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Insolvent liquidations/Bankruptcy

Overview


If, despite everyone’s best efforts, a recovery is not possible and a company is insolvent, the best way for secured creditors and investors to attempt to recover assets and realise a return is through the statutory procedure of liquidation.

We were admitted to the register of bankruptcy administrators in Beijing, the second batch of the register of bankruptcy administrators in Shanghai and the register of bankruptcy administrators in Suzhou in 2007, 2014 and 2017 respectively. This means we can act as the bankruptcy administrator of insolvent companies in a liquidation process under China’s new PRC Bankruptcy Law, which became effective on 1 June 2007.

Liquidating a company in China burdened with debt usually involves a number of complex procedures. In this regard, we are also able to act as financial advisers for bankruptcy administrators to provide professional advisory services for large bankruptcy cases.

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Potential issues

  • Unable to dissolve or deregister via voluntary liquidation when the company is already insolvent.
  • Uncooperative shareholders and/or management of the insolvent company, making it difficult for bankruptcy administrators to obtain general information and understand the financial situation of the company.
  • The liquidated company faces a large amount of employee claims and employee settlement issues.
  • The company is involved in domestic or foreign litigation and must take legal action in China or abroad to safeguard rights and claim for the company’s interest.
  • The insolvent company may have misappropriated assets, leading to the need for cross-border investigations to recover assets.
  • Although the company may be insolvent, there is a need to value and sell elements of the business that are still viable.

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Support

  • We can be appointed as bankruptcy administrators by the People’s Court in China or engaged as financial advisers by bankruptcy administrators.
  • We can participate in domestic and international lawsuits on behalf of the company to safeguard its rights and recover assets, in order to protect the company’s and the secured creditors’ interests.
  • We can review the assets/debt situation of the company independently, assess its financial position, adjudicate secured creditor claims in accordance with relevant regulations, and convene creditor meetings in an orderly manner.
  • Our team can manage the assets of the insolvent company in an efficient manner in order to maximise the recovery value and protect the interests of secured creditors and other stakeholders.
  • We can identify potential investors for realisable assets through our extensive domestic and international network.
  • We are on hand to assist creditors in fully understanding the real position of an insolvent company through AIC inspections or asset investigations. We can also actively discuss appropriate asset recovery methods with secured creditors to maximise their interests in a liquidation.
  • We maintain a high degree of independence and neutrality and treat each secured creditor fairly in the distribution of bankruptcy estate so that all interests are equally protected.
  • We are experienced in using a smooth, low-conflict process to address employee claims and disputes.

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Our experience

  • Acted as financial advisers to the bankruptcy administrator of STX Dalian Group with total debt of RMB30 billion. This involved 14 group companies, domestic and foreign creditors, China Government authorities and employees. We assisted the administrators in the smooth settlement of employee claims and played a positive role in maintaining social stability.
  • Appointed as bankruptcy administrator of Shanghai Agriculture Investment Co., Ltd., which had a dual corporate identity as both a business corporation and a public institution with a total debt of RMB1.1 billion. The major assets included an equity investment in a subsidiary worth RMB20 million. We successfully obtained approval from the creditors meeting in regards to disposal of the major asset.
  • Appointed as bankruptcy administrator of Shanghai Business News Media Co., Ltd. with total debts of RMB100 million. The company ran a local newspaper that was published daily in Shanghai.
  • Appointed as bankruptcy administrator of Guangzhou Harbour Commercial Co., Ltd. with debt of RMB25.6 million. Relevant parties in the liquidation included secured creditors, shareholders, China Government authorities and employees. We managed the assets of the bankrupt entity and maximised its recovery after liquidation to protect creditors’ interests.
  • Appointed as the bankruptcy administrator of Guangdong Tiantai Industry Co., Ltd. which involved creditors, shareholders and China Government authorities. We filed lawsuit(s) against the debtor(s) of the company and were awarded a judgment in our favour. We successfully recovered amounts from the debtors which maximised the value of remaining assets and protected secured creditors’ interests.
  • Appointed as bankruptcy administrator of Beijing Guodu Property Management Company, Beijing Yuntonghang Industry and Trade Company and Beijing Light Steel Structure Design Co., Ltd. We conducted company investigations, protected the interests of secured creditors, adjudicated the claims against the bankrupt entities, liaised with the debtors, carried out debt collection procedures for accounts receivable, actively sought the secured creditors’ views on the appropriate asset recovery methods and assisted the People’s Court of China in convening creditor meetings.

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Contact us

Victor Jong

Victor Jong

Mainland China and Hong Kong Restructuring & Insolvency Leader, PwC Hong Kong

Tel: +[852] 2289 5010

Tim Guo

Tim Guo

Partner, PwC China

Tel: +[86] (21) 2323 2610

Christopher So

Christopher So

Partner, PwC China

Tel: +[852] 2289 2577

Chen Lau

Chen Lau

Partner, PwC China

Tel: +[86] (10) 6533 2208

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