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Wenzhou Decision - The First Personal Bankruptcy Case in China?

In September 2019, a court in Wenzhou, Zhejiang province approved a settlement agreement among Mr Cai and his four creditors. Mr Cai was ordered previously by another court to be jointly and severally liable for debt of a bankrupt enterprise. The debt is more than 2,140,000 yuan (equivalent to US$305,710).

Prior to this there was no way for natural persons to obtain legal relief from unaffordable debts in China due to the absence of personal bankruptcy regime. The 2006 Enterprise Bankruptcy Law only applies to legal persons and unincorporated organisations.

However, China is in the process of establishing personal bankruptcy system. In June 2019, the Supreme Court confirmed its proposal to establish a personal bankruptcy system by issuing guidelines. In September, the Intermediate Court in Wenzhou published The Implementing Opinions on the Centralised Clean-up of Personal Debt (《关于个人债务集中清理实施意见》) (the Implementing Opinions). The clean-up procedures aim to form personal debt clean-up plans within the existing legal framework, in accordance with the regimes of enforcement, reconciliation and participation in distribution, and with reference to the principles of individual bankruptcy. Mr Cai’s case was the first one decided in accordance with the Implementing Opinions.

So whilst the Wenzhou September decision does not form the first personal bankruptcy case in China, it does suggest that China’s personal bankruptcy laws at national level will be enacted in the near future. This will be welcome news to lenders in Cayman and BVI, where security may have been taken by way of personal guarantee. 

Wenzhou Decision - The First Personal Bankruptcy Case in China?

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