 | The
PRC Enterprise
Bankruptcy Law: The People's Work in Progress
By Deryck A. Palmer and John J. Rapisardi
08/2009 - Hardcover
449 pages
1587982978 
US$179.95
Publisher
Comments
Recognizing that bankruptcy law is a cornerstone in the legal infrastructure of any modern, developed market system, the People’s Republic of China has labored over the past dozen years to replace its initial collection of bankruptcy-related laws with a unified, updated law that addresses the needs of participants in China’s increasingly market-based economy.
The Enterprise Bankruptcy Law, which became effective on June 1, 2007, is a complex and sophisticated commercial statute that features, among many notable developments, provisions enabling the reorganization of not just state-owned enterprises but any troubled “enterprise legal person.” Indeed, the new law incorporates many of the most advanced techniques from the restructuring laws of developed nations.
As a tool that makes it easier for Chinese companies to obtain credit in an increasingly competitive and international market, and for foreign parties to invest with more confidence in China’s markets, the Enterprise Bankruptcy Law represents a major step forward. However, as the authors note, the new law is still a work in progress as many of its aspects remain unclear and untested.
Authors Deryck A. Palmer and John J. Rapisardi, partners in the corporate restructuring practice at Cadwalader, Wickersham & Taft LLP, undertake a systematic review of the Enterprise Bankruptcy Law’s major provisions, from the comparative perspective of the U.S. Bankruptcy Code in particular. They provide not only a nuanced understanding of the law, but also insights and practical recommendations on its meaning and possible application.
Intended for bankruptcy law practitioners and judges, legislators, academicians, and other restructuring professionals, the materials and issues presented in this book are as challenging as they are important.
No
book reviews available.
Deryck A. Palmer
Deryck Palmer, Co-Chair of the Financial Restructuring Department, concentrates his practice in the representation of debtors as well as creditors under chapter 11 of the Bankruptcy Code, and has handled a wide variety of workout, corporate restructuring, and bankruptcy matters.
Recognized by Turnarounds and Workouts as one of the nation's top twelve "Outstanding Bankruptcy Lawyers," Mr. Palmer serves as the Co-Vice-Chair of the American Bar Association's Business Bankruptcy Committee's Healthcare Working Group and is a member of both the New York State Bar Association Committee on Bankruptcy and Committee on Courts and the Community. He is also a former member of the Committee on Bankruptcy and Corporate Reorganization of the Association of the Bar of the City of New York.
Mr. Palmer lectures at many of the major law schools nationwide and is an Adjunct Professor of Law, teaching advanced topics in bankruptcy and corporate reorganization, at New York Law School. He is the co-author of The PRC Enterprise Bankruptcy Law: The People's Work in Progress (Beard Group, Inc., 2008), History of Bankruptcy Law in the Second Circuit (Matthew Bender & Co., 1995) and Restructuring: The Search for Value in a Troubled Enterprise (Euromoney Books, 1993). In addition, he delivers numerous lectures each year on business reorganization topics, including an annual American Bar Association panel concerning current developments in the field.
Mr. Palmer is a member of the Bureau of National Affairs Advisory Board for the Bankruptcy Law Reporter and sits on the Board of Directors of Boys & Girls Harbor, Inc., Insol International, Greater New York Councils Boy Scouts of America, Maplewood Village Alliance, Syracuse University, and The Cleveland Clinic Foundation. He is also a Fellow of the American College of Bankruptcy.
Mr. Palmer received his B.A. from Syracuse University and his J.D. from the University of Michigan. He recently received the Chancellor's Citation for Exceptional Achievement from Syracuse University, which recognizes outstanding contributions in scholarship, research, teaching, and creative work.
Prior to joining Cadwalader as a partner in 2007, Mr. Palmer was a partner at Weil, Gotshal & Manges LLP in the Business Finance and Restructuring Department.
John J. Rapisardi
John Rapisardi, Co-Chair of Cadwalader's Financial Restructuring Department, has more than 27 years of domestic and international restructuring experience across a variety of industries, including automotive, casinos, chemical, healthcare, retail, real estate, satellite, sports franchises, textile and telecommunications companies. Mr. Rapisardi served as outside counsel to the United States Department of Treasury and the Presidential Task Force with respect to the restructuring of Chrysler, General Motors and Delphi. Most recently, he was selected by the United States Department of Treasury to represent the government in the restructuring of CIT, the distressed bank holding company.
Mr. Rapisardi was recently recognized by the Global M&A Network as "Restructuring Advisor of the Year" and received a Turnaround Atlas Award in this category for his work in 2008/2009. He has been named as a highly recommended international restructuring counsel in PLC Cross-border Restructuring and Insolvency Handbook, recognized as one of the leading restructuring lawyers in the U.S. by Chambers USA, and included in Best Lawyers in America.
