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BANKRUPTCY I ,AW OF PFOPf .R'S RFPURJ .Ie OF CHINA (DRAFT)

CONTENTS

Ch. 1: General Provisions

Ch. 2: Applications and AcceptancesSec. 1: applicationSec. 2: acceptance

Ch. 3: Administrators

Ch. 4: Estate (debtor's property)Sec. 1: general rulesScc. 2: the rescission and voidance of certain actions before the bankruptcy

procedureSec. 3: Bankruptcy procedure expenses and expenses for common benefits

Ch. 5: The Filing of Claims

Ch. 6: Creditors' meetingSec. I: general provisionsSec. 2: creditors' committee

Ch. 7: ReorganizationSec. 1: Application for and Examination of ReorganizationSec. 2: Operation during ReorganizationSec.]: The Making and Confirmation of the Rcorgnniztltion PlanSec. 4: The Execution of the Reorganization Plan

Ch. 8: Conciliation

Ch. 9: LiquidationsSec. 1: Declaration of BankruptcySec. 2: Recall right and exemption rightSec. 3: Credit Right

Sec. 4: Appraisal and DistributionSec. 5: Conclusion of BankruptcySec. 6: Discharge

Ch. 10: Legal Liabilities

Ch. 11: Supplementary ProvisionsCHAPTER ONE: GENERAL PROVISIONS

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[Article! JThis Law is formulated in order to regulate the bankruptcy actions ofenterprises, fairly try bankruptcy cases, fairly handle debts and credits, protectthe legitimate rights and interests of creditors and debtor, maintain the economic

order and promote the development of socialist market economy.

[Article 2] This Law applies to the following civil entities:(1) enterprise legal entities;(2) partnership and its partners:(3) individual proprietorship enterprise and its investor; and(4) other profit-making established in accordance with law.

Where the entity listed in the preceding paragraph has been dissolved but hasnot been liquidated or has not been liquidated completely, it is deemed to existwithin the scope of the provisions III this Law.

[Article 3] wherever a debtor is unable to payoff the debts due, or all his assetsis not enough to payoff all the debts, its debts shall be liquidated in accordancewith the procedures prescribed in this Law.

"Unable to pay off the debts due" prescribed in the preceding paragraph meansthat when the debt is already due, the debtor does not perform his obligation topayor obviously lacks payment ability.

A debtor who ceases to payoff debts due and this ceasing to pay stayscontinuously shall be presumed unable to pay.

\Vhcrcver il debtor is unnb1c or probllbly unable to pny off debts due, and needs

reorganization, the debtor may enter into the reorganization procedure inaccordance with this Law.

[Article 4] Bankruptcy cases shall be under the jurisdiction of the people's courtin the place of the debtor's domicile.

[Article 5] Bankruptcy cases that are tried by the people's courts shall apply tothe reorganization, conciliation or bankruptcy liquidation procedures providedfor in this Law.

[Article 6J The ruling made by the people's court according to the provIsions inthis Law shall enter into force from the date of making the ruling.

No appeal shall be brought up against the ruling made by the people's courtaccording to the provisions in this Law except otherwise provided for in thisLuw.

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The ruling made by the pcople's court in accordance with the provisions in thisLaw shall be made public except otherwise provided for in this Law.

The rulings made by the people's court in bankruptcy cases shall be published inthe media designated by the people's supreme court especially for publicizingannouncements and shall be put up in the bulletin board of the people's courtthat accepts the case.

[Article 7] Where this Law has not stipulated the procedures for bankruptcycases, the relevant provisions of Civil Procedures Law shall be applied, exceptfur pi UI.,:I;Ullll;;::, fUi Sl;;L:UUU instiiuce.

[Article 8] The bankruptcy procedures initiated according to this Law shall beeffective in regards to the debtor's property that is outside the territory of thePeople's Republic of China.

The bankruptcy procedurcs initiated outside the territory of the People'sRepublic of China, after the approval of the people's court through rulings, shallbe effective in regards to the debtor's property that is inside the territory of the

People's Republic ofChina.

However under any of the following circumstances, the people's court shall notmake a ruling of approval:

(1) if there arc no relevant treaties or reciprocity relationship between thecountry and the People's Republic of China;(2) if the bankruptcy procedure initiated outside the People'3 Republic of Chinn

violates the public interests of the People's Republic ofChina;(3) if the bankruptcy procedure initiated outside the People's Republic of Chinamay impair the lawful interests or rights of the creditors ofthc People'sRepublic of China

[Article 9] The people's court shall safeguard the lawful rights and interests ofthe employees of the bankrupt enterprises in accordance with law when tryingbankruptcy cases.

The people's court shall investigate the legal liabilities of the operation andmanagement personnel of the bankruptcy entities in accordance with law.

CHAPTER T'VO: APPLICATIONS AND ACCEPTANCES

Sec. 1. Application

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[Article 10] Where the situations stipulated in Article 3 of this Law occur to thedebtor, the debtor may file an application for reorganization, conciliation, orliquiJatioll with the people's court.

Where the debtor is unable to payoff debts due, the creditor may apply for thedebtor's bankruptcy with the people's court.

Where the situation stipulated in Paragraph 2, Article 3 of this Law occurs andthe debtor's property is not sufficient to pay off the debts, the person who isresponsible for liquidation shall file an application for bankruptcy with thepeople's court.

[Article 11] The applicant shall submit an application form for bankruptcy andrelevant evidence to the people's court when filing an application with thepeople's court.

The application form for bankruptcy shall contain:(1) the basic situations of the applicant and the party against whom anapp lication is filed;

(2) the purpose of the application;(3) the facts and reasons of the application;(4) the character and amount of the credit, InclUding whether there IS a propertyguarantee or lien.(5) other matters that the people's court deems shall be contained.

Whcre an application is filed by the debtor, the debtor shall submit a report onits financial status, dcbt list, credit list and relcvant financial reports to thepeople's court.

(Article 121 The applicant, either the debtor or the creditor, who has filed anapplication for bankruptcy, may request to withdraw the application before theapplication is accepted by the people's court.

Sec. 2: Acceptance

[Article 131 The peopLe's court shall decide whether or not to accept theapplication within fifteen days after receiving the application. Where thepeople's court has deCIded to accept an apphcahon, It shall make a rUlmg on It.

Where the people's court accepts an application for bankruptcy, the people'scourt shall notify the debtor within fifteen days after it makes the ruling ofacceptance.

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Where an application is filed by the creditor, the debtor shall submit a report onits financial status, a dcbt list, a credit list and relevant financial reports to thepeople's court within fifteen days after it receives the notification issued by thept:oplc's coulL

[Article 14] Where the people's court has decided not to accept a bankruptcyapplication, it shall make a ruling on it and explain the reasons.

The people's court shall notify the applicant of the ruling prescribed in thepreceding paragraph within five days after making the ruling, but a publicannouncement is not necessary.

Where an applicant refuses to accept the ruling made by the people's court thatthe people's court will not accept the application, he can appeal with thesuperior people's court within fifteen days after the delivery orthe ruhng.

[Article 15] The people's court shall designate an administrator when acceptingan application for bankruptcy.

[Ar1icle 16] The people's court shall f01111 a collegiate beneh to try the

bankruptcy case after accepting the application. However, where the amount ofdebtor's property is comparatively small, the debt and credit are clear, and thenumber of creditors is small in the bankruptcy case, the people's court may notform a collegiate bench panel to try it.

[Article 17] The people's court shall notify the ruling to the creditors who arealready known within fifteen days after making the ruling if it accepts theapplication for bankruptcy and shall makc a public announcement.

