Rationalization and analysis丨From the perspective of "execution and bankruptcy", the improvement of bankruptcy initiation procedures

From the perspective of "enforcement and bankruptcy", the improvement of bankruptcy initiation proceduresThis article was published in the 08th edition of People's Court Daily on July 20, 2023, author: Wang Xinxin, the "Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China" implemented in 2015, established the "enforcement and bankruptcy" system; The Guiding Opinions of the Supreme People's Court on Several Issues Concerning the Transfer of Enforcement Cases for Bankruptcy Review issued in 2017 provides guidelines for the implementation of "enforcement and bankruptcy"; Part VII of the Minutes of the National Court Bankruptcy Trial Work Conference, issued in 2018, "The Connection between Enforcement Procedures and Bankruptcy Procedures", provides more detailed provisions on the "enforcement and bankruptcy" system. Under the guidance of the Supreme People's Court, the system of "enforcement and bankruptcy" has been widely implemented in local courts across the country, which has helped solve the problem of difficult enforcement, especially bankruptcy, to a certain extent. However, how to correctly understand and implement the "implementation of the "implementation and transformation" system and continue to deepen reform and development is still a problem that needs to be explored.

First, the essence and significance of "implementing and breaking through", there are two main situations in which implementation difficulties exist in practice. First, the debtor has the ability to settle debts, but subjectively refuses to perform its debt settlement obligations, and even carries out debt evasion. Since the debtor is objectively solvent, although there may be acts such as transferring or concealing property, the ultimate contradiction can be resolved in the enforcement procedure. The so-called "difficulty" means that the enforcement measures and related links still need to be strengthened and improved, and the problem can be solved without being transferred to bankruptcy procedures. Second, the debtor has lost its solvency and is objectively unable to perform its obligations, resulting in the fact that no matter how strong the enforcement measures are, it is impossible to finally realize the settlement of all debts. At this time, the "difficulty" is that it is difficult to go beyond the enforcement measures and related links, and such cases are not within the scope of the enforcement procedure, but should be resolved through the bankruptcy procedure. In the latter case, enforcement is difficult in form, but in essence it is difficult to insolvency caused by various reasons. Without truly resolving bankruptcy difficulties, cases that should have entered bankruptcy procedures may accumulate in the enforcement process for a long time, and enforcement difficulties cannot be effectively resolved. Therefore, the introduction of the "enforcement and bankruptcy" measures intuitively aims to resolve the difficulty of enforcement, but the final solution of the problem depends on how to resolve the bankruptcy difficulty. A large number of cases that should have been subject to insolvency proceedings remain in enforcement proceedings for a long time, which not only makes enforcement difficult, but also has a substitution and hindering effect on insolvency proceedings, and adversely affects the normal acceptance of insolvency cases. And the "executive turnaround" system can solve this problem.

Article 4 of the Guiding Opinions of the Supreme People's Court on Several Issues Concerning the Transfer of Enforcement Cases for Bankruptcy Review clearly stipulates that if after the enforcement court takes property investigation measures, it finds that the enterprise legal person who is the subject of enforcement complies with the provisions of Article 2 of the Bankruptcy Law, it shall promptly ask the applicant for enforcement and whether the person subject to enforcement agrees to transfer the case to bankruptcy review. In other words, although debtors who have a large backlog of final cases need to be transferred to bankruptcy to realize the liquidation of zombie enterprises, the purpose of setting up "execution and bankruptcy" is not to execute the debtor's property until the final cost is transferred to bankruptcy, but to consider whether "execution and bankruptcy" should be applied after the enforcement department takes over the case and takes property investigation measures. Otherwise, the legislative purpose of the Enterprise Bankruptcy Law cannot be achieved, and it is impossible to guarantee fair settlement of all creditors, nor can it achieve the rescue of the distress of the debtor's enterprise with rescue value and hope. Therefore, we cannot only understand and apply the "enforcement and bankruptcy" from the perspective of solving enforcement difficulties, but also see that the essence of a considerable number of enforcement difficulties is bankruptcy difficulties. In a sense, the fewer the debtor's assets that are individually enforced in enforcement proceedings, the sooner the transfer to bankruptcy proceedings, the smoother the subsequent settlement of debts and the resolution of derivative social issues. The view that "enforcement and bankruptcy" is aimed at cases that have no property to enforce and can only be transferred to bankruptcy liquidation procedures is a misunderstanding of the "enforcement and bankruptcy" system, and the bankruptcy procedures transferred to "enforcement and bankruptcy" cases also include enterprise reorganization and reconciliation procedures.

