enterprise's investors, directors, senior managers or actual controllers for evading debts such as withdrawing capital, falsely contributing capital, embezzling or concealing enterprise property, or for the above-mentioned personnel's acts of eroding the company's independent personality, encroaching on the company's independent property, transferring the company's assets, etc., which damage the company's interests or control the company's interest transfer in the company's daily operation, the collegial panel of the accepting court may discretionarily not collect such derivative litigation acceptance fees.

 

In the process of performing their duties in accordance with the law, if the administrator, on behalf of the interests of all creditors, enterprise employees or debtors, sues to confirm the amount or nature of relevant claims, the collegial panel of the accepting court may discretionarily not collect such derivative litigation acceptance fees.

 

If a creditor, on behalf of the interests of all creditors, objects to other people's claims recorded in the statement of claims, and thus sues to confirm the amount or nature of relevant claims, the collegial panel of the accepting court may discretionarily not collect such derivative litigation acceptance fees.

 

5. Conversion of Liquidation Procedure and Reorganization Procedure

 

Article 18 [Principle of Application for Initiation and Conversion of Bankruptcy Procedure] The initiation and conversion of bankruptcy procedures shall follow the principle of application. Debtors or creditors may apply to initiate bankruptcy liquidation, reorganization or reconciliation in accordance with relevant laws and regulations. In the process of handling the case, debtors and creditors may apply for the conversion of the bankruptcy procedure depending on the circumstances. If the accepting court considers that the conditions for procedure conversion are met after review, it shall make a ruling on the conversion of the bankruptcy procedure.

 

Article 19 [Bankruptcy Liquidation Transferred to Bankruptcy Reorganization] If the situation of the bankrupt enterprise is more complicated and there is great uncertainty as to whether the reorganization procedure is applicable, the people's court may first initiate the bankruptcy liquidation procedure based on the application of the debtor or creditor. In the process of liquidation, if the bankrupt enterprise meets the conditions for reorganization, it may be converted into a reorganization procedure based on the application of the debtor or creditor.

 

6. Coordination in the Filing Link

 

Article 20 [Timely Filing and Transfer] The trial department responsible for hearing bankruptcy cases shall actively coordinate the filing procedures with the filing department, determine the formal review standards for bankruptcy application materials, and request the filing department to conduct a formal review in a timely manner after receiving the bankruptcy application materials from the bankruptcy applicant. If the formal review requirements are met, the case shall be filed on the bankruptcy reorganization case judge's work platform in a timely manner, and the relevant materials shall be electronically scanned and uploaded before the paper materials are transferred to the bankruptcy trial department; for bankruptcy applications that do not meet the formal standards, the applicant shall be required to submit supplementary materials within a time limit in accordance with the law before filing the case.