The notification and the public announcement shall contain the following:(1) the main body of the ruling on the acceptance of the bankruptcy case and thetime of the acceptance of the bankruptcy case;(2) the time limit of and special points for attention for the filing of claims forthe credit;(3) the name of the administrator and the address of the place where theadministrator handles business;

(4) the debtor of the debtor shall payoff its debts to the administrator and theholder of the debtor's property shall deliver the property to the administrator;(5) the date and place ofthe first creditors' meeting; and(6) Other matters that the people's court deems shall announce.

[Article 18] As soon as the people's court accepts the bankruptcy case, thedebtor and relevant persons shall bear the following duties:

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(1) properly keepin~ all the property, accounting hooks, documents, data, sealsand other articles that they occupy, use and manage;(2) working according to the requirements of the people's court, theaUllJillistrator dIlU answering their inquiries in truth;

(3) attending the creditors' meeting as nonvoting delegates and answering thecreditors' inquiries in truth;(4) not leaving the place of domicile without the pennission of the people'scourt.(5) not taking positions, such as directors or managers of any other enterprises.

The relevant persons referred to in the preceding paragraph include the legall~IJI t:st:lltati Yes uf tht: enklprise entities, paliners and persons in charge of thepartnership enterprises, investors and persons in charge of individualproprietorship enterprises or persons in charge of other profit-makingorganizations; with the authorization of the people's court, the relevant personsparagraph may also include the financial administrator and key businesspersonnel of the enterprises.

[Article 19] After the people's court accepts the bankruptcy case, debtor'spay-off of debts to a specific creditor is invalid.

CHAPTER THREE: ADMINISTRATORS

[Article 20]The administrators referred to in this Law means organizations, institutions orindividuals who are in charge of property management of the debtor's propertyand other duties in the procedures of reorganization, conciliation or liquidationin accordance with the provision of this Law.

The administrator designated by the people's court in accordance with Article15 of this Law may be confirmed by the creditors' meeting or elected andappointed through other means.

When fulfilling its obligations, the administrator shall be responsible to thepeople's court and under the supervision from the creditors' meeting andcreditors' committee.

The administrator shall attend the creditors' meeting ad nonvoting delegate,report to the creditors' meeting and answer inquiries.

rArticle 211 The administrator may be any of the following organizations,institutions, or individuals:(I) the liquidation team established in accordance with law or established by thedesignation ofthe people's court;

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(2) social intennediary institutions established in acconhnr:p. with law, !':llch ai'.law finns, accounting finns, or bankruptcy liquidation firms; and(3) professionally-licensed personnel with relevant professional knowledge.

Where administrators are organizations or institutions, they shall hire personnelwith relevant professional knowledge and professional licenses to assist theirwork.

Whp.re the anmini!':trator ii'. an individual, he shall participate in professionalliability insurance.

[Artidl: 22] TIll;::: fulluwiug ]Jl;;I~UlJ~ Ul iustitutiollS shall not be the administrator:

(I) if they have been criminally punished or have other bad socialrecords;(2) if lawyers or certified accountants are revoked of their licenses;(3) if they are interested parties with the bankruptcy case; and(4) if they arc thought by the people's court inappropriate to he an administrator.

[Article 23] The administrator shall generally perform the following functions:(1) takiug over all of the debtor's propel1y, accounting books, documents, data,

seals and other articles;(2) investigating into the debtor's property status, and making a report on theinvestigation into the financial status;(3) detennining the managing affairs inside the debtor's business;(4) detennining the daily expenses and other necessary expenses for the debtor;(5) employing necessary managing personnel, professional techniciansand other staff;(0) lh:::kuuining whether or not the debtor shall continue to operate businessbefore the convention of the first creditors' meeting;(7) managing and handling the debtor's property;(8) accepting the property delivery by a third party to the debtor;(9) participating in a lawsuit or an arbitration concerning the disputes over thedebtor's property on behalf of the debtor;(10) calling for the convention of the creditors' meeting;(11) other functions that the people's court thinks shall be exercised by theadministrator.

If administrator's functions are stipulated otherwise in this Law, otherprovisions shall apply.

[Article 24] Before the convention of the first creditors' meeting, theadministrator shall obtain pennission to act from the people's court if his actionfalls into one of the activities that are stipulated in Article 64 of this Law.

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[Article 25] The administrator shall perform his duties in honest and duediligence.

The administrator shall be liable for the compensation ">vhere he brings losses to

debtor's property or creditor due to the violation of the preceding paragraph.

[Article 26JThe payment and expenses of the admInIstrator shall be decided bythe creditors' meeting.

Before the convention of the first creditors' meeting, the payment and expensesof the administrator shall be decided by the people's court.

[Article 27] Before the creditors' meeting elects and appoints an administrator,the administrator designated by the people's court shall not cease working.

CHAPTER FOUR: DEBTOR'S PROPERTY

Sec. I: General Provisions

[Arbc.le 28] All the property :mrl property rizhts that helong to the debtor at thetime when the bankruptcy case is accepted and the property and property rightsthe debtor obtains after the acceptance of the bankruptcy case but before thetermination of the bankrupll:y prul:t:uurt:~, :shall bt: ut:btm':s plUpt:lty.

[Article 29] After the people's court accepts the bankruptcy case, the debtor'sdebtor shall payoff its debts to the administrator and the holder of the debtor'sproperty shall deliver the property to the administrator.

Where the debtor's debtor payoff its debt to the administrator or the holder ofthe debtor's property delivers the property to the administrator in violation ofthe provisions ofthe preceding paragraph, the debtor or the property holder shall

not be exempted from the obligations of continuing to payoff the debts ordelivering the property.

[Article 30] After the people's court accepts the bankruptcy case, all theproperty custody measures and other execution measures in regarding todebtor's property shall stop unless stipulated otherwise by this Law.

[Article 31] After the people's court accepts the bankruptcy case, all the civil

actions in relation to debtor's property or property rights that have alreadybegan but have not ended shall be suspended; the actions shall continue after theadmInIstrator takes over the debtor's property.

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[Article 32] Where the debtor, creditor or other related parties have disputesover debtor's property or debts, they may institute a lawsuit with the people'scourt that has accepted the bankruptcy case.

Sec. 2: Rescission and voidance of certain actions before the bankruptcyprocedure

[Article 33] Within one year before the people's court accepts the bankruptcycase, the administrator is entitled to request the people's court to rescind thefollowing activities taken by the debtor concerning the debtor's property andproperty rights:(1) hau:ofl:ning propelty or property rights frce of charge;

(2) transferring property with obviously unreasonable low prices;(3) providing property security for the debts that originally have no propertysecurity;(4) paying 0 ff in advance the debt undue; and(5) giving up credits.

[Article 34] Within six months hefore the people's court accepts the bankruptcycase and upon full knowledge of his inability to payoff due debts, where the

debtor still pays off debts to specific creditors, which impairs the interests ofother creditors, the administrator is entitled to request the people's court torescind the repayment unless the specific repayment benefits the debtor'sproperty.

[Article 35] The following activities taken by the debtor concerning debtor'sproperty and property rights of the debtor shall be invalid:(1) hiding, illegally distributing property; and(2) fabricating debts or recognizing unreal debts.

[Article 36] The admilllstrator is entitled to recover the debtor's property orproperty rights that are obtained through activities stipulated in Article 33,Article 34 or Article 35 of this Law.

[Article 37] Where the investor ofthe debtor has not yet performed his investingobligation after the people's court acccpts thc bankruptcy case, the administratorshall request the investor to pay the amount he committed regardless the timelimit of the investment.

[Article 38] The administrator shall recover the unusual income that thedirectors, managers and other personnel in charge of the bankrupt enterprisehave obtained by taking advantages of their authority and the enterpriseproperty that they have encroached illegally.