In the practice of "implementation and breaking", people have found that the "implementation and breaking" is only started at the implementation stage, and sometimes the timing is too late. As a result, some local courts have begun to try the pilot work of "litigation to break the lawsuit" and "immediate to break the bank", bringing forward the implementation time of the "enforcement and breaking of the lawsuit", lengthening the chain, and further deepening it. In the process of filing the case and litigation, the court begins to identify whether the debtor has the cause of bankruptcy, so as to initiate the "execution and bankruptcy" as soon as possible and better achieve its institutional purpose. However, it should also be noted that the time for the implementation of the "enforcement and destruction" will be moderately advanced, mainly due to the adjustment of external mechanisms, and there are also certain legal limitations. The reason why "enforcement and bankruptcy" was initially determined to shift from "execution" to "bankruptcy" is because the claims in the enforcement stage have been confirmed by the effective legal judgment, and only then can the creditor have the right to file a bankruptcy application. However, the fact that a creditor initiates a lawsuit and requests a case to be filed has already shown that its claim has not been legally confirmed or recognized by the debtor, so there may still be legitimate legal disputes over whether the debtor has bankruptcy reasons and whether the creditor has the right to apply for bankruptcy, and the application of the transfer procedure will be subject to certain restrictions. The court can often only seek the consent of the debtor or other creditors who have obtained the basis for enforcement to transfer to bankruptcy, and the scope of persons seeking consent and the probability of obtaining consent may be affected, requiring more in-depth work by the court.

IV. Practical Exploration of "Enforcement and Integration" In the practice of "Enforcement and Integration", the Suzhou Intermediate People's Court of Jiangsu Province put forward the idea of "Enforcement and Integration", which pushed the reform of "Enforcement and Integration" to a deeper substantive sense. According to the introduction of the Suzhou Intermediate Court, "enforcement and bankruptcy integration" means to integrate the advantages of enforcement and bankruptcy procedures, appropriately break the boundaries of procedures, and give full play to the advantages of "mandatory" and "informatization" of enforcement procedures and the functions of "protection" and "liquidation" of bankruptcy procedures through the integration of concepts, resources, means and effects, effectively taking into account efficiency and fair value, and forming a general pattern of centralized debt liquidation work. "Enforcement and Breaking" improves the internal coordination mechanism between "enforcement" and "breaking", and combines the advantages of the two procedures to jointly complete the task of solving enforcement difficulties and bankruptcy difficulties. Under the idea of "implementation and integration", the Suzhou Intermediate Court has carried out in-depth reform of "implementation and destruction" and formulated detailed work guidelines and rules with operability. The author believes that its innovation points mainly include: First, it integrates the advantages of the two procedures, breaks the barriers between the procedures, realizes the effect of "1+1>2", takes the solution of debt settlement problems as the common orientation, and fully realizes the legislative goal of "implementing and breaking the problem". Second, break down the barriers between departments and personnel within the court, and form a "enforcement and bankruptcy integration" team to handle "enforcement and bankruptcy" cases, establish a general pattern of centralized debt liquidation work that is above the department, and eliminate the problems of departmentalism and poor cooperation that may exist in the "enforcement and bankruptcy". Third, break down information barriers, realize information exchange and sharing, and connect the information-based case-handling platform for enforcement and bankruptcy to improve work efficiency. Fourth, to realize the sharing and sharing of working means, powers and resources between the enforcement and bankruptcy departments, not only can use enforcement resources to forcefully carry out specific work such as property investigation and control, online judicial auction, search, detention, fine, compulsory liquidation, etc., but also make full use of the systems of avoidance, rescission, and accelerated maturity of shareholders' capital contributions in bankruptcy procedures to enrich the debtor's responsible property and increase the rate of debt settlement. "Enforcement and integration of destruction" has achieved good legal and social results in its implementation, and it can be considered for promotion in qualified courts.

