Several
Issues Concerning the Trial of Civil Dispute Cases Related
to Restructuring of Enterprises Provisions
(Promulgated by the Supreme People's Court on 3 January 2003
and effective as of 1 February 2003.)
These
Provisions are formulated in accordance with the provisions
of laws and regulations such as the PRC, Civil Law
General Principles, the PRC, Company Law, the
PRC, State Industrial Enterprise Law, the PRC,
Contract Law and the PRC, Civil Procedure Law and
with the adjudication practice, in order to correctly try
civil dispute cases related to the restructuring of
enterprises.
1.
ACCEPTANCE OF CASES
Article 1: People's courts shall accept the
following civil dispute cases between equal civil principals
arising from the restructuring of enterprise equity system:
-
civil
disputes arising from enterprise corporate
restructuring;
-
civil
disputes arising from enterprise cooperative share
system restructuring;
-
civil
disputes arising from division of enterprises;
-
disputes regarding conversion of claim to equity of
enterprises;
-
disputes regarding contracts for sale of enterprises;
-
disputes regarding enterprise merger contracts; and
-
other
civil disputes related to the restructuring of
enterprises.
Article 2: People's courts shall accept cases
brought by a party that comply with the circumstances set
forth in Article 1 hereof and the conditions for instituting
an action under Article 108 of the Civil Procedure Law.
Article 3: People's courts shall not accept civil
actions instituted by a party with a people's court
regarding a dispute occurring in the course of
administrative adjustment or transfer of an enterprise's
State-owned assets by a competent government department.
2.
ENTERPRISE CORPORATE RESTRUCTURING
Article 4: If a State-owned enterprise is completely
restructured into a wholly State-owned limited liability
company in accordance with the Company Law, the debts of the
original enterprise shall be borne by the limited liability
company that results from the restructuring.
Article 5: If an enterprise realizes equity
participation of another party by way of capital and share
increase or assignment of part of its equity, and is thereby
completely restructured into a limited liability company or
a company limited by shares, the debts of the original
enterprise shall be borne by the newly established company
after the restructuring.
Article 6: If an enterprise utilizes part of its
property and corresponding debts to set up a new company
with another party and the creditor of the debt being
assigned approves the same, the civil liability for the debt
shall be borne by the newly established company. If the
assignment of the debt has not been notified to, or has been
notified to but not approved by, the creditor, the civil
liability shall be borne by the original enterprise. If the
original enterprise is unable to repay the debt and the
creditor asserts its claim against the newly established
company, the newly established company shall bear joint and
several civil liability for the debts with the original
enterprise to the extent of the property received from the
original enterprise.
Article 7: If an enterprise utilizes its quality
property to set up a new company with another party while
retaining its debts in the original enterprise, and a
creditor asserts its claim by instituting an action against
the newly established company and the original enterprise as
joint defendants, the newly established company shall bear
joint and several liability with the original enterprise to
the extent of the property received from the original
enterprise.
3.
ENTERPRISE COOPERATIVE SHARE SYSTEM RESTRUCTURING
Article 8: If the staff and workers of an enterprise
buy out the property rights in the enterprise and
restructure the original enterprise into a cooperative share
system enterprise, the debts of the original enterprise
shall be borne by the cooperative share system enterprise
that results from the restructuring.
Article 9: If an enterprise assigns part of its
property rights to its staff and workers and sets up a
cooperative share system enterprise with the staff and
workers, the debts of the original enterprise shall be borne
by the cooperative share system enterprise that results from
the restructuring.
Article 10: If an enterprise is restructured into a
cooperative share system enterprise with the investment of
its staff and workers through capital and share increase,
the debts of the original enterprise shall be borne by the
cooperative share system enterprise that results from the
restructuring.
Article 11: When an enterprise is undergoing
cooperative share system restructuring, it shall, in
accordance with the relevant provisions of the Company Law,
notify its creditors by public announcement. In cases where
a creditor institutes an action against the cooperative
share system enterprise for concealment or omission of a
debt by the asset manager (or contributor of capital) of the
original enterprise after the enterprise has been
restructured into a cooperative share system enterprise, if
the creditor has declared such claim during the public
notification period, the cooperative share system enterprise
may seek compensation from the asset manager (or contributor
of capital) of the original enterprise after bearing the
civil liability for the debt. If the creditor failed to
declare the claim during the public notification period, the
cooperative share system enterprise shall bear no civil
liability and the people's court may notify the creditor to
institute a separate action against the asset manager (or
contributor of capital) of the original enterprise.