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Sec. 3: Bankruptcy Expenses ami Expenses for Common Benefits

[Article 39] The following expenditures generated after the people's courtacct:pts tlIt: bankruptLy Lase art: bankruptcy expCJlses:

(1) lawsuit expenditures of the bankruptcy case;(2) expenditures for the management, appraisal and distribution of the debtor'sproperty; and(3) expenditures of and payment for the administrator, expenditures forpcrformine clutics and for employine staff

[Article 40] The following debts generated after the people's court accepts theuankruptcy case art: t:Ji..pt:IliSt::s fUl LUIIl1ll0n benefits:(1) the debt that is generated on the administrator's request to perform bilateralcontracts;(2) the debt that is generated from the voluntary services that is not legally orcontractually obliged to be done for the debtor's property;(3) the neht that is generated from the unjust enrichment that 15 acquiredimproperly or without a lawful basis to the debtor's property;(4) the labor cost and social security cost paid in order to continue the debtor'sbusiness operation after the people's court accepts the bankruptcy case,;(5) the debt that is generated to other people from the administrator or relevantpersons in their performing of duties; and(6) the debt that is generated from the damages to other people caused by theproperty of the bankrupt enterprise.

[Article 41] Bankruptcy expenses and expenses for common benefit shall bepaid otT at any time with the debtor's property.

Where the debtor's property is insufficient to payoff all of the costs forbankruptcy and expense for common benefit, the expenses for bankruptcy shallbe paid off with priority.

Where the debtor's property is insufficient to pay of all of the bankruptcyexpenses and expenses for common benefits, they shall be paid off inproportion.

Where the debtor's property is insufficient to pay off the expenses forbankruptcy, the administrator shall apply to the people's court for thetermination of the bankruptcy case. The people's court shall make a ruling oftcnnination within fifteen days after receiving the application of theadministrator for the termination of the bankruptcy case.

CHAPTER FIVE DECLARATION OF CREDITS

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[Article 47] The crerlitors with their crerlit rights toward the creditor are entitledto perform the rights in accordance with the procedures stipulated in theprocedures in this Law when the people's court accepts the bankruptcy case.

[Article 43) The people's court shall confirm the time limits for the creditdeclaration after accepting the bankruptcy case. The time limits of creditdeclaration shall not be less than 30 days and not exceed 3 months.

The time limits for credit declaration shall he counted from the date when thepublic announcement that the people's court makes the ruling on acceptance ofthe bankruptcy case becomes effective.

[Article 44] The undue credit shall be deemed as due when the bankruptcy caseis accepted.

Where a credit is not due until the acceptance of the bankruptcy case, interests"hall cea<:;c to he counted into a credit from the date of the acceptance of thebankruptcy case.

[Article 45] Creditor may file for conditional, executory credit claims, and

disputed credit claims in litigation.

[Article 46] After the people's court accepts the bankruptcy case, the creditorsshall file their credit claims with the administrator within the time limits set bythe people's cOllrt.

Labor credit claims shall be put into the credit list and be posted in public.

[Article 47] When filing for credit claims, the creditors shall explain in writtenthe amount of the claim and whether there are liens, and shall submit relevantevidence. Where the claim is joint claim, the creditor shall explain.

[Article 48] Where the creditor is unable to file his claims due to irresistiblecauses or other just causes, he may apply for an extension of the time limit fordeclaration to the people's court.

Where thc crcditor does not declare his claims within the time limits set by thepeople's court, he may complementarily declare his credit before the finaldistribution of the bankrupt property. But no complementary distrihution shallbe made if the property has been distributed before. The creditor ofcomplementary declaration shaH pay thc costs for examining and confirming thecomplementary declaration.

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Where the creditor has not declared his credit within the time limit ofdeclaration set by the people's court, he shall not exercise his right inaccordance with the procedures stipulated in this Law except prescribed in thepreceding two paragraphs.

[Article 49] Joint creditors may filc their credits by one representative creditordeclaring credits for all joint creditors or they may declare credits together.

[Article 50] The guarantors of a debtor or other joint debtors shall filc theirclaims according to their respective recourse rights they enjoy toward thedebtor.

[Article 51] Where the procedures prescribed in this Law have applied to thejoint debtors simultaneously or successively, their creditors are entitled to filetheir credit claims in separate bankruptcy cases for all the credits respectively.

[Article 52] After receiving the credit claims, the administrator shall register andmake a credit list and also examine truth and trustworthiness of the claims.

When the administrator makes a credit list, the amount of the non-monetary

credit shall be counted as the average market price at the place where the debt isperfonned on the date when the people's court decides on the acceptance of thebankruptcy case. The amount of monetary credit in foreign currency shall becounted as the base price of the exchange rate of the RMB market on the datewhen the people's court decides the acceptance of the bankruptcy case.

The credit list and declaration materials shall be kept by the administrator forinterested parties to refer to.

[Article 53] The credit list made in accordance with the provisions in Article 52of this Law shall be submitted to the first creditor's meeting tor investigation.

Where the administrator, debtors, creditors' meeting have no opposition againstthe claims contained in the Credit Fonn, the people's court shall make a rulingof confinnation.

Where the administrator, debtors, creditors have opposition against the creditscontained in the credit list, they may bring up a lawsuit concerning theeonfinnation of the credits to the people's court that has accepted thebankruptcy case.

CHAPTER SIX CREDITORS' MEETING

Sec. 1: General provisions

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[Article 54] All creditors who have declared credits according to law aremembers of the creditors' meeting. Members of the creditors' meeting areentitled to attend the creditors' meeting and enjoy the rights to vote.

The creditors whose credits have not been confirmed shall not exercise therights to vote unless the administrator temporarily decides the amount of thecredits in order that the creditors can enjoy the rights to vote.

Secured creditors who have not abandoned their priority rights to be repaid donot have the rights to vote on the resolutions prescribed in Item 9 and Item 10Paragraph One, Article 56.

The creditors may consign their deputies to attend the creditors' meeting andexercise the rights to vote. The deputies shall submit the creditor's letter ofauthorization to the people's court or to Chainnan of the creditors' meeting.

The employees and workers' union of enterprise debtors may send theirrepresentatives to attend the creditors' meeting.

[Article 55] The creditors' meeting sets up one chairman, who will bedesignated by the people's court from among the creditors with the rights tovote.

Chairman of the creditors' meeting shall preside over the creditors' meeting.

[Article 56] Article 56: The creditors' meeting shall perform the followingfunctions and powers:

(1) investigating into the credits;(2) selecting, appointing and replacing the administrator, and detennining thepayment and expenses of the administrator;(3) supervising administrator;(4) appointing and replacing the members of the creditors' committee;(5) deciding to continue or terminate the debtor's business;(6) passing the conciliation agreement;(7) passing the reorganization plan;

(8) passing the plan on how to manage the debtor's property;(9) passing the plan on how to appraise the bankrupt property;(10) passing the plan on how to distribute the bankrupt property; and(11) other matters that the people's court thinks should be decided by thecreditors' meeting.

When the creditors' meeting perfonns the above functions and powers, it shallmake written resolutions.

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[Article 57] The first creditors' meeting shall be called by the people's court, andshall be convened within 15 days aftcr the expiration of the period for creditdeclaration.

Subsequent creditors' meeting are convened at such times as the people's courtdeems them necessary, and may also be convened upon the proposal by theadministrator, the supervisor, the creditors whose credits are conlirmed tocomprise more than one-fourth of the total amount of claims to Chainnan of thecreditors' conference.

