Avoidance Actions in Bankruptcy Cases in China

Abstract

The revision of the Enterprise Bankruptcy Law was taken up as part of the 2023 legislative programme of the Standing Committee of the National People’s Congress. The Enterprise Bankruptcy Law now in force was enacted in 2006. Its rules on avoidance actions have proven inadequate in light of the fast pace of developments in insolvency practice. There is general agreement in the legal community that the current provisions on avoidance actions for the protection of all creditors need to be redrawn. Among the chief problems with these avoidance actions are the incomplete provisions of Articles 31, 32 of the Enterprise Bankruptcy Law, the difficulty of determining when Article 33 applies, and the unclear relationship between avoidance actions for the protection of individual creditors as opposed to creditors on the whole. Moreover, the legislature will have to choose whether the legal standard in avoidance actions for the protection of creditors on the whole is to be the subjective intent of the debtor (malice) or the respondent’s knowledge of the pertinent facts.