China Clarifies the Scope of Debtors’ Property under Enterprise Bankruptcy Law

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Oct. 2 – China’s Supreme People’s Court released the “Provisions on Several Issues Concerning the Application of Enterprise Bankruptcy Law (II) (fashi [2013] No.22, hereinafter referred to as the ‘Provisions’)” on September 13, which clarifies the scope of debtors’ property under the country’s Enterprise Bankruptcy Law. Detailed information can be found below.

Property of Debtors

According to China’s Enterprise Bankruptcy Law, if a debtor has been declared bankrupt, they will become bankrupt and the property they owned will be treated as the bankruptcy property. Such property will be disbursed to the creditors according to legal procedures.

A debtor’s property includes all of the property that belongs to the debtor when the application for bankruptcy is accepted, as well as the property obtained by the debtor during the period from the time when the application for bankruptcy is accepted to the time when the procedures for bankruptcy are concluded.

The Provisions further clarify the scope of debtors’ property, providing that a debtor’s property shall include all the monetary funds and physical goods of the debtor, as well as the following items which can be assessed in monetary terms and are transferable pursuant to the relevant laws:

  • Creditor’s rights;
  • Equities;
  • Intellectual property rights;
  • Usufructuary rights (The right to use and enjoy the profits and advantages of something belonging to another as long as the property is not damaged or altered in any way); and
  • Property rights.

Moreover, the people’s court shall identify the following items as the debtor’s property:

  • Property upon which the debtor has created security interests pursuant to relevant laws;
  • Portions owned by the debtor in jointly-owned properties;
  • Corresponding property rights jointly owned by the debtor and other persons in jointly-owned properties; and
  • Portion of property obtained by the debtor from the division of jointly-owned property.

However, the following property shall not be identified as the debtor’s property:

  • Property of which the ownership has not yet been obtained by the debtor under a title retention transaction;
  • Property of which the ownership is proprietary to the State and are not allowed to be transferred;
  • Other property which is not owned by the debtor according to laws and administrative regulations; and
  • Other person’s property occupied or used by the debtor based on:
  • Warehousing contract;
  • Safekeeping contract;
  • Work contract;
  • Commission sales contract;
  • Loan contract;
  • Deposit contract;
  • Leasing contract; and
  • Other legal relationships.

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