[Article 58] The administrator shall notify the known creditors fifteen days inadvance of the convention ofthe creditors' meeting.

lArtIcle YJJKesolutIons of the creditors' meeting shall be passed by more thanhalf of the creditors with the right to vote present at the meeting; and the amountof their credits must comprise more than half of the total amount 0 f credits thatare not secured with property unless provided otherwise by this Law,

Where the resolutions at the creditors' meeting impair some creditors' interests,the impaired creditors may, within fifteen days after the creditors' meeting hasmade such resolutions, apply to the people's court for a ruling to withdraw theresolutions and ordering the creditors' meeting to make new resolutions.

Resolutions at the creditors' meeting shall have binding force on all thecreditors.

[Article 60] Where the creditors' meeting is unable to pass resolution over thethings listed in Item 2, Item 5, Item 8 and Item 9, Paragraph One, Article 56 ofthis Law by voting, the people's court shall make a ruling.

Where the creditors' meeting is unable to pass resolutions over the things listedin Item 10, Paragraph One, Article 56 of this Law by a second voting, thepeople's court shall make a ruling.

The people's court may announce the rulings prescribed in the preceding twoparagraphs at the creditors' meeting with no necessity to notify or make a publicannouncement separately.

[Article 61] Where the creditor refuses to accept the ruling made by the people'scourt according to Article 6U ofthis Law, he may apply for reconsideration tothe same people's court within fifteen days, During the reconsideration period,the ruling shall be performed nonnally.

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Sec. 2: Creditors' Committee

[Article 62J The credilors' rnt:t:ling may elecl anu appoint credilur

representatives to from creditors' committee. The creditor representative shallbe confirmed by the people's court in written.

The number of creditor representative shall be more than nine, in which, thereshall be one lahor pmrlitor n~presentative_

[Article 63] The creditors' committee shall perform the following functions andpowers:(1) supervising the management and disposing of the debtor's property;(2) supervising the distribution of the bankruptcy property;(3) calling [or the convention of the creditors' meeting; and(4) other functions and powers consigned by the creditors' meeting.

When performing functions and powers, the creditors' committee is entitled torequest the administrator, the creditor to make explanations or to supply relevantuocuments within the scope ofthcir duties and powers.

Where the persons prescribed in the preceding paragraph violate the provisionsof this Law and refuse to accept supervision, the creditors' committee is entitledto request the people's court to make a decision. The people's court shall make a(h~cision within five days upon the supervisor's request.

Where creditors' committee causes damages to debtors or creditors either onpurpost: or by lIt:gligCIlCt:, it shall be liable for the compensation.

[Article 64] when performing the following activities, the administrator shallreport to the creditors' committee in time:(1) transfelTing the ownership of real estate;(2) transfelTing such property rights as mining rights, tenure and intellectualproperty rights;(3) transfelTing all the stock or business operation;(4) setting a loan;(5) establishing a property guarantee;(6) having to transfer the movable property valued at more than 10,000 Yuan inorder to continue business operation;(7) transfelTing the credits and securities;(8) requesting for the per[offilance of a bilateral contract:(9) going through conciliation procedure or arbitration concerning debtor'sproperty, lawsuits or other legal procedures;(10) giving up rights;

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(11) withdrawing the guaranty; and(12) other property disposal activities that may materially affect the creditors'interests.

CHPATER SEVEN REORGANIZATION

Sec. 1: Application for and Examination of Reorganization

[Article oS] The provisions in this C:hapter only apply to enterprise legalpersons.

[Artidt: 66] Wllt:Il tht: JdJtUI ur tht: l:rt:Jitors tilts an applicatioll in al:l:urdance

with Article 10 of this Law, they may apply for reorganization directly to thepeople's court.

After the people's court accepts the bankruptcy case but before the debtor isdeclared into bankruptcy, the debtor, the creditors or the investors who holdmore than one-third of the debtor's registered capital, may apply forreorganization to the people's court.

[Article 67] The person who applies for reorganization shall submit anreorganization application form and relevant evidences to the people's court.

[Article 68J Where after examination the people's court believes that thereoreanization complies to the provisions ofthis Law, the people's court make aruling to approve organization.

Sec. 2: Business Organization During Reorganization

[Article 69] The period from the date when the people's court makes the rulingfor the debtor to reorganize to the date when the reorganization procedure is theperiod of reorganization.

[Article 70] During reorganization, upon the application of the creditor and theapproval from the people's court, the creditor may manage its property andoperation business under the supervision of the administrator.

[Article 71] Where the situations prescribed in Article 70 do not apply, theadministrator shaH perfonn the duties and powers prescribed in Article 23 ofthis Law.

The administrator may cmp10y personnel from the creditor enterprise to managebusiness operations for the enterprise.

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[Article 72] During reorganization, the collateral rights of the guarantor shall besuspended. However, where the possibility that the collateral objects may bedamaged or the value of the collatcral objects may be decreased dramatically issUl:h that they w ill hurt the rights of the guarantor, the guarantor shall he entitled

to ask for resumption of exercising the collateral rights and the people's courtshall approve of it.

The creditor may take back the pledge and lien in ordcr to continue to operatebusiness, but shall provide substitute guaranty.

[Article 73] During reorganization, the debts that the debtor bears in order to goon with business operation are debts of common benefits.

During reorganization, where the debtor raises a loan in order to go on withbusiness operation, the debtor may take the property that has not yet become thesubject matter of the collateral rights as the guaranty of the credits.

The usage of the loan prescribed in the preceding paragraph shall be restrictedand necessary control and supervision shall be performed on its usage.

[Article 74] Where the right holder of the property that is occupied by the debtoron legitimate grounds requests to take back the property during reorganization,agreed requirements shall be met.

[Article 75] During reorganization, the debtor shall be entitled to dissolve orcontinue to perform the bilateral contract which is established before thebeginning of the reorganization procedure but has not been performed yet, andshall l10tify in written the counterpart. Where the debtor docs not notify the

counterpart within three months from the beginning of the reorganizationprocedure, or does not give any reply within thirty days since receiving thecounterpart's interpellation, the contract shall be deemed as being dissolved.The compensation request for damages caused by the dissolution of the contractshall be the declarable credit.

Where the debtor decides to continue to perform the bilateral contract that isestablished before the reorganization procedure und thut has started to be

performed, the counterpart of the bilateral contract shall perform the contract,but is entitled to request corresponding guaranty.

[Article 76] Where the people's court rules to permit the debtor to go throughreorganization, the debtor's investor shall not ask the debtor for any investmentproceeds distribution.

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Where the people's court rules to permit the debtor to go through rcorg~ni7Mion,

the directors, managers or other senior management of the debtor shall nottransfer their shares of the debtor to a third party.

[Article 77JDuring reorganization, upon the request of interested parties, thepeople's court may decide to tenl1inate the reorganization procedure afterexamination and confirmation wherever any circumstances as following arise:(1) if the management and financial situation of the debtor continue tonetcriorate without a pm:sihility to save it;(2) if the debtor acts with fraud, decreasing the enterprise's property in badpurpose, delaying without reasons or other behaviors that apparently areJism1vitllLagt:uus Lo lltt: l.,acditOlS,(3) if the behaviors of the debtor's institution or other employees make theadministrator unable to perform his duty.

Where the reorganization plan is approved, thc people's court may decide toterminate the reorganization procedure.

Under the circumstances prescribed in the preceding two paragraphs, thept:up1e's L:uurt shall meanwhile make a ruling to declare the debtor bankrupt.

Sec. 3: The making and Confirmation of the Reorganization Plan

[Article 78J The debtor or the administrator shall submit the draft plan ofreorganization within six month after thc people's court makes the ruling ofreorganization.

After the expiration of the time limit stipulated in the preceding paragraph, upon

the request of the debtor or administrator, the people's court may make anextension of three months if it deems justifiable reasons exist.

