Chinese Enterprise continued from page 37 Concluding Remarks The 2025 draft amendment marks a pivotal stage in the evolution of China’ s insolvency framework. Rather than a wholesale departure from the 2006 law, it represents a systematic consolidation and refinement of two decades of judicial practice, policy experimentation, and market experience. Its significance lies not only in the expansion of substantive rules, but also in the articulation of differentiated procedures capable of addressing enterprises of varying size, complexity, and systemic importance.
Looking forward, the effectiveness of the reform will depend on the content and finalisation of the amended legislation, as well as on its practical implementation. The draft has many new developments, yet it also leaves open important questions concerning the future development of a comprehensive personal bankruptcy regime, the scope and depth of cross-border insolvency cooperation, and the coordination between judicial and regulatory authorities. In this sense, the 2025 draft amendment should be understood not as the end point of reform, but as a foundation for the next phase of China’ s insolvency law development. Its success will ultimately hinge on judicial capacity, professional training, and effective coordination among courts and insolvency practitioners in translating statutory design into functional outcomes.
Preventive Debt continued from page 30 with the general interests of creditors, including satisfaction of the liquidation value test. If the requirements are not met, it will revoke its prior confirmation and the procedure will terminate. 6. Creditors’ Meeting and Voting After the third-party review, a creditors’ meeting is convened. Voting rights are allocated pro rata based on the value of unsecured el-
38
igible claims. Two outcomes are possible. If all affected creditors unanimously approve the proposal, it becomes immediately binding. Alternatively, the proposal may be adopted by a supermajority, requiring approval by at least 75 % in value of voting claims; where a single creditor holds 75 % or more of the claims, adoption also requires a headcount majority. 7. Court Approval In cases of supermajority approval, court authorization is required. The court may deny approval only on limited grounds, including unremedied legal violations, clear infeasibility of performing the modified obligations, unlawful means on the voting process, or inconsistency with creditors’ general interests. Immediate appeals against the court’ s decision are available to both the debtors and affected creditors. III. Significance and Outlook The Early Business Recovery Act marks a major step toward modernizing Japan’ s debt restructuring framework. By introducing a confidential, hybrid procedure that enables financial debt restructuring with supermajority creditor approval while safeguarding creditor interests, the Act brings Japan’ s regime closer to international best practices. With subordinate regulations currently under development, the framework is expected to become operational by the end of 2026 and is likely to attract close attention from turnaround professionals both in Japan and abroad.
38