Vol 23 (2026) - Issue 4

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Bankruptcy Reorganisation Procedures of Micro and Small Enterprises under Chinese Insolvency Law Legal Framework: Potential Problems and New Developments

Synopsis
The design of traditional bankruptcy reorganisation procedures is mostly more suited to large enterprises. Due to their limited bankruptcy assets, simplified corporate governance structures, and poor tradability, micro and small enterprises (MSEs) can hardly sustain the prolonged time costs incurred by bankruptcy reorganisation proceedings. This explains why, on a global scale, some countries have enacted dedicated legislation to
regulate the reorganisation of SMEs in light of their distinctive characteristics, such as the United States and Japan. Although China’s Enterprise Bankruptcy Law 2006 has incorporated a reorganisation regime, it lacks specific provisions governing the reorganisation of MSEs. This has resulted in an extremely limited number of cases where MSEs apply for reorganisation procedures in judicial practice. In September 2025, the release of the Draft Amendment to the Enterprise Bankruptcy Law responded to the calls from academic and practical circles. By establishing a special chapter to regulate the bankruptcy reorganisation of SMEs, it has achieved legislative progress, yet a host of issues remain unresolved.