Mr. Rapisardi is playing or has played a leading role on behalf of clients in the following restructurings:
- LyondellBassell Industries in its chapter 11 cases
- Citigroup, Inc. in the chapter 11 case of Lehman Brothers Holding, Inc.
- JPMC as agent lender for $2 billion debt in Centro Properties
- Barclays as agent lender for $1 billion debt in the Landsource chapter 11 cases
- Merrill Lynch as agent lender in BLB/Twin Rivers Casinos
- Ad Hoc Noteholders Committee in Black Gaming
- Ad Hoc Noteholders Committee in Fleetwood Enterprises
- Lehman as agent lender for approximately $2 billion debt in Intrawest
- An investor in acquiring Steve & Barrys (retail department store chain) out of chapter 11
- Merrill Lynch in the Fred Leighton chapter 11 cases
- Saint Vincents Medical Center in its chapter 11 case
- West Point Stevens in its chapter 11 case and related U.K. subsidiaries in insolvency proceedings
- Portland Trailblazers in workout negotiations with its bondholders
- Merrill Lynch in the $300 million exit financing of Pliant Corporation
- A bank steering committee in the Owens Corning chapter 11 case
- An ad hoc bondholders' committee in the Solutia chapter 11 case
- An investor in acquiring Aladdin Casino in its chapter 11 case
- The bondholders' committee in the Trump Atlantic City Casinos restructuring
- Investors in the acquisition of Barneys New York department stores in their chapter 11 cases
- An ad hoc bondholders' committee in the NSM Steel restructuring (under Thai bankruptcy law)
- Metallurg in its chapter 11 case and related U.K. and German subsidiaries in insolvency proceedings
- A bank steering committee in the Safety Kleen chapter 11 cases
Mr. Rapisardi has advised investors and financial institutions and written extensively on the subject of lender rights and remedies under the new Chinese Bankruptcy Code. He is a member of INSOL and was chair of its planning committee for INSOL's Quadrennial Conference 2009 in Vancouver, British Columbia.
A Beta Gamma Sigma graduate from the College of Business Administration at Fordham University, Mr. Rapisardi received his LL.M. from New York University and J.D. from Pace University and served on the Pace Law Review.
Mr. Rapisardi clerked two years for the then Chief Bankruptcy Judge of the Southern District of New York.
Mr. Rapisardi for the past fifteen years, has been a regular bankruptcy columnist for the New York Law Journal.
| Preface |
v |
| Foreword |
vii |
| Introduction |
1 |
| CHAPTER ONE: Bankruptcy Law in
the People’s Republic of China |
9 |
| 1.1
The March Toward a Market Economy | 9 |
| 1.2
Chinese Legislative Institutions and the Legislative Process |
12 |
1.2.1 Legislative Institutions, 12
1.2.1.1 National People’s
Congress, 12
1.2.1.2 Standing Committee of the NPC,
13
1.2.1.3 State Council, 14
1.2.2 China’s Courts, 16
1.2.3 Interpretation of Laws, 17 |
|
| 1.3
The Chinese Banking System and the NPL Market in China |
18 |
| 1.4
Commercial Enterprises in the PRC | 20 |
1.4.1 Legal Persons, 21
1.4.2 Enterprise Legal Persons, 21
1.4.2.1 State-Owned
Enterprises, 22
1.4.2.2 Business
Forms Under the Company Law, 22
1.4.2.2.1 Limited Liability Companies, 23
1.4.2.2.2 Foreign Investment Enterprises, 23
1.4.2.2.3 Companies Limited by Shares, 26
|
|
| CHAPTER TWO: Bankruptcy Law in
the PRC Prior to 2007 | 29 |
| 2.1
The 1986 Bankruptcy Law | 32 |
2.1.1 Initiating a Bankruptcy Case, 32
2.1.1.1 Eligible and
Ineligible Entities, 32
2.1.1.2 Two Ways to
Commence a Case, 32
2.1.1.3 SOEs
Contesting an Involuntary Petition, 33
2.1.1.4 Involuntary
Petition Allows for Possible Reorganization of SOE, 33
2.1.2 Implementation, 34
2.1.2.1 Liquidation
Teams, 34
2.1.2.2 Satisfaction
of Claims, 35
2.1.3 Other Provisions of the 1986 Bankruptcy Law,
36 | |
| 2.2
Chapter XIX of the 1991 Civil Procedure Law | 37 |
| 2.3
The 2002 Explanation | 38 |
| 2.4
Labor Issues and the “Policy Bankruptcy” Program |
39 |
| CHAPTER THREE: Property,
Collateral, and
Creditor’s Remedies in the PRC |
43 |
| 3.1
Lending in China | 43 |
3.1.1 International Borrowing by Organizations Resident in China, 44
3.1.2 Borrowing by FIEs, 45
3.1.2.1 Foreign
Borrowing, 45
3.1.2.2 Domestic
Borrowing, 46
3.1.3 Consequences of Unapproved Lending, 47 |
|
| 3.2
Taking and Perfecting Security | 47 |
3.2.1 Forms of Security, 48
3.2.1.1 Guarantees,
49
3.2.1.2 Mortgages
and Pledges, 50
3.2.2 Perfection of Security Interests, 53
3.2.3 Security Given to Foreign Parties, 53 |
|
| 3.3
Collecting Debts in the PRC | 54 |
3.3.1 Debt Recovery by the Unsecured Creditor, 54
3.3.2 Debt Recovery by the Secured Creditor, 55 |
|
| CHAPTER FOUR: Overview of the
Enterprise Bankruptcy Law | 57 |
| 4.1
The Need for Bankruptcy Reform | 57 |
| 4.2
General Contours of the Enterprise Bankruptcy Law |
58 |
| 4.3
Three Alternatives: Reorganization, Conciliation, and Liquidation |
64 |
4.3.1 Reorganization, 65
4.3.2 Conciliation, 65
4.3.2.1 Application
for and Acceptance of Conciliation Procedure, 65
4.3.2.2 Adoption of
the Conciliation Agreement by Creditors, 66
4.3.2.3 Discharge, 67
4.3.3 Bankruptcy Liquidation, 68
4.3.3.1 Declaration
of Bankruptcy, 68
4.3.3.2 Plan of
Disposal; Asset Sales, 69
4.3.3.3 Plan of
Distribution; Priority Scheme, 70
4.3.3.4 Termination
of Bankruptcy Proceeding, 73 | |
| CHAPTER FIVE: Commencing a
Bankruptcy Proceeding | 75 |
| 5.1
Who May Be a Debtor | 75 |
5.1.1 Entities: SOE and Non-SOE Distinction, 75
5.1.2 Prerequisites: Financial Requirements, 76 |
|
| 5.2
Filing and Acceptance of Bankruptcy Application |
79 |
|
Insights and Recommendations, 81 | |
| 5.3
Automatic Stay | 82 |
5.3.1 The Stay with Respect to Pre-Acceptance Claims, 82
5.3.2 Relief From Stay, 83
Insights and Recommendations, 84 |
|
| CHAPTER SIX: Control of Case;
