Corporate legal persons operating in good faith in Shenzhen but unfortunately going bankrupt will be able to avoid the risk of unlimited transfer of collective debt to individuals and families through the personal bankruptcy system. On June 2, the "Shenzhen Special Economic Zone Personal Bankruptcy Regulations (Consultation Draft)" (hereinafter referred to as the "Consultation Draft") was announced to the public and solicited opinions. This reforming "ice-breaking" move immediately caused social concern .
What is "individual bankruptcy system"
"Individual bankruptcy system" refers to a legal system in which a natural person can declare bankruptcy through statutory procedures and distribute its remaining assets to creditors fairly, and exempts the natural person from continuing to pay responsibility for unclaimed claims.
At present, my country has only the enterprise bankruptcy law, which is called "half bankruptcy law" by academia, and it is believed to cause unequal status among market players.
The establishment of the personal bankruptcy system is related to the actual needs of Shenzhen. In Shenzhen, in addition to self-employed individuals, a large number of natural persons have directly participated in commercial activities in their own name in recent years. The data shows that as of the end of January 2020, there were 3.298 million commercial entities registered in Shenzhen, including 1.236 million individual industrial and commercial households, accounting for 37.5%. There are also a large number of self-employed commercial entities in the form of micro-commerce and e-commerce.
The Shenzhen Municipal People's Congress Legal Work Committee said that once these commercial entities encounter market risks, they need to bear unlimited debt liability in the name of individuals, cannot obtain the same bankruptcy protection as enterprises, and cannot withdraw and regenerate from the market.
In addition, financial institutions or capital lenders often require operators to use personal or family property as collateral, which breaks through the principle of limited liability of legal persons and the spirit of modern enterprise systems, and also creates living space for usurable loans, underground money houses and other illegal financing channels. The establishment of a personal bankruptcy system can effectively clarify the responsibility for framing the market subject to bear risks, guide enterprises and the public to enhance their understanding of credit value, and promote the establishment of a social credit system.
The basic value orientation of this local legislation in Shenzhen is that honest and trustworthy debtors can obtain the protection of the personal bankruptcy system when they are unfortunately caught in a debt crisis, and help them to escape from the debt crisis, re-engage in social and economic activities, and create more wealth .
On March 20, "Shenzhen explored to establish an individual bankruptcy system" won the support of the Legal Work Committee of the Standing Committee of the National People's Congress. The Bill was first submitted to the 41st Session of the Sixth Shenzhen Municipal People's Congress Standing Committee for deliberation at the end of April. June 2-18 is the feedback period for opinions and suggestions from all walks of life.
Will it be a safe haven for "Lao Lai"
The consultation draft stipulates that the debtor must have paid Shenzhen Social Security for three consecutive years, and the creditor is owed more than 500,000 yuan to propose bankruptcy and liquidation of the debtor.
The Legal Work Committee of the Shenzhen Municipal People's Congress said that the reason for the "individuals participating in social insurance for three consecutive years" is to consider that Shenzhen, as an immigrant city, actually has a population that far exceeds the number of registered residents, and generally participates in social insurance for three consecutive years. The actual resident population not only has relevant information such as property registration and social security, but also has been basically improved, and to a certain extent avoids the situation of "come deep to avoid debts". "Creditors are owed more than 500,000 yuan" is in line with international practice to prevent the abuse of bankruptcy proceedings by small creditors.
How to avoid debtors evading debt maliciously? The consultation draft stipulates that when the people’s court examined the bankruptcy application, it found that the applicant “applied for bankruptcy based on illegitimate purposes such as transferring property, maliciously evading debts, or damaging the reputation of others”, or “having false statements, providing false evidence, etc. that obstructed the bankruptcy proceedings. ", will not be accepted. The consultation draft also stipulates the system of non-forgivable debts, non-forgivable behaviors, extension of the forgiveness inspection period, and cancellation of forgiveness, in order to prevent and punish bankruptcy fraud.
The consultation draft clearly stated that after entering the bankruptcy proceedings, the debtor cannot take first-class seats on airplanes, trucks, ships, or motor cars, cannot consume in hotels, hotels, nightclubs, and golf courses with more than three stars, and cannot purchase real estate and motor vehicles. It is not possible to build, expand, or renovate houses, or to travel, for children to attend high-charge private schools, to rent high-end office buildings, or to pay high premiums to purchase insurance and wealth management products.
In addition, the debtor may not hold the positions of directors, supervisors and senior management personnel of listed companies, non-listed public companies and financial institutions, or engage in occupations prohibited by laws and administrative regulations. If the debtor obtains a loan or credit line of more than 1,000 yuan, he must declare his bankruptcy to the lender or creditor.
The Shenzhen Municipal People's Congress Legal Work Committee stated that relief is the essential attribute of the individual bankruptcy system. The draft for consultation is to avoid the personal bankruptcy system becoming a safe haven for the "old lai" through a series of system designs. That is to say, only when the debtor declares the property truthfully, follows the principle of good faith, actively transfers the property and cooperates with the disposal, fulfills due obligations, and abides by the relevant behavior restriction decisions, can the remaining debt be exempted according to law.
The consultation draft also stipulates that reasonable necessities and expenses may not be used to pay off debts, and items with special commemorative significance to the debtor, social insurance funds, and minimum living guarantee funds are also exempted property.
Three years after declaring bankruptcy, you can apply for debt relief
Are all debts immediately released after bankruptcy? The consultation draft stipulates that debt cancellation can only be applied for three years after the declaration of bankruptcy. During this period, the bankrupt should regularly report to the bankruptcy management department and administrator the status of personal income, expenses, property, etc. If the bankrupt violates relevant restrictions during this period, the people's court may extend the period of exemption inspection.
After the exemption inspection period expires, the bankrupt may apply to the people's court to cancel the remaining debt. The administrator (referring to the bankruptcy administrator recommended by creditors individually or jointly before the court accepts the bankruptcy application) investigates whether the bankrupt has debts that cannot be waived and the circumstances that cannot be waived, consults the creditors and the bankruptcy management department, and submits to the court A written report is issued, and the court ultimately decides whether to forgive the remaining debt.
The Shenzhen Municipal People’s Congress Legal Work Committee stated that the exemption time will be set at 3 years from the date when the court declares the debtor bankrupt, mainly considering that the personal bankruptcy legislation is still the first in China. From the perspective of social acceptance and risk prevention and control, It is advisable to proceed cautiously and gradually.
China Youth Daily · China Youth Daily reporter Liu Fang Source: China Youth Daily
01 June 2020 Edition