4.
DIVISION OF ENTERPRISES
Article 12: If a creditor asserts a claim against an
enterprise after division and an agreement regarding the
assumption of the debts of the original enterprise was
reached at the time of division, and such agreement has been
approved by the creditor, the debts shall be handled in
accordance with the agreement between the parties. If at the
time of division of the enterprise, no agreement regarding
the debts of the original enterprise was reached, or the
agreement is unclear, or although there was an agreement,
the creditor did not approve it, the enterprises that result
from division shall assume joint and several liability for
the debts.
Article 13: After the enterprises that result from
the division have assumed joint and several liability, if
they have an agreement on the assumption of the debts of the
original enterprise, the debts shall be settled in
accordance with the agreement. If there is no agreement, or
the agreement is unclear, the debts shall be borne by the
enterprises in proportion to their assets at the time of
division.
5.
CONVERSION OF CLAIM TO EQUITY OF ENTERPRISES
Article 14: If a creditor has entered into an
agreement on conversion of claim to equity with the debtor
on a voluntary basis and such agreement does not violate the
mandatory provisions of laws and administrative regulations,
the people's court shall confirm the validity of the
agreement on conversion of claim to equity when trying
related civil dispute cases.
Conversion
of claim to equity of a policy type shall be handled in
accordance with the regulations of the relevant State
Council departments.
Article 15: If a debtor defrauds the creditor into
signing an agreement on conversion of claim to equity by way
of concealing or falsifying a list of the enterprise's
assets, and the creditor exercises his right of rescission
within the statutory time limit, the people's court shall
support the creditor.
After
rescission of the agreement on conversion of claim to
equity, the creditor shall have the right to demand that the
debtor repay the debt.
Article 16: The engagement of some creditors in
conversion of claim to equity shall not affect the assertion
of claims against the debtor by other creditors.
6. SALE
OF SMALL-SCALE STATE-OWNED ENTERPRISES
Article 17: If an enterprise is sold through
assignment by agreement and the sale contract for the
enterprise has not been examined and approved by the local
people's government with the examination and approval
authority or by its authorized functional department, the
people's court shall confirm that the sale contract for the
enterprise is void when trying related civil dispute cases.
Article 18: If, in the course of the sale of an
enterprise, both parties maliciously collude to damage State
interests, the people's court shall confirm that the sale of
the enterprise is invalid when trying related civil dispute
cases.
Article 19: If, in the course of the sale of an
enterprise, the seller engages in an act specified in
Article 54 of the Contract Law and the buyer exercises his
right of rescission within the statutory time limit, the
people's court shall support the buyer.
Article 20: If, upon expiration of time limit for
performance stipulated in a contract for the sale of an
enterprise, one party has refused to perform the contract or
has failed to fully perform his contractual obligations,
thereby making the objective of the contract unachievable,
and the other party demands rescission of the contract and
compensation for his losses, the people's court shall
support the other party.
Article 21: If, upon expiration of time limit for
performance stipulated in a contract for the sale of an
enterprise, one party has failed to fully perform his
contractual obligations and the other party demands
continual performance of the contract and compensation for
his losses, the people's court shall support the latter. If
both parties have failed to fully perform their contractual
obligations, the civil liability to be borne by each party
shall be determined based on their fault.
Article 22: If, during the sale of an enterprise,
the seller fails to fulfil its obligation to truthfully
disclose major matters such as the assets and liabilities,
and profits and losses, etc. of the enterprise to be sold,
thereby affecting the sale price of the enterprise, and the
buyer claims for compensation in a people's court, the
people's court shall support the buyer.
Article 23: Where a contract for sale of an
enterprise has been confirmed as being void or has been
rescinded, the business profits or losses incurred during
the time period in which the buyer operated the enterprise
after the sale of the enterprise shall be enjoyed or borne
by the buyer.
Article 24: If, after an enterprise has been sold,
the buyer injects the assets of that enterprise into its own
enterprise or converts the purchased enterprise into a
subsidiary of its own enterprise, the buyer shall bear the
debts of the purchased enterprise unless the seller and the
buyer have agreed otherwise and the creditor has approved
such agreement.