Operation of Business | 85 |
| 6.1
Administrator | 85 |
6.1.1 Administrator’s Duties, 86
6.1.2 Eligibility and Selection, 87
6.1.3 Comparison to Eligibility and Selection of
Trustees Under the U.S. Bankruptcy Code, 89
6.1.4 Compensation for Administrators, 91
Insights and Recommendations, 92 |
|
| 6.2
Debtor in Possession | 95 |
| 6.3
Creditor Representatives | 97 |
6.3.1 Creditors’ Meeting Under the Enterprise Bankruptcy Law,
97
6.3.2 Creditors’ Committee Under the
Enterprise Bankruptcy Law, 98
6.3.3 Creditors’ Committee Under the
U.S. Bankruptcy Code, 98 | |
| CHAPTER SEVEN: Claims Against the
Debtor | 101 |
| 7.1
Categories of Claims | 101 |
7.1.1 Categories of Claims Under the Enterprise Bankruptcy Law, 101
7.1.2 Categories of Claims Under the U.S.
Bankruptcy Code, 101 | |
| 7.2
Assertion of Claims | 102 |
7.2.1 Asserting Claims Under the Enterprise Bankruptcy Law, 102
7.2.2 Asserting Claims Under the U.S. Bankruptcy
Code, 103 | |
| 7.3
Assignment of Claims | 104 |
| 7.4
Estimating Claims | 105 |
| 7.5
Issues Relating to Secured Claims | 106 |
7.5.1 Secured Claims Under the Enterprise Bankruptcy Law, 106
7.5.2 Secured Claims Under the U.S. Bankruptcy
Code, 108
7.5.3 Adequate Protection, 109 |
|
| 7.6
Payment of Administrative Expenses | 110 |
7.6.1 Post-Acceptance Costs and Expenses Under the Enterprise
Bankruptcy Law. 110
7.6.2 Administrative Expenses Under the U.S.
Bankruptcy Code, 111 | |
| 7.7
Reclamation and Setoff Rights | 112 |
7.7.1 Reclamation Rights, 112
7.7.2 Setoff Rights, 113
Insights and Recommendations, 114 |
|
| CHAPTER EIGHT: Assets and Rights
of the Debtor | 119 |
| 8.1
Property of the Estate | 119 |
8.1.1 Property of the Estate Under the Enterprise Bankruptcy Law, 119
8.1.2 Property of the Estate Under the U.S.
Bankruptcy Code, 119 | |
| 8.2
Executory Contracts | 120 |
8.2.1 Assumption/Rejection Under the Enterprise Bankruptcy Law, 120
8.2.2 Assumption/Rejection Under the U.S.
Bankruptcy Code, 121
Insights and Recommendations, 123 |
|
| 8.3
Avoidance Powers | 123 |
8.3.1 Avoidance Powers Under the Enterprise Bankruptcy Law, 123
8.3.2 Avoidance Powers Under the U.S. Bankruptcy
Code, 125
Insights and Recommendations, 127 |
|
| CHAPTER NINE:
Reorganization | 131 |
| 9.1
Commencement of a Reorganization | 131 |
| 9.2
Operation of Business | 134 |
9.2.1 Debtor in Possession Concept Under the Enterprise Bankruptcy Law,
134
9.2.2 Debtor in Possession Concept Under the U.S.
Bankruptcy Code, 135 | |
| 9.3
Postpetition Financing | 135 |
9.3.1 Financing Under the Enterprise Bankruptcy Law 135
9.3.2 Financing Under the U.S. Bankruptcy Code .
136
Insights and Recommendations 136 |
|
| 9.4
Asset Sales | 137 |