[Article 79J If the debtor continues to manage the property, the debtor shallmake the draft plan of reorganization.

If the administrator is in charge of the management of the property, theadministrator shall make a draft plan of reorganization.

[Article 80] The draft plan of reorganization shall contain:(1) the management scheme of the reorganized enterprise;(2) the classification of the credits;(3) the adjustment scheme of the credits;(4) the repayment scheme of the credits;(5) the executing time limits of the reorganization plan;(6) the supcTvi::lion time limit of the execution of the reorganization plan; und

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(7) other schemes that are conducive to the reorganization of the enterprise.

[Article 81] The credits are classified in the reorganization plan as follows:(1) secured credits;(2) labor credits;(3) taxation; and(4) ordmary credIts.

[Article 82] The creditor or administrator shall submit feasibility report oforganization to the creditors' meeting when they submit draft plan ofreorganization to the people's court.

[Article 83] After receiving the draft plan of reorganization, the people's courtshall call the convention of the creditors' meeting within two month to vote onit.

The creditor or the administrator shall make explanations about the draft plan ofreorganization to the creditors' meeting and answer inquiries.

[Article 84] The investors of the debtor may attend as non-voting delegates thecreditors' meeting that discusses the draft plan of reorganization.

[Arliclt;: 85] DiffeleIll gruup:; ba:;cu U1I the da:;:;ifil:ation of the credits according

to provisions in Article 80 of this Law shall vote in the creditors' meeting inorder to pass the draft plan of reorganization.

Where more than half of the creditors in the same voting group present at themeeting agree on the draft plan of reorganization, and the amount of the creditstakes up more than two-thirds of the settled credit amount, the draft plan ofreorganization shall be deemed as being adopted by this group.

Where the groups all pass the draft plan of reorganization, the plan shall bedeemed as being adopted.

[Article 86] Where the draft plan of reorganization is not passed, theadministrator may negotiate with the voting group that does not adopt the draft:plan of reorganization. This voting group may vote again after negotiation. Thecompromise reached by the two sides in negotiation, shall not impair theinterests of the other voting groups.

Where the draft plan of reorganization is still not adopted by the second votingafter negotiation, the creditor or administrator may apply to the people's counfor approval of the reorganization plan under the following conditions:

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(1) ifhased on the reorganization plan, the secured credits are fully paid off, thelosses incurred by delayed repayment are compensated fairly and the collateralrights does not suffer substantial damages; unless the reorganization planadupted by the group with secured credits provides otherwise;

(2) if based on the reorganization plan, the labor credits and taxation creditsshall be fully paid off, or if the adjusted repayment proportion has been adoptedby corresponding voting groups.(3) if the repayment proportion of the non-secured credits obtained according tothe reorganization plan is no lower than the repayment proportion of the creditswithout the security of property obtaincd according to the bankruptcyliquidation procedure at the time when the reorganization plan is submitted forapproval;

(4) if the repayment order prescribed in the reorganization plan does not violatethe provisions in Article 81 of this Law;(5) if the management scheme of the reorganized cntcrprise is feasible.

Where the people's court thinks that the application submitted by the creditor orthe administrator meets the requirements prescribed in the preceding paragraph,the people's court shall make a ruling of approval within 30 days.

[Article 87] Where the creditors' meeting does not the draft plan ofreorganization, the people's court shall make a ruling to tenninate thereorganization procedure and declare the debtor bankrupt.

[Article 88] The creditor or the administrator shall apply to the people's courtfor its approval of the reorganization plan within tcn days after the adoption ofthe reorganization plan.

Upon the receipt of the application, the people's court shall decide to approvethe reorganization plan after examination that the plan meets the prescribedprocedures of this Law.

Sec. 4: The Execution of the Reorganization Plan

[Article 89] The debtor shall be in charge of the execution of the reorganizationplan.

After the people's court approves the reorganization plan, the administrator thathas been in charge ofthc property management and business operatIon shalldeliver property and operation business to the creditor.

[Article 90] During the supervision period of the reorganization plan, thcadministrator shall be in charge of the supervision of the execution of the

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reoreanization plan since the date the people's court adopts the reorganizationplan.

During the supervision period, (he cn;ditor shall report to the administrator the

execution situations of the reorganization plan and the financial situation of theenterprise.

[Article 91] After the supervision period ends, the administrator shall submit tothe people's court supervision report. Since the submitting date of thesupervision report, the administrator shall be released his supervision duties.

[Article 92] The n:orguuizatlull pIau uppluveu by the peulJk'S court, shall havebinding force over all the credits that have been established before the people'scourt accepts the bankruptcy case.

The reorganized credits that have not been declared according to the provisionsof this Law shall not be claimed during the execution period of thereorganization plan and shall be claimed according to the repayment conditionsprescribed as the same kind of credits in the reorganization plan after thecompletion of the execution of the reorganization plan .

The repayment liabilities of the guarantor of the reorganized enterprise or otherjoint debtors shall not be affected by the reorganization plan.

[Article 93] where the creditor is unable to or refuses to execute thereorganization plan, upon the application of interested party, the people's courtshall decide to terminate the execution of the reorganization plan.

Where the people's court terminates the execution of the reorganization plan, itshall announce the debtor bankrupt. The payment obtained by the creditorowing to the execution of the reorganization plan is still in force. The unpaidpart of the reorganized credit shall be deemed as the bankrupt credits.

The creditors prescribed in the preceding paragraph shall continue to receivedistribution only if the other creditors are paid to the same proportion.

Under the circumstances prescribed in Paragraph One of this article, theconcession made by the reorganized creditors in the reorganization plan loses itseffect. However, the guaranty provided for the execution of the reorganizationplan shall continue to be in force within the guarantee scope prescribed in thereorganization plan.

(Article 94] As to the reorganized credits that are deducted according to thereorganization plan, the debtor shall be exempted from his repayment liability of

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this part from the date when the people's comt clccicles to temlinate thebankruptcy case.

CHAPTER EIGHT CONCILIATION

[Article 95] The debtor may, according to Article 11 of this Law, directly applyfor conciliation to the people's court.

A fter the acceptance of the bankruptcy case by the people's court and before thedeclaration of the bankruptcy case, the debtor may apply for conciliation to thepeople's court.

[Article 96] Where upon examination the people's court thinks the conciliationapplication conforms to the provisions of this Law, it shall make a ruling topermit conciliation and convene the creditors' meeting to discuss the draft planof conciliation.

The right holders of liens, guaranty, and pledge against debtors' property orproperty eights shall exercise those rights after the date the people's courtUCL:iLles to approve the conciliation.

[Article 97] The people's court may order the applicant to modify accordinglyafter examining the application for conciliation that fails to meet therequirements prescribed in this Law. Where the applicant refuses to make amodification or the modification still fails to meet the requirements prescribedin this Law, the people's court shall decide on refusal of the application forconciliation.

The people's court shall, within five days since the ruling of the refusal, notifythe applicant with no necessity to make a public announcement.

The people's court shall declare the debtor bankrupt when it decides on refusalof the application for conciliation in accordance with this Law.

[Article 98] The resolution of the conciliation agreement concluded at thecreditors' meeting shall be adopted by over half of the creditors with votingrights present at the conference; and the amount of their credits must take upmore than two-thirds of the settled total amount of credits.

[Article 99] Where the draft agreement of conciliation is not passed at thecreditors' meeting, the people's court shall make a ruling to declare the debtorbankrupt.

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[Article 100] Where the conciliation agreement arrived at the creditors' meetingviolates the provisions of this Law, the people's court shall rule the conciliationagreement invalid and declare the debtor bankrupt.

