Author
Mr Wang Gongjie
Organisation/Institution
East China University of Political Science and Law
Country
CHINA
Panel
Bankruptcy
Title
Compromise Procedures for Micro and Small Enterprises Rescue – The Chinese Perspective
Abstract
The decline in the viability of MSEs due to heightened economic uncertainty has prompted countries to implement specialized insolvency regimes for MSEs. The core of MSEs is the entrepreneur. Following insolvency, it is challenging for MSEs to secure alternative investments, with the exception of funds provided by the entrepreneurs themselves, as well as there is no change of management. Consequently, the rescue of MSMEs after insolvency is essentially a collective debt settlement negotiation, distinct from reorganization procedures. The potential for compromise is greater for MSEs than for medium and large enterprises due to the fact that MSEs are characterized by a small number of claimants, simple types of claims and certainty of claims. Another feature of MSEs is that their business activities are conducted within a creditor-acquaintance society – apart from financial institutions, their creditors are basically family, friends or business associates. Consequently, entrepreneurs are more likely to seek for compromise with the intention of maintaining relationships with acquaintances, as opposed to opting for straightforward debt discharge. The compromise procedures can serve to mitigate the stigmatization of insolvency and preserve business reputation. Furthermore, this approach enables the entrepreneur to address their personal debts and guarantees in a single, consolidated proceeding, thus avoiding the necessity for a separate personal bankruptcy process. Under the compromise procedure, the identity of the administrator is gradually shifted to that of a mediator, and judicially-led insolvency cases are gradually shifted to centralized debt negotiation led by market intermediaries, thus enabling the special insolvency regime for MSEs to be more widely applied and to achieve simplicity and efficiency.
Biography
Wang Gongjie is a PhD candidate from the East China University of Political Science and Law, whose main research areas are corporate law, bankruptcy law, and the business environment. He has published a number of papers in China on issues such as bankruptcy of MSMEs and cross-border bankruptcy, and has won several academic honors such as the Outstanding Paper Award of the China Bankruptcy Law Forum and the Outstanding Paper Award of the China Business Law Annual Conference.