9.4.1 Sale of Assets Under the Enterprise Bankruptcy Law, 137
9.4.2 Sale of Assets Under the U.S. Bankruptcy
Code, 137
Insights and Recommendations, 138 |
|
| 9.5
Proposing a Plan of Reorganization | 138 |
9.5.1 Deadline to File Plan of Reorganization 138
9.5.1.1 Deadline
Under the Enterprise Bankruptcy Law, 138
9.5.1.2 Deadline
Under the U.S. Bankruptcy Code, 139
9.5.2 Plan Contents and Classification . 140
9.5.2.1 Plan
Contents and Classification Under the Enterprise Bankruptcy Law, 140
9.5.2.2 Plan
Contents and Classification Under the U.S. Bankruptcy Code . 141
Insights and Recommendations 142 |
|
| 9.6
Lock-Up Agreements; Prepackaged and Prenegotiated Chapter 11 Cases |
143 |
9.6.1 Lock-Up Agreements, 143
9.6.1.1 Problems
Encountered with Lock-Up Agreements, 144
9.6.2 Prepackaged Cases, 146
9.6.3 Prenegotiated Cases, 147
9.6.4 Prepackaged and Prenegotiated Reorganization
Cases Under the Enterprise Bankruptcy
Law, 147 | |
| 9.7
Acceptance of a Plan of Reorganization | 148 |
9.7.1 Disclosure and Solicitation, 148
9.7.2 Voting Eligibility Under the Enterprise
Bankruptcy Law, 151
9.7.3 Voting Eligibility Under the U.S. Bankruptcy
Code, 151
9.7.4 Voting Standards Under the Enterprise
Bankruptcy Law, 153
9.7.5 Voting Standards Under the U.S. Bankruptcy
Code, 153
Insights and Recommendations, 154 |
|
| 9.8
Confirmation or Approval of a Plan of Reorganization |
155 |
9.8.1 Requirements for Approval Under the Enterprise Bankruptcy Law, 156
9.8.1.1 Consensual
Plan of Reorganization, 156
9.8.1.2
Nonconsensual Plan of Reorganization, 156
9.8.2 Requirements for Confirmation Under the U.S.
Bankruptcy Code, 159
9.8.2.1 Consensual
Plan of Reorganization, 159
9.8.2.2 Cramdown, 161
9.8.2.3
“Liquidating” Chapter 11 Plans, 164
9.8.3 New Value
Corollary, 165
Insights and Recommendations, 166 |
|
| 9.9
Implementation of a Plan of Reorganization |
171 |
| 9.10
Post-Confirmation Modification of a Plan of Reorganization |
171 |
| 9.11
Termination of Reorganization Process | 172 |
| 9.12
Discharge and Releases | 173 |
9.12.1 Discharge, 173
9.12.2 Third Party Releases, 174 |
|
| CHAPTER TEN: Cross-Border Issues
and the UNCITRAL Model Law |
177 |
| 10.1
Recognition of Foreign Proceedings | 177 |
| 10.2
International Principles of Comity | 178 |
10.2.1 Overview of the Principle of Comity, 178
10.2.2 The Principle of Comity in the Bankruptcy
Context, 179 | |
| 10.3
Existing Law in the PRC and the Enforcement of Foreign Judgments |
184 |
10.3.1 State of the Law, 184
10.3.2 Practical Implications and the History of
Enforcement, 186 | |
| 10.4
Chapter 15 and the U.S. Approach to International
Restructurings | 188 |
|
Insights and Recommendations, 190 | |
| CONCLUSION |
193 |
|