Article 25: If, after an enterprise has been sold,
the buyer sets up a new company with another party by
injecting the assets of the enterprise as capital
contribution and the registration of the legal person of the
purchased enterprise has been cancelled, the buyer shall
bear the civil liability for the debts of the purchased
enterprise incurred before purchase to the extent of all of
his assets, including his equity in the newly established
company.
Article 26: If, after an enterprise has been sold,
the buyer re-registers the purchased enterprise as a new
enterprise legal person and cancels the registration of the
legal person of the purchased enterprise, the debts of the
purchased enterprise incurred before purchase shall be borne
by the newly registered enterprise legal person unless the
seller and the buyer have agreed otherwise and the creditor
has approved such agreement.
Article 27: If, after an enterprise has been sold,
cancellation of registration of the enterprise legal person
should have been handled but were not handled, and a
creditor institutes an action against the enterprise, the
people's court shall, in accordance with the circumstances
after the transfer of the enterprise's assets, notify the
creditor to join other responsible entities in the action
and order the responsible entity to bear civil liability.
Article 28: During the sale of an enterprise, the
seller shall notify the creditors by public announcement in
accordance with the relevant provisions of the Company Law.
If, after an enterprise has been sold, a creditor institutes
an action against the buyer for concealment or omission of a
debt of the original enterprise by the seller, and the
creditor has declared such claim during the public
notification period, the buyer may seek compensation from
the seller after bearing civil liability for the debt. If
the creditor has failed to declare the claim during the
public notification period, the buyer shall bear no civil
liability. The people's court may notify the creditor to
institute a separate action against the seller.
Article 29: If the purchased enterprise engages in
any of the acts specified in Article 74 of the Contract Law
and a creditor exercises his right of rescission during the
statutory time limit, the people's court shall support the
creditor.
7.
MERGER OF ENTERPRISES
Article 30: Enterprise merger agreements shall be
effective as of the date the agreement is signed and sealed
by the parties. Enterprise merger agreements that require
the approval of the competent government department shall be
effective as of the date the merger agreement is approved.
Enterprise merger agreements that have not been approved
shall not enter into effect. However, if a party completes
the submission and approval procedures before the conclusion
of the court debate in the court of first instance, the
people's court shall confirm the validity of the merger
agreement.
Article 31: After an enterprise has been merged by
absorption, the debts of the merged enterprise shall be
borne by the surviving party.
Article 32: An enterprise shall notify its creditors
by public announcement in accordance with the relevant
provisions of the Company Law when carrying out merger by
absorption. If, after the enterprise has been merged by
absorption, a creditor institutes an action against the
surviving party for concealment or omission of a debt by the
original asset manager (contributor of capital) of the
merged enterprise and has declared the claim during the
public notification period, the surviving party may seek
compensation from the original asset manager (contributor of
capital) of the merged enterprise after bearing civil
liability for the debt. If the creditor has failed to
declare the claim during the public notification period, the
surviving party shall bear no civil liability. The people's
court may notify the creditor to institute a separate action
against the original asset manager (contributor of capital)
of the merged enterprise.
Article 33: When an enterprise is merged by
establishment, the debts of the merged enterprise shall be
borne by the enterprise legal person that results from the
merger.
Article 34: After merger by absorption or merger by
establishment, if the merged enterprise should have
cancelled its business registration but failed to do so and
a creditor institutes an action against the merged
enterprise, the people's court shall, in accordance with the
circumstances after the merger, notify the creditor to join
other responsible entities in the action and order the
responsible entity to bear civil liability.
Article 35: Where the controlling shareholding of an
enterprise is acquired by way of acquisition, the debts of
the controlled enterprise shall continue to be borne by
itself. However, if the controlled enterprise is unable to
repay its debts due to the withdrawal of funds or evasion of
debts by the controlling enterprise, the debts of the
controlled enterprise shall be borne by the controlling
enterprise.
8.
SUPPLEMENTARY PROVISIONS
Article 36: These Provisions shall be implemented as
of 1 February 2003. Judicial interpretations formulated
prior to the implementation hereof by this Court with regard
to enterprise restructuring that contradict these Provisions
shall no longer apply.
