represents an important milestone toward the eventual establishment of a comprehensive personal bankruptcy regime in China. In particular, the draft also allows, in appropriate cases, for the substantive or procedural consolidation of individual debts into enterprise bankruptcy proceedings, reflecting an integrated approach to corporate and personal insolvency. Institutionalisation of practice-driven reforms The basic structure of the 2006 EBL proved robust, but its limited scope left many substantive and procedural issues unaddressed. Over the past two decades, courts and insolvency practitioners have responded pragmatically, filling legislative gaps through local rules, judicial policies, and interpretative guidance.
One of the most striking features of the draft amendment is its openness to this accumulated practice. Many solutions developed at the local level are now expressly incorporated into the statute. These include streamlined filing and hearing procedures, clearer rules on executory contracts and avoidance actions, an expanded pool of eligible administrators, a reallocation of administrators’ powers and responsibilities, and the establishment of government-funded compensation mechanisms for asset-less cases. The draft also reorders creditor priorities and promotes the digitalisation of bankruptcy procedures. In this respect, the reform is not purely top-down, but represents an effort to institutionalise practical experience accumulated over two decades. Modernisation of reorganisation proceedings The draft amendment substantially modernises China’ s reorganisation framework. It introduces public hearings both before case acceptance and prior to confirmation of a reorganisation plan, enhancing transparency and stakeholder participation. Out-of-court restructuring negotiations are explicitly encouraged, and agreements reached in such negotiations may be recognised, in whole or in part, as a reorganisation plan. While the debtor-in-possession( DIP) model is retained, the draft specifies circumstances under which it may be terminated. Both the DIP and the administrator are subject to enhanced disclosure obligations toward creditors and other stakeholders. Following plan confirmation, the administrator is formally entrusted with detailed supervisory responsibilities, reinforcing the credibility and enforceability of reorganisation outcomes.
In addition, the role of external investors is also clarified, including their rights to information and corresponding confidentiality obligations. In particular, reorganisation financing is accorded higher priority, ranking immediately below bankruptcy costs, and expenses incurred by professionals engaged in estate investigation are expressly included within the catalogue of bankruptcy expenses. Together, these changes signal a clear policy shift toward earlier intervention, greater transparency, and stronger incentives for rescue financing. Special regime for MSME insolvency The draft amendment introduces a simplified insolvency regime for MSEMs. Where the debtor’ s assets and liabilities are clear, creditor relationships are straightforward, and the number of creditors is limited, courts may apply streamlined procedures. Such cases may be heard by a single judge, with individual administrators appointed where appropriate, and creditor committees are generally dispensed with.
Procedural efficiency is further enhanced through relaxed rules on creditor participation and voting, flexible claim-filing deadlines, and a mandatory six-month time limit for case completion. In MSME reorganisations, debtors typically retain control of operations under administrator supervision, and reorganisation plans must be submitted within three months. Where investors contribute future disposable income to debt repayment, the plan may allow them to retain all or part of their equity and control rights. This tailored regime reflects a
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