[Article 101] The conciliation agreement concluded between the debtor and thecreditors' meeting shall enter into force after the people's court rules torecognize it and make a public announcement.

[Article 102] The ruling concerning the conciliation agreement approved by thepeople's court shall contain:(1) the main body and date of the approved conclliation agreement;(2) the tiuspcl1tiion of the bankrupt procedure;(3) other matters that the people's court thinks shall be publicized.

[Article 103] Where the people's court decides to approve the conciliationagreement, it shall decide to suspend the bankrupt procedure simultaneously.

Where the people's court decides to suspend the bankrupt case, it shall infonnthe administrator to suspend his performance of his duty. The administratorshall transfer the property and the management affairs to the debtor, and alsosubmit a report concerning his perfomlance of duties to the people's court.

[Article 104] The conciliation agreement shall have binding force over thedebtor and all the conciliated creditors.

The conciliated creditors referred to in the preceding paragraph are the personswho have the right to claim before the people's court accepts the bankrupt case.

The conciliation credits, which are not properly applied for in accordance withthe provisions of this Law, shall not be exercised during the performance of theconciliation agreement; and may be executed according to the repaymentconditions prescribed in the conciliation agreement after the completion oftheperformance of the conciliation agreement.

[Article 105] The rights of the conciliation creditors to thc guarantor of thedebtor and to the other joint debtors shall not be affected by the establishment of

the conciliation agreement.

[Article 106] The debtor shall not give extra benefits to specifiC conciliationcreditors on conditions contrary to the conciliation agreement, which willimpair the interests of other conciliation creditors.

[Article 107] The debtor shall payoff his debts according to the conditionsprescribed in the conciliation agreement.

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[Article 108] Where the debtor's fraud or other unlawful activities exist, theconciliation agreement shall be invalid.

With the circumstances prescribed in the preceding paragraph, the people'scourt shall declare the debtor bankrupt.

With the circumstances prescribed in the preceding paragraph, the repaymentthat the creditors get based on the conciliation agreement shall not be returnedwithin the scope of equal proportion.

[Allick 109] WhtJI;: the debtOl refuses to pay offhis debts accQI-ding to the

conditions prescribed in the conciliation agreement, the conciliation creditorsmay file an application with the people's court for enforcement. However, thecompromise that the conciliation creditors have made in the conciliationagreement shall lose effect.

[Article 110] Where the debtor refuses or is unable to payoff his debtsaccording to the conditions prescribed in the conciliation agreement, theconciliation creditors may request the people's court to declare the debtor

bankrupt.

Where the people's court declares the debtor bankrupt, the repayment by thedebtor according to the conciliation agreement that the conciliation creditors getshall still he in force. The unpaid conciliation credits shall be deemed as thebankruptcy credits.

The creditors prescribed in the preceding paragraph can only continue to receivedistribution when the distribution of bankrupt property of other creditorsreaches the same proportion as theirs.

[Article 111] With the circumstances prescribed in Article 109 or Article110 of this Law, the guarantee that a third party provides for the establishmentand performance of the conciliation agreement shaH continue to be effective.

[Article 112] After the people's court accepts the bankrupt case, if the debtorreaches an agreement concerning the disposal of the credits and debts with thecreditors who unanimously agree, the debtor may request the people's court todecide on recognition of the agreement and at the same time decide to terminatethe bankruptcy case.

CHAPTER NINE LIQUIDATION

See. 1: Declaration of Bankruptcy

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[Article 113] Where the people's court declares the debtor bankrupt inaccordance wlth this Law, it shall make a ruling in written and shall deliver it tothe debtur ami the adrninistmtur within five days after making the ruling.

The debtor shall be called "the bankrupt" after being declared bankrupt.

The debtor's property shall be called "bankrupt property" after the declarationofhankruptcy.

(Article 114] After making the ruling of bankruptcy declaration, the people'sl:uurt shall nutify the kllUWll t.:reJituus withill fiileell J<:tys <:tfter the luling and

shall also make a public announcement.

[Article 115] The people's court shall decide to terminate the bankruptcyprocedure and make a public announcement on the following grounds before thedec1aration ofhankruptcy:(1) if a third party provides guarantee for the debtor Or help the debtor to payoffthe debts;(2) if the debtor has paid off a11 of the debts due.

[Article 116] Where the property of a partnership enterprise or its partners areinsufficient to payoff the debts due, the people's court shall declare all thepartners bankruptcy at the same time when it declares the partnership bankrupt.

Where the people's court declares the partners bankrupt, provisions of Article113 of this Law shall apply.

[Article 117] Where the property of an individual proprietorship enterprise andits investors is insufficient to pay off the debts, the people's court shall declare itbankruptcy.

[Article 118] The bankrupt declared in accordance with Article 116 and Article117 of this Law is entitled to keep necessary life expenses for himself and hisfamily members.

Sec. 2: Recall Right and Exemption Right

[Article 119] The owner and other right holders of the property that does notbelong to bankrupt may take back the property through the administrator.

[Article 120] Where the buyer is declared bankrupt before receiving the subjectmatter which the seller has already dispatched and for which he has not paid offthe full price, the seller may take back the subjcct matter which is on dclivcry.

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Rut the ::ldministrator may pay off the fill! price :mcl ask the seller to deliver thesubj ect matter.

Tht: plOY i:siuns uf lhe preceding paragraph do not obstruct the application of the

provisions in Article 129 of this Law.

[Article 121] The rcal rights granted by way of security such as mortgage,pledge and lien over the property or the rights of the debtor is exemption right.The holder of such a right is the holder of exemption rights.

The holder of exemption rights has the prior rights to be paid off on the subjectlUi:1ttl;;l of the exemption right.

[Article 122J Where the holder of exemption rights has not been fully paid offwhen exercising the exemption rights, the holder shall exercise his rightsaccording to the liquidation procedure as to his unpaid-off part.

Where the holder of exemption rights gives up his prior right to be paid off, heshall exercise his rights according to liquidation procedures unless the bankruptprovides the guaranty of property rights for a third party with his property.

[Article 123J The administrator may take back the subject matter of theexemption right by means or repayment or providmg the guaranty acceptable tothe creditors.

Where the value of the subject matter of the exemption right is lower than thatof the guaranteed credit, the debt repayment or substitute guaranty prescribed inthe preceding paragraph shall be limited within thc scope ofthc market price ofthe subject matter at that time.

Sec. 3: Bankruptcy Credit

[Article 124] The credits to the debtor established before the people's courtaccepts the bankruptcy case is bankruptcy credit.

[Article 125] \\There one or more joint debtors are declared bankruptcy, thecreditor may claim his rights to all of the persons who have gone bankrupt withthe full amount of his credit at the time of the declaration of bankruptcy as hisbankruptcy credit.

[Article 126] Where one or more joint debtors are declared bankrupt and otherjoint debtors have already paid off the debts for the person who has gonebankrupt, the other joint debtors may claim their rights with the claiming rightas their bankruptcy credit.

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Where one or more joint debtors arc declared bankruptcy, the other joint debtorsmay claim their rights with the fuhlre claim right resulting from replacing theperson who has gone bankrupt to payoff debts as the bankruptcy credit unlessthe creditor has already claimed his right with the full amount of his credit.

[Article 127J The provisions of Article 126 of this Law shall apply to theguarantor of the bankrupt.

[Article 128] Where the partners are declared bankruptcy in accordance withthis Law, the partners shall be liquidated respectively.

The creditors of a partner and the creditors of a partnership enterprise shall be inequal position in the bankruptcy liquidation procedure.

