The answer is YES. If a judicial administrator, liquidator or bankruptcy administrator has been appointed for you by a court or other competent authorities in your country, such administrator will represent your company in litigation in China.
The bankruptcy of an enterprise is divided into seven steps: application, case acceptance, receivership by the bankruptcy administrator, declaration of creditor’s rights, settlement/restructuring/declaration of bankruptcy, liquidation and deregistration.
In the recognition and assistance procedures for cross-border bankruptcy cases, Chinese courts are attempting to provide guidance to the bankruptcy administrator to directly apply to foreign courts for recognition and assistance.
When a Chinese enterprise is adjudged bankrupt, it generally means that its assets are insufficient to pay off all its debts, so its shareholders cannot recover their capital contributions through bankruptcy procedures.
If your debtor defaults on a debt, you can take a lien on the debtor’s chattels (movable property) that you have legal possession of. In other words, the seller can retain ownership of the goods if the buyer fails to pay the price or perform other obligations as scheduled.
The management of the enterprise shall cooperate with the bankruptcy administrator and may be prohibited from serving as executives of other enterprises.
Your Chinese debtor can no longer pay off its debts to you alone. You shall be paid together with all of its creditors. You also need to declare your creditor rights to its bankruptcy administrator.
It will lose control over its assets and management, and will no longer be able to pay off any particular debt independently.
The examination procedure of the court for accepting bankruptcy cases can be summarized into four stages: applying for bankruptcy, conducting formal examination, accepting the application and accepting the bankruptcy case.
If a creditor wishes to apply for bankruptcy of a Chinese debtor, it shall submit the following materials to the court.
If a debtor files an application for bankruptcy, it shall submit the following materials to the court.
The following parties may apply for bankruptcy of the debtor: the debtor itself, creditors, liquidation obligors, relevant governmental authorities and employee creditors.
Enterprises can all go bankrupt. In a few places, like Shenzhen, natural persons can go bankrupt. Chinese central and local governments and public institutions cannot go bankrupt. In addition, law firms cannot go bankrupt, either.
A Chinese enterprise may go bankrupt if both of the following conditions are met: first, it fails to pay its debts as they fall due; and second, its assets are inadequate to pay off all debts or it is clearly insolvent.
You can claim debt recovery from its shareholders. Normally, due to the very nature of companies (legal persons), it is very difficult for you to claim debt recovery from a Chinese company’s shareholders. Once the company is canceled, however, you will have opportunities to do so.