ALERT
KIRKLAND & ELLIS LLP
October 2006
China’s New Enterprise Bankruptcy Law
This Restructuring Alert focuses on the recently promulgated Enterprise Bankruptcy Law of
China. The Alert highlights the key features of the new law and compares important
provisions of the Enterprise Bankruptcy Law with those of the United States Bankruptcy
Code and administration under United Kingdom law. It is accompanied by a schedule
summarizing the most relevant provisions of each jurisdiction. The enactment of this law
represents a watershed moment for Chinese capital markets. We invite you to contact us
with any questions about this Alert or for copies of any materials discussed in this Alert.
China’s Enterprise Bankruptcy Law of 2006
On August 27, 2006, President Jintao Hu of China signed into law China’s new Enterprise
Bankruptcy Law, effective on June 1, 2007. The new law is groundbreaking and one of the
most significant pieces of legislation for China’s market economy. The new law clarifies
many provisions of the 1986 Interim Enterprise Bankruptcy Law and will provide creditors
and investors with more certainty, transparency and protection during a restructuring. The
new law embraces many concepts drawn from the United States Bankruptcy Code,
including the automatic stay, fraudulent conveyance/preference actions, approval of a plan of
reorganization, and the appointment of a bankruptcy administrator, although the exact
meaning and scope of these legal concepts remain untested. The most significant change for
international investors is that the Chinese government will no longer play a leading role in a
bankruptcy case.
Important additions to the new Enterprise Bankruptcy Law are as follows:
Who May Be A Debtor. Any legal person in China may be a debtor under the new law,
regardless of whether the entity is stated-owned (i.e., state-owned enterprise or “SOE”),
private, or foreign-invested. For the first time in China’s history, the bankruptcy of all legal
persons in China will be governed by one uniform bankruptcy law. P