Where the bankruptcy property of a partnership enterprise is insufficient to payoff the creditors' bankruptcy credits, the creditors of this partnership enterprisemay claim their rights in the liquidation procedures of all partners according tothe provisions of Article 125 of this Law. However the total amount distributedto him shall not exceed the credit amount he is entitled to .

[Article 129] With respect to executory contracts, the administrator is entitled todecide whether to terminate or continue to perform the contract.

The counterpart of the contract may demand a decision by the administratorwithin a set period of time. The absence of any response on the expiry of thegiven period will be treated as the termination of the contract.

When the administrator decides to continue to perform the contract, and thecounterpart requires to provide corresponding collateral for performing thecontract during the period agreed or reasonable period, the administrator doesnot provide the collateral during the period proscribed above, the contract isdeemed as dissolved.

According to the above four paragraphs, in case of any losses incurred on thecounterpart as a result of the termination of contracts, the right to compensation

shall be treated as bankruptcy credit.

[Article 130J In the case oftcrmination of entrustment agreement, whereas thetrustee carries on his entrusted businesses without any knowledge or beinginfonned of the termination of the entrustment agreement and incurred lossesthereof, any claims resulted thereof constitute bankruptcy claims.

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[Article 131] In the case of the issuer o[bi11s declared bankrupt whereas thedrawee or acceptor has made payment or acceptance of the bills without anyknow ledge or being infonued of the bankruptcy of the same and incurred lossesthl:reuf, any claims resulted thereof constitute bankruptcy claims. The drawee

and acceptor are creditors.

[Article 132] Creditors who owe debts to the bankrupt may claim to theadministrator to offset them before the announcement of bankruptcy propertydistrihution.

[Article 133] Repayment offsets shall not be made under any of the followingCiII,;Ulll:stancl;S inl.ionslstent with Article 132 ofthc Law:

1) Creditors in debt to the bankrupt enterprise after the declaration ofbankruptcy;2) Debtors to the bankrupt enterprise acquiring bankruptcy claims after thedeclaration of bankruptcy;3) Creditors running into debts to the bankrupt enterprise in spite of the fact thatthe latter has suspended payments or has been filed for bankruptcy;Whereas debts incurred from reasons provided by law or one year before filingfor bankruptcy are excluded from this directory.

4) Debtors acquiring claims to the bankrupt enterprise in spite of the fact that thelatter has suspended payments or has been filed for bankruptcy; whereas claimsacquired for reasons provided by law or one year before filing for bankruptcyare excluded from this directory.

Sec. 4: Appraisal and Distribution

[Article 134] Upon declaration of bankruptcy, the administrator shull beresponsible for the appraisal, disposition and distribution of bankruptcyproperty as appropriate in accordance with the distribution plan adopted at thecreditors' meeting.

[Article l35J The administrator shall be responsible for drafting up thedistribution plan of bankruptcy property in due time and submit it to thecreditors' meeting for discussion. The creditors' meeting shall discuss and adopta plan for the disposition and distribution ofbankruptey property.

[Article 136] Bankruptcy property shall be sold off through auction unlessotherwise provided by resolutions ofthe creditors' meeting.

The bankrupt enterprise may be sold either as a whole or in parts. Intangibleassets and other assets may be sold separately in the latter case.

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Bankrupt properly thM is not alloweo to he auctioned or sold in public asprovided by laws or regulations shall be disposed of as per relevant laws orregulations.

[Article 137] After the prior deduction of bankruptcy expenses and debts ofcommon benefits from the bankruptcy property, repayment shall be made in thefollowing order:1) wages owed to the staff and workers, social security insurance as well asother expenses due as provided by state laws and administrative regulationsowed by the bankrupt enterprise;2) taxes owed by the bankrupt enterprise; and3) unlillary lJ(tuluu(Jtcy claims.

Where the bankruptcy property is insufficient to meet all repayment needswithin a single order of priority, it shall be distributed on a pro-rata basis.

[Article 138] Distribution of bankruptcy property shall be conducted in the formof money unless otherwise provided by the creditors' meeting.

[Article 139] The administrator shall arrange in due time the drafting-up ofdistribution plan of bankruptcy property and submit it to the creditors' meetingfor discussion.

The above-mentioned distribution plan of bankruptcy property shall contain thefollowing items:(1) name and address of creditors participating in the distribution;(2) total sum of claims entitled to creditors qualified for the distribution;(3) total sum of bankrupt property distributable;(4) the order, proportion and amount of the distribution; and(5) the ways of distribution applied.

Upon the resolution over the distribution plan made by the creditors' meeting,the administrator shall submit the plan to the people's court for approval.

The distribution plan takes effect upon the day of approval by the people'scourt.

[Article 140J The administrator shall be responsible to carry out the distributionplan upon its effect.

The administrator may arrange distributions either once-for-all or for manytimes as per the distribution plan.

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Tn the ca~e of many distrihutions, the administrator shall announce the totalamount ofproperty and that of creditors' right of each distribution. In the case offinal distribution, the administrator shall also make announcement asappropriate, whieh shall incOlvoratc all items listed in Paragraph 2, Article 141of the Law.

[Article 141] The administrator shall separately keep conditional claims.

The portion of property set aside by the administrator for conditional claimsshall be distributed, provided that the conditions are not met or the terminationconditions are met upon the announcement of final distribution, to the other\..H;Jilur~, UII lIIl;: cUIlt/dry, should tht: l,;ullditiolls are met or the termination

conditions are not met upon the announcement of final distribution, the portionset aside shall be distributed to the creditor involved.

[Article 142] The administrator shall keep separately the portion of distributedproperty unaccepted by creditors.

Two months after the announcement of final distribution, distributed propertystill unaccepted by the creditor shall be deemed as abandonment of claims. The

unaccepted property shall be distributed to the other creditors.

[Article 143] With respect to claims under litigation or arbitration during thedistribution, the administrator shall separately keep the due proportion ofproperty_ Whereas, in regard to claims unaccepted after two years following theconclusion of bankruptcy proceedings, the due proportion set aside shall bedistributed to the other creditors by the people's court.

Sec. 5: Conclusion of Bankruptcy

[Article 144] Whereas the debtor has no property to distribute, the administratormay apply to the people's court for a ruling of termination of bankruptcy.

Following the final distribution of the bankruptcy property, the administratorshall timely submit to the people's court a distribution report and apply fortermination of the bankruptcy.

The people's court shall, within 15 days following the administrator'sapplication, decide whether to terminate the bankruptcy case.

[Article 145J The administrator shalL within 10 days upon termination of thebankruptcy, handle the procedures for the cancellation ofregistration of thebankrupt enterprise with the original registration authorities with the ruling oftermination from the people's court.

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[Article 146] The administrator shall cease its work following the second day ofthe cancellation of registration unless there is litigation or arbitration pending.

[Article 147] After two years when the bankruptcy is terminated in accordancewith Paragraph 4 in Article 41 or Article 142 of the Law, creditors are entitled toapply to the people's court for additional repayment according to thedistribution plan in any of the following circumstances:(1) under the conditions provided in Article 33, Article 34 and Article 35 of theLaw where the bankmptcy property shall be retrieved;(2) the bankrupt enterprise is discovered to possess other property that should bedistributed.

Under the circumstances as provided in above articles yet the propertydiscovered is too little in sum to cover distribution expenses, additionalrepayment shall not be made. The property discovered shall be turned over tothe state.

[Article 148] Upon conclusion of the bankruptcy proceedings, the guarantor andjuinl JdJtor of the bankrupt enterprise shall continue to be responsible forrepayment of any bankruptcy claims of creditors that have not been satisfiedduring the bankruptcy proceedings.

