March 31.2015

　　On March 30th, the 4th Enterprise Bankruptcy Law Practices Forum jointly hosted by the Kaiyuan Law School of Shanghai Jiaotong University, the Commercial Law Institute of the Shanghai Law Society and the Second Civil Tribunal of the Shanghai Higher People’s Court was held at Jiaotong University. Partner Xiaosu Zhu and Associate Binghui Cai from Watson & Band were invited to the Forum. The Shanghai Law Society announced the establishment of the Bankruptcy Law Institute, China’s third provincial bankruptcy law institute after the Beijing Bankruptcy Law Institute and the Shandong Provincial Law Society’s Enterprise Bankruptcy and Restructuring Institute. The new Institute will operate on the frontier of Shanghai’s economic development by studying market exit mechanisms such as enterprise bankruptcy liquidation and restructuring, and by facilitating the effective allocation of social resources.

　　As a Professor from the Kaiyuan Law School and the Director of the Bankruptcy Protection Law Research Center, Changyin Han will serve as the first President of the Bankruptcy Law Institute. Watson & Band Partner Xiaosu Zhu will serve as the Bankruptcy Law Institute’s Managing Director.

　　The experts, scholars, judges and attorneys in attendance held an in-depth discussion of the banks’ Accelerated Maturity provision for enterprise bankruptcies. The attendees generally agreed that an examination must be conducted under the Contract Law to determine whether the provision is legitimate and valid, and at the same time, the question of whether or not the amounts collected by banks from bankrupt enterprises based on the Accelerated Maturity provision are revocable must be examined under the Bankruptcy Law. When determining whether or not to revoke a bank’s early loan recovery and seize a bankrupt enterprise’s property, the nature of the early-recovered property must be taken into consideration, e.g. whether the guarantee consists of the enterprise’s own property or whether the property was provided by third parties, and whether the guarantees should be counted as the bankrupt enterprises’ fixed deposits, settlement account balances or margin account balances. The attendees also generally agreed that although the Accelerated Maturity provision is generally applied to current bank lending services, its application to enterprise bankruptcy will influence the banks’ examination or even the arrangement of their enterprise lending programs. Consequently, when examining the Accelerated Maturity provision under the Bankruptcy Law, the social effect should also be taken into account.

　　Other practical issues such as disposal of secure claims, guarantees and third party guarantee claims during bankruptcy were also discussed at the Forum.