Chase Cambria
  • Log in
  • Not a member yet?
go
  • Contact
  • Webmail
  • Archive
 
  • Home
  • Overview
  • Journal Issues
  • Subscriptions
  • Editorial Board
  • Author Guidelines

International Corporate Rescue

Journal Issues

  • Vol 1 (2004)
  • Vol 2 (2005)
  • Vol 3 (2006)
  • Vol 4 (2007)
  • Vol 5 (2008)
  • Vol 6 (2009)
  •         Issue 1
  •         Issue 2
  •         Issue 3
  •         Issue 4
  •         Issue 5
  •         Issue 6
  • Vol 7 (2010)
  • Vol 8 (2011)
  • Vol 9 (2012)
  • Vol 10 (2013)
  • Vol 11 (2014)
  • Vol 12 (2015)
  • Vol 13 (2016)
  • Vol 14 (2017)
  • Vol 15 (2018)
  • Vol 16 (2019)
  • Vol 17 (2020)
  • Vol 18 (2021)
  • Vol 19 (2022)
  • Vol 20 (2023)
  • Vol 21 (2024)
  • Vol 22 (2025)

Vol 6 (2009) - Issue 6

Article preview

Transaction Avoidance in China’s New Bankruptcy Law: Perspectives and Problems

Haizheng Zhang, Lecturer, Law School, Beijing Foreign Studies University, Beijing, China

Introduction

There may be a period of time from when a debtor realises that it is insolvent or is facing impending insolvency to the time when formal insolvency proceedings are initiated. During this period, a debtor may enter into certain transactions with other parties such as transferring property at an value below market value or making donations. Or, the position of certain creditors may be improved by granting them security subject to collateral by the debtor, or the claims of certain creditors may be satisfied by the debtor during this period. In contrast to those creditors who obtain an advantage from these transactions, other unsecured creditors in the same rank remain unsecured and/or unpaid. Transaction avoidance laws can provide an effective legal framework to prevent the illegitimate reduction of a debtor’s property and ensure the equitable treatment of all creditors in the same rank. Transaction avoidance may be more effective in realising the collective approach of insolvency laws enabling the maximum realisation of the debtor’s assets than a system where creditors pursue their claims by initiating civil litigation individually.

The first bankruptcy law since China was founded in 1949, the Enterprise Bankruptcy Law 1986 (for Trial Implementation) (the ‘EBL 1986’), established a number of provisions relating to voidable transactions. However, this simple legislation was not sufficient nor adequate to deal with fraudulent or preferential transactions which harmed the common interests of creditors. A more efficient legal framework in relation to transaction avoidance has been established by the coming into force of the Enterprise Bankruptcy Law 2006 (‘EBL 2006’).

This article provides an overview of the Chinese transaction avoidance legislation under the old regime, an analysis of the new provisions of the EBL 2006 and a critique of the new legislation identifying the potential weaknesses.

Conceptual factors

The term ‘transaction’ refers to a wide range of conduct which may result in the reduction of a debtor’s assets or the incurrence of liabilities including by transferring property, the making of a payment, providing security, making a gift, advancing a loan or giving up credits.

Buy this article
Get instant access to this article for only EUR 55 / USD 60 / GBP 45
Buy this issue
Get instant access to this issue for only EUR 175 / USD 230 / GBP 155
Buy annual subscription
Subscribe to the journal and recieve a hardcopy for
EUR 730 / USD 890 / GBP 560
If you are already a subscriber
log In here

International Corporate Rescue

"Among a vast variety of insolvency and restructuring journals, International Corporate Rescue is unparalleled in its depth of coverage of issues relevant to practitioners in all corners of the globe today."

Paul Kirk, Collins Pitt Associates, Melbourne

 

 

Copyright 2006 Chase Cambria Company (Publishing) Limited. All rights reserved.