Sec. 6: Discharge

[Article 149] Upon conclusion of the bankruptcy proceedings, partners inpartnership business, proprietor of private business shall, after being exemptedfrom the n;:spun:;ibi1ity pruviJeJ ill Altidc 150 of this Law, continue to bcresponsible for repayment of any bankruptcy claims of creditors that have notbeen satisfied during the bankruptcy proceedings with all the property heacquires or will acquire.

Before being discharged, the bankruptcy shall not have extravagant expenses orany investment.

The bankrupt pn;;:;l;ribed ill Paragraph One may draft up a repaymcnt plan forany repayments after the conclusion of the bankruptcy proceedings and submitthe plan to the creditors' meeting for approval before the conclusion. Therepayment plan approved by the creditors' meeting is equally binding to bothcreditors and debtors.

[Article 150] Upon conclusion of the bankruptcy proceedings, the bankruptcyeutel pLise shall, under any of the following circumstances, be discharged from

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;lny hankruptcy claims remained lInpl'lid, with the exception of compensation forany losses by intentional crimes:1) where over 40% of all bankruptcy claims have been repaid upon thetermination of bankruptcy proceedings and at the expiration of three years uponthe conclusion;2) where over 30% (yet less than 40%) of all bankruptcy claims have beenrepaid upon the termination ofbankruptcy proceedings and at the expiratIOn of 4

years upon the conclusion;1) where over 20% (yet less than 10%) of all hankruptcy claims have beenrepaid upon the temlination ofbankruptcy proceedings and at the expiration of 5years upon thc conclusion;4) Whl;;lt: uvcr 10% (yet less than 20%) of all bankruptcy claims have beenrepaid upon the termination ofbankruptcy proceedings and at the expiration of7years upon the conclusion;5) where less than 10% of all bankruptcy claims have been repaid upon theteffi1ination of bankruptcy proceedings and at the expiration of 10 years uponthe conclusion;

Whereas the bankrupt enterprise shall not be discharged from its responsibilitiesunder any ofthc conditions provided in Paragraph 2 of Article 149, Article 152,Article 153, Article 154, Article 155, Article 156, Article 158 and Article 160of the Law.

Where the bankrupt enterprise discharged from its responsibilities is willing torepay any bankruptcy claims already exempted, any interests acquired bycreditors are legally protected.

CHAPTER TEN LEGAL LIADILITIES

[Article 151] Where the directors, managers and other personnel in charge of thebankrupt enterprise, owing to major negligence or intentional offense, bearmajor responsibility for the bankruptcy of the bankrupt enterprise, the personinvolved shall take joint repayment liability; where their misconduct constitutescrimes, criminal responsibility shall be investigated in accordance with relevantlaws of the state.

Personnel subject to above mentioned penalties shall not have extravagantexpenses or involve in any investment activities; they shall also be restrictedfrom any business operations or business management withm 5 years followingthe conclusion of the bankruptcy proceedings.

[Article 152] Debtors or debtor's representatives, who are obliged to be presentat the creditors' meeting yet absent from the meeting without rational reasons inspite of the summon from thc people's court, shall be arreGted and taken into

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custody by the people'~ mmt ~ml shall be ~llhject to an arlministrative fine ofover RMB5,000 but below RMB50,000. Debtors and other personnelresponsible to make accounts or give explanations, or even make false accountsor explanatiuns, shall be subject to an aumiuistrati ve fine of over Rl'v1B5,OOO butbelow RMB50,000 by the people's court.

Where the above mentioned misconduct constitutes crimes, criminalresponsibilities shall be investigated.

[Article 153]Whcrc the debtor, in violation of the provisions of this Law, refuses to submittilt: ::.pccification on his financial status, the detailed list of debts, the detailed list

of credits and related financial report to the people's court, or submit unrealdocuments, the people's court may impose a fine ranging from over 5, 000 yuanto under 50,000 yuan upon the person directly responsible for the conditions.

Where the dehtor, in violation of the provisions of this Law, refuses to transferthe property or the accounting books, documents, material, data, seals related tothe property to the administrator or the bankrupt liquidator, or the debtorcuunterfeits, destroys some evidence rdated to the property, resulting in the

ambiguity of the property status, the people's court may impose a fine rangingfrom over 10,000 yuan to under 50,000 yuan upon the person directlyresponsible for the conditions.

Where any person acts as prescribed in the preceding two paragraphs and thecase is so serious as to constitute a crime, he shall be prosecuted for his criminalliabilities according to law.

[Article 154] Where the debtor acts as prescribed in the provisions of Article 35of this Law, the people's court may impose a fine ranging from over 20,000yuan to below 100,000 yuan upon the person directly responsible for the actIOn.

Where the case is so serious as to constitute a crime, the person shall beprosecuted for his criminal liabilities according to law.

[Article 155] Where the debtor acts as prescribed in the provisions of Article 33

and Article 34 of this Law, thc people's court may impose a fine ranging fromover 10,000 yuan to below 50,000 yuan upon the person directly responsible forthe action. Where the case is so serious as to constitute a crime, he shall beprosecuted for his criminal liabilities according to law.

[Article 156] Where the debtor has known or should have known his inability topay off his due debts, but still makes irrational or extravagant expenses, thepeople's court may impose u fine ranging from over 10,000 yuan to below

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SO,OOO yuan upon the person directly responsihle for the action. Where the caseis so serious as to constitute a crime, the person shall be prosecuted for hiscriminal liabilities according to law.

[Article 157] Where during the performance oftheir duties or the exerciseoftheir rights according to this Law, the administrator, the member of creditors'committee demands, accepts bribes or transfers the property to obtaininappropriate interests through taking advantages of their duties or position, thepeople's court may impose a fine ranging from over 20,000 yuan to below100,000 yuan based on the severity of the case.

Wht::lt:: tlIt:: l;<t:st:: i:s :su :st::liuu:s it:> tu l;U1l5titute a crimc, the pcrson shall be

prosecuted for his criminal liabilities according to law.

[Article 158] Where any person bribes the administrator, the member of thecreditors' committee in the procedures prescribed in this Law, the people's courtmay impose a fine ranging from over 5,000 yuan to below 50,000 yuan upon theperson directly responsible for the action based on the severity of the case.Where the case is so serious as to constitute a crime, the person shall beprosecuted for his criminal liabilities according to law.

[Article 159] Any person in violation of the provisions prescribed in ParagraphThree, Article 10 of this Law shall be imposed a fine ranging from over 10,000yuan to below 50,000 yuan. Where the case is so serious as to constitute a crime,the person shall he prosecuted for his criminal liabilities according to law.

[Article 160] Where any person violates the provisions prescribed in ItemFour, Paragraph One, Article 18 of this Law, the people's eourt may admonishor detain him, and may also impose a fine ranging from over 5,000 yuan tobelow 50,000 yuan.

[Article 161] Where the administrator, the member of the creditors' meetingcauses economic losses to the creditors, the debtor or a third party by means ofnegligence of duty or other unlawful activities, they shall be responsible for thecompensation. Where the losses are enormous, the person may be imposed afine ranging from over 20,000 yuan to below 100,000 yuan or be detainedaccording to the severity of the case; where the case is so serious as to constitutea crime, the person shall be prosecuted for his criminal liabilities.

CHAPTER ELEVEN SUPPLEMENTARY PROVISIONS

[Article 162] Within the time limit and scope prescribed by the State Council,the bankruptcy case of state owned enterprises shall be governed by thoseregulations by the state council.

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[Article 163J The bankruptcy of financial institutions such as commercial banksand insurance companies shall be governed by the measures made in accordancewith this Law other law provisions.

[Article 164J This Law shall enter into force as of.. .. The Law of the People'sRepublic of China on Enterprise Bankruptcy for Trial Implementation shall beabolished from the date when this law enters into force .

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