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2 - Commencement of Corporate Reorganisations in China

Published online by Cambridge University Press:  21 September 2018

Zinian Zhang
Affiliation:
University of Leeds
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Summary

Chapter 2 investigates the general use of China's first corporate reorganization law, shedding light on what criteria or bankruptcy tests China's courts use to select eligible corporate reorganization candidates and which parties are more likely to trigger an in-court corporate reorganization procedure, followed by the findings of court jurisdiction on the existing corporate reorganizations. In particular, the findings in this chapter reveal that the innovative bankruptcy exemption test that is embedded in China's new bankruptcy law is simply shelved in practice, that the vaguely-worded reorganization-for-large-company test is excessively applied, and that a pragmatic survivability test is created by courts so as to choose suitable companies for formal judicial reorganization. Meanwhile, although some sixty per cent of reorganizations are filed by debtors themselves, the political support or endorsement from local government is still essential for a corporate reorganization application to be accepted by a local court. Finally, it is found that about sixty per cent of the reorganizations are heard by courts at the county level, which gives rise to the concern of local protectionism.
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Chapter
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Corporate Reorganisations in China
An Empirical Analysis
, pp. 12 - 58
Publisher: Cambridge University Press
Print publication year: 2018

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