V. "Enforcement and Reversal" in the Revision of the Enterprise Bankruptcy Law In the current "enforcement and bankruptcy" system, the party's application doctrine is adopted as to whether the enforcement case is transferred to bankruptcy proceedings, that is, the consent of the debtor or the applicant for enforcement must be sought. Without the consent of the parties, the court cannot implement the "execution and destruction" ex officio. There are currently a number of propositions on how to further strengthen the implementation of "execution and bankruptcy", which are also reflected in the revision of the Enterprise Bankruptcy Law. It was argued that legislation could be enacted to provide that the court found that the cause of the debtor's bankruptcy had occurred in enforcement proceedings and that it could transfer the case to insolvency proceedings ex officio if certain conditions were met. The reason is that the adoption of the authoritarian doctrine can prevent the debtor's debts from continuing to expand malignantly and harm the interests of creditors when the debtor is insolvent and no one has filed a bankruptcy application, and fully reflect the fair settlement of creditors and the positive rescue mechanism of the debtor under the enterprise bankruptcy law. Opponents argue that the commencement of insolvency proceedings falls within the scope of private law adjustments, and that initiation by public power through authoritarianism will infringe on the parties' right to civil disposition. Therefore, unless there are special circumstances expressly provided for in the law, such as Article 134 of the Enterprise Bankruptcy Law, which stipulates that the financial regulatory authority under the State Council may apply for reorganization or bankruptcy liquidation of financial institutions, it is not appropriate for the court to intervene ex officio, otherwise it is easy to trigger interference and infringement of the rights and interests of enterprises by the courts or even local governments. In addition, the cause of bankruptcy will present a vague state and many complex situations that are difficult to determine within a certain period of time, and the court's judgment of authority may not be correct, and it should be decided by the direct interested party on its own. Therefore, although some people have put forward the idea of commencing insolvency proceedings by authoritarianism or disguised authoritarianism, it has not received the support of the majority, and the legislative provisions involving "enforcement and bankruptcy" still tend to maintain the current principle of applicationism. It was advocated that, drawing on the provisions of some national insolvency legislation, the obligation to file for insolvency of specific persons of the enterprise should be created when the cause of insolvency of the debtor's enterprise occurred. If the debtor has a bankruptcy cause but has not filed a bankruptcy application, the debtor's directors and other executive members (or the board of directors) shall file a bankruptcy application within a certain period of time to emphasize its fiduciary duty to all creditors. Failure to comply with this obligation is liable to compensate creditors for the increase in losses caused by delay in bankruptcy. The above-mentioned period of compulsory bankruptcy filing is interrupted by the debtor's pre-restructuring and out-of-court restructuring activities. It was also argued that, for the sake of prudence, conditions for the obligation to file a petition for insolvency should also be attached such as that the debtor had gone out of business, had its business licence revoked, and was included in the list of business exceptions. Opponents believe that whether an enterprise has a bankruptcy cause is more a matter of business judgment, and even if the business judgment of the company's directors is wrong, in principle, they will not be held liable. Requiring directors and others to bear the obligation to compulsorily file bankruptcy applications and to hold violators liable for damages is not conducive to the normal operation of enterprises and directors and the flexibility to rescue debt-distressed enterprises, especially self-rescue activities. For state-owned enterprises, filing for bankruptcy requires the consent of the state-owned assets management agency, and it is not something that directors can decide. At present, in the process of revising the Enterprise Bankruptcy Law, there is considerable controversy over whether to adopt the above views. How to better solve the problems of difficulty in enforcement and bankruptcy, and how to establish a more perfect system of "enforcement and bankruptcy" in the revision of the Enterprise Bankruptcy Law, still requires continuous research and exploration.

Note: The author, Wang Xinxin, is a professor at the Law School of Chinese Minmin University and the director of the Bankruptcy Law Research Center of Chinese Minmin University.

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